TORONTO – Wind Mobile Canada has never been so candid, or detailed, about its numbers.
During his luncheon keynote Tuesday, Wind CEO Tony Lacavera released subscriber, ARPU and various other metrics that make Wind, now with about 740,000 Canadian customers, look like a growing, viable, business – despite the hundreds of millions in debt owed from 2008 spectrum purchases and its network build since then.
But there’s a method to that data dump. Wind needs investors. With its foreign backer Vimpelcom having written Wind Canada’s value down to zero, that gave license to pundits, analysts and competitors to take their shots at Wind, dismissing it as a spent force in the Canadian wireless game. “There has been so much negative analyst coverage and so much negative media coverage surrounding the writedown by Vimpelcom,” said Lacavera in an interview with Cartt.ca after his speech, adding that most missed the point of that move. “(Vimpelcom) wrote it down to zero because of a regulatory constraint. It was not a business problem,” he said.
The regulatory constraint, of course, is that the federal government will not allow Wind to sell its AWS spectrum even after its five year moratorium on the sale of that spectrum expires, nor will it allow Vimpelcom to take full control of the asset – and it won’t say why. So, from Vimpelcom’s point of view, Wind Canada is stranded – and it is no longer funding the operation.
All of which led to Lacavera using the CTS to get out his message – and hope then some investors or partners might come forward. “This really is a pivotal moment, and the business is on a great growth track,” he said. “So is it financeable now by the debt markets or the public markets? I believe that it is but there is still one gating factor – and that is I have to have a clear source and price for the LTE spectrum we need… So I think that yes, we will go to the capital markets and I don’t know if it will be an IPO or a high yield issue, but we will be able to access the capital markets, as soon as we can get a definitive answer on what the source is going to be and what the cost is going to be because obviously the cost has to be rational.”
That spectrum could come from the CCAA-protected Mobilicity, or from Videotron, or Shaw, in a transaction, or in partnerships. However, Lacavera isn’t hopeful that the AWS spectrum auctioned in 2008 will come to him.
“The foreclosure economics and the incumbent premiums on spectrum need to be eradicated so that we have a market value for new entrant spectrum.” – Tony Lacavera, Wind
“The premium that Telus is paying for Mobilicity spectrum, or was trying to pay, versus what we can actually, sustainably pay – obviously I can’t go to the capital markets and say hey guys, I bought this million dollar house for five million dollars, so how about you finance my house? The foreclosure economics and the incumbent premiums on spectrum need to be eradicated so that we have a market value for new entrant spectrum,” said Lacavera. While he wouldn’t put a number on it, Lacavera said his company would only be able to afford paying “a fraction” of the $350 million Telus had offered for Mobilicity, before pulling its bid.
Lacavera is turning his attention to the next wireless auction – of the 2,500 MHz band next year and then AWS-3 (2155 – 2175 MHz spectrum range) after that. The FCC is running an auction of AWS-3 later this year. He wants to know, about AWS-3, “why can’t that be on the table and make that available the same time as the April 2015 2500 auction?”
AWS-3 capable handsets are expected mid-2015 since T-Mobile and AT&T will likely be the buyers of that spectrum in U.S.
“Any one of those are viable options for us, but we need a solution to happen at a cost that’s not necessarily cheap, but it has to be viable and supportable by the business plan. It has to be something that Wind can reasonably afford.”
Industry Canada, however, had this to say about AWS-3 when we asked them about it after our talk with Lacavera: “AWS-3 spectrum was identified in the Industry Canada 2013 Commercial Mobile Spectrum Outlook as a future source of additional commercial mobile spectrum. As is standard practice, Industry Canada will conduct a public consultation before determining the appropriate licensing framework for AWS-3 spectrum,” a spokesperson wrote in an e-mail to Cartt.ca.
While Wind does need cash to fund more growth, Lacavera says his spectrum position is okay for now. “We need to start building LTE in the back part of next year and we need to know the source of the spectrum and the cost for it… in the next 12 to 18 months,” he said. “(But) we have all the way until T-Mo completes all the re-farming of their 3G AWS handsets which is expected to be late 2018-2019 – when our actual handset ecosystem will start to diminish.”
There are also some spectrum partitioning Wind can perform in Ontario on its own, if it wanted to launch LTE there.
“Since February, our U.S. roaming is up 100 times over what it was… reflecting how badly people were getting gouged going to the U.S.” – Lacavera
For now, Lacavera intends to keep his shoulder to the wheel, differentiating on price and other items such as its low U.S. roaming plans. “The U.S. roaming deals are unbelievable. I just hope I can maintain it because the growth in our roaming profile with T-Mo is staggering. Since February, our U.S. roaming is up 100 times over what it was… reflecting how badly people were getting gouged going to the U.S. (as a subscriber of the Big Three).
So to follow that up, Lacavera let us in on another change coming for Wind customers. “We are going to come out with an unlimited Canada (roaming plan) very shortly in the wake of this new roaming regime,” although he wouldn’t divulge the pricing or exact timing.
