USA based Verizon is reported to have made an offer to buy the Canadian mobile network, Wind Mobile, valuing it at around US$700 million.
Canada’s three smallest networks have struggled to compete against the larger incumbents, and recent attempts by Wind Mobile and Mobicity to sell themselves to larger owners have been blocked by the government.
Mobicity’s sales was blocked as the buyer was one of the three larger incumbents, while Wind Mobile faced concerns about the potential Russian owner.
Verizon is seen as taking advantage of new rules that allow full foreign ownership of a small mobile network with less than 10% market share, and as a US company is likely to face far fewer regulatory problems than Russia’s VimpelCom.
Verizon has also started talks with financially striken Mobilicity, and is considering whether to bid in a pivotal auction of wireless licences in January, sources have told the Globe and Mail newspaper.
News that Verizon has moved from simply considering a bid to tabling an actual offer sent the share prices of the three larger networks, Rogers, Telus and BCE down sharply.
The Canadian government is keen to see competition in the market increased and may support a buyout by a deep-pocketed investor of two of the smaller networks to build a fourth national carrier.
“We believe the entrance of Verizon into the Canadian wireless market would be a game changer for wireless economics and wireless valuations,” Drew McReynolds, a telecom analyst with RBC Dominion Securities, said in a research note.