Shaw sitting out cellphone wars

Shaw Communications Inc. has decided to sit out the cellphone wars for the time being, despite spending $189 million in an auction this summer to buy wireless licences.

The Calgary-based company on Thursday said it would wait to see how the competitive situation in wireless and the current economic uncertainty are going to play out.

"We continue to review our wireless strategy and believe our entry in this new market should be measured and prudent in light of the developing competitive wireless market dynamics," said chief executive officer Jim Shaw said in a statement. "As a result, we do not currently anticipate making material investments in wireless during 2009."

Shaw was one of the companies that lobbied the federal government in 2007 to create special rules for the auction that would favour new entrants.

The government listened to Shaw and other potential newcomers by reserving about 40 per cent of the licences for them in the auction this summer. Wireless incumbents Bell Canada Inc., Rogers Communications Inc. and Telus Corp. were not allowed to bid on those licences.

Under Industry Canada rules, winners of the spectrum licences can sell them to other companies. Licenses obtained through the set-aside rule, however, cannot be sold to other companies that do not also qualify as new entrants, which are defined as having less than 10 per cent of the nation's wireless revenue, for the first five years.

Before the auction, Bell, Rogers and Telus argued against instituting the set aside because companies would use the special rules to obtain discounted licences, only to resell them at a profit later.

Spectrum makes Shaw more valuable

Equity analysts have also speculated for years that Toronto-based Rogers or Montreal-based Bell have been interested in buying Shaw. The wireless licences would either make Shaw more valuable once the five-year limitation expires, or make it more difficult to take the company over before then.

Shaw's 18 licences cover mainly Western Canada, with a few situated in Northern Ontario as well.

Despite Shaw's decision to sit out, wireless competition in Western Canada is set to increase next year when Toronto-based Globalive Communications Inc., another auction winner, launches its nation-wide network and goes up against Bell, Rogers and Telus.

Toronto-based Data & Audio-Visual Enterprises Inc., a company owned by local entrepreneur John Bitove, also won licences in all of Western Canada's major cities. Bitove could launch wireless service in Vancouver, Victoria, Edmonton and Calgary, although he has not yet announced any plans to do so.

Wireless competition in British Columbia is also expected to ratchet up as the 2010 Olympics in Vancouver will bring a horde of cellphone-toting tourists from around the world. Much of the roaming revenue brought in by this tourism was expected to go to Rogers, which uses network technology that is compatible with most of the other cellphone carriers in the world.

Bell and Telus, however, earlier this month announced they were jointly building a new network that should be up by the time the Olympics start, which will allow them to get in on the action.

Montreal-based Quebecor Inc. earlier this week announced plans to launch its wireless network in Quebec in the next 12 to 18 months. Halifax-based Bragg Communications Inc., which operates Maritimes cable provider Eastlink, plans to announce its intentions in the next two months.