Thinking 3 moves ahead

It is way too easy to conclude that the plan for TELUS to acquire Mobilicity will result in a reduction in the level of competition in Canada’s wireless marketplace.

But that assessment is based on a superficial analysis.

Yes, one of the brands operating in a number of major cities may eventually disappear. But Mobilicity isn’t operating in any markets that don’t already have 5 or more other facilities based providers, with new entrants and incumbents battling for each customer.

The alternate scenario could include Mobilicity being shut down by its creditors. With losses of a million and a half dollars per week, Mobilicity’s backers have signalled that they are impatient for a deal to exit. After months of searching for a suitor, Mobilicity’s president and chief operating officer, Stewart Lyons, told Rita Trichur of the Globe and Mail that there are no other options.

We have spent a lot of time talking to a lot of people, including every single new entrant [carrier].

Stop to think about how the overall consumer marketplace will react to word that 250,000 Mobilicity customers woke up to phones reading “no service”, having to scramble to find a new service provider. We know that many people consider the activity of shopping for wireless services to be as appealing as a visit to the dentist. The damage to consumer confidence could impact the rest of the new players. How many consumers will simply decide that the price savings aren’t worth the risk of dealing with a service provider that is operating on the edge of financial security? All of the new entrants have been broadcasting their financial woes for the past few months. A network shutdown will clearly hit the remaining independent new entrants.

Then turn your mind toward the investment community. How will investors respond to being told that they cannot get the best deal for their money, that the company may have to be sold in a fire sale. With its accumulated tax losses, the best offer for Mobilicity will come from companies that can make use of those losses – that road leads to the doorsteps of the big three carriers. A rejection of the deal will impact more than just Mobilicity’s backers; Canada’s Industry Minister has been trying to drum up interest in market entry from investors around the world, in hopes of securing more bidders for the upcoming auction of the 700 MHz band. All of these potential global players will be watching to see whether they will face a friendly investment climate before they risk billions of dollars.

Culling the herd, allowing Mobilicity to be acquired quickly, painlessly by TELUS, may be precisely what is needed to strengthen the state of competition.

In two weeks, the leadership of Canada’s information and communications sectors will be gathering in Toronto at The 2013 Canadian Telecom Summit. The event will be covering these issues and so much more.

You need to be at The 2013 Canadian Telecom Summit, June 3-5, 2013. Have you registered yet?

Continuing Professional Development: Some of the time spent attending sessions at The 2013 Canadian Telecom Summit may be claimed as “Substantive Hours” towards LSUC’s CPD requirements.

Register today! Download the complete conference brochure here.

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