DBRS Comments on TELUS Corporation’s Announced Purchase of Public Mobile

DBRS notes that on October 23, 2013, TELUS Corporation (TELUS or the Company; rated A (low) with a Stable trend) entered into an agreement to purchase Public Mobile, following approval from Industry Canada and pending approval from the Competition Bureau. As part of the transaction, TELUS will acquire Public Mobile’s 280,000 subscribers and G-block spectrum licenses in Ontario and Québec.

DBRS believes that TELUS acquired Public Mobile primarily for its spectrum assets as Public Mobile’s G-Block spectrum aligns well with the spectrum TELUS holds in Western Canada. Furthermore, TELUS benefits from the fact that U.S. carriers are ensuring this spectrum is optimized for the deployment of LTE networks. DBRS also notes that certain popular newly released devices are compatible with G-block spectrum. DBRS notes however, that given Public Mobile’s size, the acquisition is not viewed to have a significant impact on TELUS’s earnings or overall credit profile.

Industry Canada stated yesterday that, considering the current technological incompatibilities related to the available equipment ecosystems for the G-block spectrum, the transfer of these spectrum licences would not significantly impact the ability of existing and future competitors to provide service. Industry Canada also noted that the transaction would result in only a modest increase in spectrum concentration amongst the incumbents.

DBRS notes the government remains firm in its goal of achieving four wireless carriers in each region of the country. All advanced wireless services spectrum transfer requests (including the spectrum licenses of WIND Mobile and Mobilicity) will still be reviewed by Industry Canada and those that would result in undue spectrum concentration — and therefore diminish competition — will likely not be permitted.

Going forward, DBRS will continue to monitor the government’s stance on spectrum transfers and competition as it evolves since regulatory decisions will likely determine the fate of the remaining new entrants. DBRS will also continue to focus on how the Canadian government plans to execute its mandate of increasing competition and improving the customer experience within the Canadian wireless sector.

Notes:
The applicable methodology is Rating Companies in the Communications Industry, which can be found on our website under Methodologies.