OTTAWA - The federal government's spectrum sale has garnered $560 million in bids on the first day of the auction, with new entrant cable company Shaw Communications Inc. (TSX:SJR.B) putting in the highest value of bids to date.
The government is auctioning 105 megahertz of radio spectrum, which is used to carry the signals of cellphones.
The auction is expected to raise more $1 billion for the government treasury and draw heavy interest from the big three existing players in the market, Rogers Communications Inc. (TSX:RCI.B), BCE Inc. (TSX:BCE) and Telus Corp. (TSX:T)
In order to encourage competition, the government has set aside 40 megahertz for new players, who can also bid on the 65 megahertz spectrum open to the incumbents.
"It's just the first two rounds, it doesn't mean anything at this early stage," said Lawrence Surtees, a technology analyst with IDC Canada.
With two more rounds scheduled for Wednesday and four more rounds of bidding in each of Thursday and Friday, Surtees said it may take the end of the week before a clear picture emerges of the key new players in Canada's cellphone market.
Shaw, who would be a new player in the cellphone market, bid the largest by far on the first day with 41 high bids totalling $153,078,401.
Another new player, Globalive Communications Corp has made eight bids totalling just over $135 million, while Bell Mobility has bid $75.5 million and Telus close to $60 million in high bids.
Earlier in the day, Industry Minister Jim Prentice predicted that the auction, which he said could take a month to complete, would result in more competition in the cellphone market and lower prices for Canadians.
"Certainly it will have the effect of introducing more competition to the Canadian market place, there's no doubt about that," he said.
"There are those who would say even to this point it has started to exert downward pressure on prices."
Independent market reports have placed Canada's cellphone market among the least competitive and most costly to users in the industrial world.
"The fact of the matter is that this is an over-protected industry and over-protected industries tend to charge higher prices and behave like monopolies," said analyst Eamon Hoey of Hoey Associates in Toronto.
Attempts to increase competition have failed in the past because new players have eventually been acquired by the big three, noted Hoey, saying it will be up to the Competition Bureau to make sure it doesn't happen again.
"I do think that as the new entrants get in, this time next year we will begin to see downward pressure on prices and upward pressure on services," he said.
Prentice said 24 bidders are in the auction, which will be conducted electronically, with the anticipation there will be many rounds. None have dropped out after the first two rounds.
Following the close of the auction, winning bidders will be required to submit ownership and control documentation and to complete various payment transactions within 30 business days, Industry Canada said.
The department will then review the information submitted by each bidder and issue licences as appropriate.
