The $1.4-billion bid to take over Microcell Communications by Rogers Wireless announced Monday would create Canada’s most powerful GSM network without disrupting existing
Fido users, executives promised.
Days after confirming it was in talks to buy Microcell, which has been subject to a hostile takeover bid by Telus Corp. since May, Rogers said it would finance the deal with a combination of cash on hand and a loan from its parent, Rogers Communications. The combined firm would have 5.1 million customers, the companies said.
Rogers Wireless recently spent $1.8-billion to buy back a stake owned by AT&T Wireless Services Inc.
Microcell is the country’s smallest cell-phone provider but also one of its most competitive. Earlier this year, for example, it announced plans to expand a low-cost service called CityFido — which offers unlimited local talk time for $45 a month — to Toronto. Since its launch in Vancouver, CityFido has prompted fierce countermarketing efforts from other wireless carriers.
In a teleconference Monday, Rogers Wireless president Nadir Mohamed would not confirm the company’s plans for CityFido, saying it was too early to speculate.
“”I’ll tell you what I like about CityFido,”” he said. “”It really attacks the premise of the wireline local business and allows customers to take advantage of wireless for all of their needs.””
Apart from its presence in Quebec, Rogers Communications chief executive Ted Rogers said Microcell’s most attractive asset is its network, which like Rogers operates on the popular global system for mobile (GSM) standard.
A takeover would mean Rogers would be able to quickly expand its GPRS and EDGE services to Microcell customers without asking them to get new phones or numbers, said Rogers.
“”That would be done by just turning on a switch — it’s not that hard,”” he said. “”I would say it would take about an hour, but we’ll say a day just to be safe.””
Microcell chief executive Andre Tremblay noted that its network already has interoperability between Nortel and Ericsson products, which would make the transition easier. “”I don’t believe that there will be any major issues,”” he said. “”I think it’s clear that we have been upgrading our network a lot in the last year. Everything that was installed for the launch of CityFido in different cities was state-of-the-art equipment.””
A Telus Mobility spokesman said the company was examining Rogers’ bid and would comment shortly. The deadline for its most recent $29 per share offer was set to expire Monday. Telus had said a recent CRTC decision to lift the spectrum cap would clear the way for its takeover of Microcell.
Iain Grant, managing director of research firm the Seaboard Group, said if the deal from Rogers is successful, it would vault from the No. 2 position in the Canadian wireless market into first place.
“”This is bragging rights. This is huge,”” he said. “”Wireless is really important to the financial analyst community. (Ted Rogers) is now the largest player in Canada. GSM is the largest standard in Europe. He’s the only one who has it here.””
Rogers was opposed to a program like CityFido principally because its network was engineered without a lot of overhead, said Grant, and it couldn’t handle the potential surge in usage.
“”(Ted) Rogers could see that if that was to happen on his network, it would crash and burn — you’d see the smoke coming off of these cell sites and they would burst into flames.””
Microcell, in contrast, built a brand-new network with empty lanes, and its job was to fill them, Grant added.
Besides its network equipment, Mohamed said Microcell would bring Rogers an increased number of cell sites and increased density of signals. Microcell is a partner in a joint venture called Inukshuk Internet with NR Communications and Allstream, providing fixed wireless service to remote communities like Yellowknife. The future of Inukshuk has not been decided, but Mohamed said Rogers supports the notion of wireless portability and recently acquired spectrum in the 2.7 and 3.5 range for the purpose of offering fixed wireless.
“”Contextually, (Inukshuk) is something that I think fits in.””
Ted Rogers said there were obvious benefits to what his company is proposing than what Telus would do with Microcell.
“”We’re talking about merging two GSM networks — keeping what we have and building on it instead of someone coming in and tearing everything down, closing it up and firing the people,”” he said, though he noted Telus could still make a play for the company. “”We’re here reporting (the proposal), but we’re not celebrating.””
Even if it loses Microcell, Grant said Telus may have gotten what it needed from the process.
“”Microcell has been looking at selling the company and defending its turf when it really ought to have been focused on its day job,”” he said. “”All it really cost you, if you’re Telus, is a couple of stamps.””
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