Verizon’s Canadian Expansion. Will they buy someone? Yeah Telus in Play soon. $VZ $T $BCE $TU $RCI

Last post covered Verizon’s  (NYSE:VZ) political problems as a supposed newbie in the Canadian market. Canadian market is approximately 10% of the US market and is politically stable and relatively close by. Canadians pay their bills on time and on a per capita basis rival and surpass at time American use of e-commerce and telecommunications. So not surprising that Verizon wants in. Wonder why AT&T (NYSE:T) is asleep on this one.

There are three major wireless players in Canada. BCE (NYSE:BCE) which grew out of the traditional phone monopolies. Rogers Communications (NYSE:RCI) which grew out of the cable business and got into wireless as an opportunity. Lastly you have Telus which is the very much smaller player of the three and is based in western Canada. Telus competes nationally on wireless product. George Cope who is now CEO of BCE used to run Telus. It’s always been thought that BCE would swallow Telus and turn the market into a full duopoly. Hasn’t happened as yet. Capital cost is a little high and perhaps the regulators have sent private signals about don’t do that we like to see multiple competitors.

Verizon will probably be blocked at the next spectrum auction. The end game will only allow them to buy one spectrum range and not two. A very good solution for Verizon to achieve significant bulk will be to buy out Telus. The regulator will still see multiple players and political optics will satisfy. Telus will allow Verizon the strategic beach head.

But Telus shareholders will demand the opportunity to auction off their company and maximize shareholder wealth. Which means either Rogers or BCE will step up to the bat and try to write some big cheques. Or another foreign third part dark horse may enter the arena. Still waiting for AT&T to wake up.

In any event Telus will be bought out in the next twelve months for strategic reasons.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter @financialskepti Follow his evil twin who writes Wall Street Murder Thrillers @georgegutowski

Verizon’s Big Canadian Political Problem $VZ $T $BCE $RCI $TU

Verizon (NYSE:VZ) has walked into a Canadian political buzz saw. Scheduled for Sep is a large spectrum auction which will decide wireless dominance into the foreseeable future. The regulators had a weird rule designed to help new small upstarts allowing them to bid on more than one spectrum range.

Verizon is using the  poor wording of the rule and declaring itself to be a new entrant. Verizon has huge capital and will be able to buy the spectrum and disrupt existing players. The rules are also perverse because to help small newcomers the existing players are supposed to allow them access to the existing networks which were built with someone else’s capital expenditures.

George Cope CEO of BCE INC (NYSE:BCE)  has compared this to a foreign player entering New York City with several new spectrum licenses and then being allowed to use AT&T (NYSE:T) and Verizon’s existing networks. You know that’s not going to happen.

Verizon used to operate in Canada but withdrew several years ago. They are four times larger than the entire Canadian wireless market. No one contemplated their use of special rules which were designed to aid small players get a foothold.

The Canadian players have started a very public media campaign to wake up voters and politicians. The federal cabinet has just been reshuffled. The short-term political solution will be to defer the auction which is just weeks away. The deferral will start a separate controversy.

Canada and Japan are the only two jurisdictions which came out with LTE standard which LTE enable tablets and smart phones were first released. There is a huge technological superiority to the networks in Canada.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter @financialskepti Follow his evil twin who writes Wall Street Murder Thrillers on twitter  @georgegutowski