Consumers shouldn’t expect a price war if U.S. telecom giant Verizon enters the Canadian cellphone market, says the CEO of Telus, one of the country’s biggest wireless providers.
“That’s typically not Verizon’s style,” chief executive Darren Entwistle said Thursday in an interview with The Canadian Press.
“Their philosophy has been more on premium pricing,” he said, adding that Verizon’s focus would be on its business clients that have operations in Canada in the Montreal and Toronto areas.
“So I think that mitigates the probability of a wider price war within the consumer market segment.”
Entwistle added that he now thinks the likelihood of Verizon coming to Canada is “50-50.”
And he isn’t the only one who thinks a price war is unlikely.
Moody’s Investors Service also believes that Verizon’s entry into the Canadian market wouldn’t mean a price war, noting in a new report that the American giant would need to invest more than $3 billion just to get started in Canada’s wireless industry.
The battle would be more about the user experience than an all-out price war, because Verizon would need to develop a top-quality network, which would be costly and time consuming, Moody’s said.
“We do not believe a new competitor would launch a price war in order to gain market share, as its position would not be sufficiently low cost to support such an effort,” it said.
Entwistle, meanwhile, noted that Telus, Rogers and Bell have taken a cumulative loss of $14.7 billion on the capital markets since word of Verizon possibly coming to Canadian broke in June.
“A minor portion of that has been ameliorated, but essentially the loss is still in that particular zip code and that is deeply frustrating,” he said.
“There’s been a slight improvement because there’s some speculation that is becoming more prevalent that Verizon is going to elect not to come to Canada. So that has supported a bit of the stock price recovery.”
Verizon could not be reached for comment Thursday.
The Globe and Mail has reported that Verizon is putting off a potential acquisition of new players Wind Mobile and Mobilicity and may only participate in the January 2014 auction for wireless spectrum, which will see telecom companies bidding on radio waves needed to make cellphone networks operate.
Entwistle said he believes Verizon is more interested in lowering its own roaming costs and would focus on large markets such as Toronto and Montreal.
“I don’t think they have a commitment to rural Canada,” he said.
He noted that Verizon turned down money from the American telecom regulator to develop network infrastructure in rural areas south of the border. Verizon is planning to develop its own strategy for rural areas in the U.S.
“If they’re not going to build in the rural U.S., they are sure as hell aren’t going to build in Canada within the rural domains,” he said.
Entwistle repeated that he has no problem competing with Verizon, but wants a level playing field.
Telus, Rogers and Bell have complained that Verizon is being given advantages since under the auction rules it’s treated like a new player entering the Canadian market.
That means it has access to bid on two blocks of prime 700 megahertz spectrum while the three domestic carriers can bid on only one block apiece. The big three Canadian carriers would also have to come to a financial arrangement with Verizon for letting its customers roam on their networks in areas where it doesn’t have coverage.
Verizon sold its remaining stake in Telus in 2004 and exited the Canadian market.
The Conservative government has eased the rules on foreign investment of for wireless companies with less than 10 per cent of the marketplace, paving the way for the entry of Verizon and possibly other foreign telecom companies to set up shop and also buy small Canadian wireless companies.
Telus was blocked last spring by Industry Canada from buying struggling carrier Mobilicity because the small carrier’s spectrum licence doesn’t expire until 2014.
Entwistle said it’s not too late for new Industry Minister James Moore to either review the auction rules or delay the auction, adding it has already been delayed twice.
So far Moore has said the government is sticking with the current rules.