Bell and Telus in 3G deal

Saturday, August 30th, 2008

David George-Cosh

Touch phones featuring larger screens have few buttons and show computer-like Internet, multimedia tools and speakerphones. Clockwise from top: Samsung’s Instinct, the HTC Touch Diamond and Apple’s iPhone. Photograph by : Steve Makris/Edmonton Journal

BCE Inc. and Telus Corp. are set to announce an upgrade to a next- generation wireless network next week that will allow the companies to provide the same popular mobile devices, such as the iPhone 3G, that industry leader Rogers Communications Inc. offers, sources have told the Financial Post.

Multiple sources in the telecom industry said Bell Canada and Telus are expected to share the costs of upgrading from their current code division multiple access (CDMA) networks to the globally adopted high speed packet access (HSPA) network. It is estimated to cost the two companies as much as $1 billion and take about one year to install.

The announcement will put pressure on Rogers and not just because its two entrenched competitors will be able to offer a similar high-speed network. As well, new wireless companies may now choose to negotiate with Bell or Telus for roaming agreements, giving the two incumbent telcos a revenue boost.

The new network will allow the companies to support such popular mobile devices as Apple Inc.’s iPhone 3G and Research In Motion Ltd.’s BlackBerry Bold, which are already offered by Rogers but so far unavailable to Bell and Telus customers due to incompatible networks.

Nokia Siemens Networks, one of the largest telecommunication-equipment makers in the world, is said to be the vendor that will provide Bell Canada and Telus with the HSPA network upgrade.

Sources said Bell and Telus won’t offer so-called “2G” GSM devices to avoid their customers paying roaming charges that would eventually go to Rogers, the only wireless provider in Canada with a GSM network.

Genuity Capital Markets equity analyst Dvai Ghose said avoiding a GSM network build-out will help the companies save capital expenditure costs while being able to tap into the “plethora” of new HSPA devices that will become available to cellphone users in the next year.

“It may not be an immediate reason to do it for the cost savings, but there’s a more immediate reason to do it for the iconic devices,” Ghose said.

Representatives from Bell Canada and Telus declined to comment on the possibility of a unified network upgrade.

The timing of the network announcement may be no accident.

This Wednesday will be the due date that wireless companies will have to pay Industry Canada after the conclusion of Ottawa‘s spectrum auction in July.

After more than one month of bidding by 15 companies, several new potential cellphone companies emerged, among them Quebecor Inc., Shaw Communications Inc., Data & Audio-Visual Enterprises (DAVE) Wireless Inc. and Globalive Communications Corp., which appears positioned to become Canada‘s next national wireless carrier.

According to Industry Canada, to encourage competition in the $14-billion industry, any new entrant will be allowed to roam on an incumbent operator’s network for five years while building out its own infrastructure.

Although the new entrants have not released details of their cellphone businesses, analysts say DAVE Wireless and Globalive have stated their wish to pursue a low-cost voice-centric model to appeal to the roughly one-third of Canadians who do not have cellphones.

“If you want any of the new entrants’ roaming revenue, you pretty much have to be on HSPA,” Ghose said. “This is important in the near to medium term (for Bell and Telus) to offset the loss of market share they will have.”

However, telecom consultant Iain Grant of the Seaboard Group disagreed. He said wireless companies focusing on voice packages, not data, will not necessarily need an HSPA network to roam on.

© CanWest News Service 2008


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