Bitove, Ghermezians want cellphone airwaves

By Peter Nowak — A few pieces of the upcoming cellphone spectrum auction puzzle fell into place Monday as additional participants, including entrepreneurs John Bitove and the Ghermezian brothers, were uncovered.

Bitove, who founded the Toronto Raptors and operates XM Satellite Radio in Canada among his other endeavours, is behind a company known as Data & Audio-Visual Enterprises Wireless Inc. (DAVE), wrote RBC Capital Markets telecommunications analyst Jonathan Allen in a research note to clients. The company put in an application to bid on the airwaves needed to run a cellphone operator last Monday, along with a letter of credit for a deposit of $106 million, which allows it to bid on 972 points of spectrum.

Industry Canada is auctioning off 292 spectrum licences starting on May 27. Those licences are divided into 6,510 bid points, each of which reflect the population of a given geographic area. Winners of the auction are expected to deploy cellphone networks to compete with the country's big three providers, Rogers Communications Inc., Bell Canada Inc. and Telus Corp.

A spokesperson for Bitove could not confirm that he was behind DAVE, but did say that XM was not involved in the auction. DAVE shares offices in Toronto with XM and Obelysk Funds, Bitove's private holding company.

An application for 1,240 bid points with a required deposit of $143 million was also made by a company called Triple Five Universal Enterprises. Sheryl Smith, a spokesperson for the Ghermezian brothers — who run a conglomerate with interests that includes ownership of the West Edmonton Mall — confirmed they are involved in the auction.

"Triple Five Universal Enterprises, which is involved in the wireless spectrum auction is related to Triple Five Worldwide," she wrote in an e-mail. Triple Five Worldwide is one of the companies run by the four brothers, Eskandar, Nader, Raphael and Bahman.

The most aggressive application, from a company known as Niagara Networks Inc., continued to mystify analysts on Monday. Niagara Networks is seeking to bid on 6,510 bid points, which requires a deposit of $881 million. About 40 per cent of the spectrum being sold is reserved for new entrants, unavailable to Rogers, Bell and Telus, and the remainder is open to everyone. Niagara Networks' deposit means the company will be able to bid on all of the spectrum, both reserved and open.

Niagara Networks president Douglas Evashkow told CBCNews.ca on Friday that he could not reveal the source of his funding because it was "tied into confidentiality agreements." In other interviews last year, however, he said his bid would include "North American partners" and "private capital." 

The company has no existing operations, and Evashkow was previously president of Bit Pacific Technologies, which bid on spectrum in an auction in 2001.

Allen said Niagara Networks' "whopping" deposit and the speculation about who is behind it could drive stocks of the big three cellphone carriers down over the coming weeks. Shares of Rogers fell two per cent to $34.27 on the Toronto Stock Exchange on Monday, while Bell also dropped two per cent to $36.50. Telus shares slid 1.8 per cent to $42.81.

Analysts had also speculated about interest in the auction from Calgary-based Shaw Communications Inc., which lodged its application for 3,076 bid points with a required deposit of $400 million. The size of the deposit surprised some analysts, as did the fact that Shaw made its application as a numbered Alberta company. That led some to speculate that Shaw would be bidding in conjunction with partners, which the company refuted on Monday.

"It's just Shaw," said president Peter Bissonnettte, who added that the application has been changed to read Shaw Wireless.

Aside from the further mystery regarding Niagara Networks, there is still one sizeable, unexplained bid from a numbered Canadian company, for 1,321 bid points with a required deposit of $154 million.

Industry Canada will reveal further details, including who is funding the various bids, on March 31, said Peter Hill, director of spectrum management operations.

"We are currently performing verification of the applications which includes assessing the beneficial ownership of the applicants," he said.