BCE Inc. (BCE), Rogers Communications Inc. (RCI/B) and Telus Corp. (T), Canada’s three biggest wireless carriers, all tumbled in Toronto trading on concern that Verizon Communications Inc. (VZ:US) is poised to enter the market.
Verizon, which co-owns the leading U.S. mobile-phone service, has submitted an initial offer for Wind Mobile, a Toronto-based wireless carrier, the Globe and Mail reported today. Verizon held talks with the another of Canada’s recent entrants to the market, Mobilicity, about potentially combining the companies to build a fourth national carrier, the newspaper said, citing people familiar with the plans.
The U.S. company’s interest in Wind coincides with action taken by the Canadian government to block the country’s three major carriers from taking control of new players in an effort to spur competition. Wind, Mobilicity and Public Mobile have struggled against BCE, Telus and Rogers, which together control about 90 percent of Canada’s mobile-phone market.
“Verizon has several advantages it could use to become successful in the marketplace, such as its advantage with U.S. roaming, capital strength and, importantly, its handset-buying power,” said Maher Yaghi, an analyst with Desjardins Securities in Montreal. Investors in BCE, Telus and Rogers “need to consider the potential downside if Verizon intends to build a national network,” he said.
Yaghi has buy ratings on BCE and Telus and a hold rating on Rogers.
Telus tumbled 8 percent to C$30.70 at the close in Toronto, its biggest drop since April 2009. BCE fell 4.1 percent to C$41.57, its worst performance since May 2009. Rogers fell (2FB:US) 9.2 percent to C$41.67, the steepest drop since October 2008.
Verizon has a market value (VZ:US) of about $145 billion, more than double the combined value of Canada’s big three. Verizon’s bid would value Wind at about C$700 million ($668 million), the Globe and Mail said.
Wind is “one of many” options under consideration, Bob Varettoni, a spokesman for New York-based Verizon, said last week. “We constantly evaluate a wide variety of business opportunities,” he said at the time.
He declined to comment today on the C$700 million bid.
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