The clock is ticking for wireless deals

According to the most recent Industry Canada timeline, deposits for participating in the 700 MHz auction in Canada are due at noon on September 17.

That date also marks the most likely deadline for definitive agreements to be reached for mergers and acquisitions in Canada’s wireless sector.

Let me explain why.

According to the “collusion rules” [see Section 5.4 of the Licensing Framework (pdf), and Section 2 of the Q&A] associated with the auction,

From the date of application until the deadline for the final payment on winning bids, each applicant is prohibited from cooperating, collaborating, discussing, negotiating or entering into agreements, arrangements or understandings with any competitors regarding the licences being auctioned, bids or bidding strategies in the auction, or the post-auction market structure. Each applicant is also prohibited from signalling its bidding intentions, either publicly or privately, from the application deadline until the end of the bidding process.

If a deal has not been concluded – or at least a proposed deal with a massive break-up fee – then the parties would have to stop working together, or agree that only one of the parties will be participating in the auction. Agreeing to forego participation in the auction could be suicidal in terms of its future Canadian business opportunities for a company to voluntarily withdraw from contention for the 700 MHz band, in the hopes of concluding a deal post-auction.

For this reason, one might expect considerable pressure for deals to be concluded over the coming 8 weeks. Given the time required for spectrum transfer approvals, one might expect deals to include substantial break fees to try to compensate for having to sit out the auction on the bench in case deals do not close for any reason.

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