Canadian wireless operators spent $3.47 billion on blocks of airwaves needed to power next-generation 5G networks, spending more than analysts expected in a spectrum auction structured so smaller providers such as Freedom Mobile and Videotron didn’t have to compete against the Big Three.

Innovation, Science and Economic Development released Wednesday the auction results for the 600 MHz band, an important frequency that penetrates buildings and works well in rural areas. Twelve qualified bidders went through 54 rounds of bidding over 18 business days before the government awarded 104 licences to nine participants.

In an interview, ISED Minister Navdeep Bains said the regional players did well in the auction.

“That’s really important because where there’s strong regional competition, Canadians pay one third less on their cellphone bills,” Bains said.

“From our perspective, we were able to achieve the goal of seeing more regional competition and more regional players.”

Rogers Communications Inc. dominated the auction, winning 52 licences in every province and territory for $1.725 billion.

“This spectrum is vital to the deployment of 5G in Canada and we are well positioned to bring the very best of 5G to Canadians,” Rogers chief executive Joe Natale said in a statement.

Telus Corp. spent $931 million on 12 licences.

BCE Inc., Canada’s largest telecommunications provider, did not win a single licence.

In a news release, Bell said it decided not to buy any 600 MHz spectrum because it already has enough in other bands.

“Given the supply of other low-band spectrum that Bell already possesses, 600 MHz is not required for Bell to deliver broadband 4G and 5G services,” Bell stated, adding its main peers in the U.S. also didn’t buy 600 MHz licences in the U.S. auction.

The Big Three were banned from bidding on three out of seven spectrum blocks (43 per cent), which were set aside for players with less than 10 per cent of the national market share in an attempt to spark competition.

We were able to achieve the goal of seeing more regional competition and more regional players

In the set aside competition, Shaw Communications Inc. and Quebecor Inc. won roughly the same amount of licences as Telus but for less. Shaw’s Freedom paid $492 million for 11 licences and Quebecor’s Videotron won 10 licences for $256 million.

Different licences have different value based on geographic location and the population they cover so it’s difficult to compare them outright. However, Rogers spent approximately $1.71 MHz per person in a coverage area, Telus spent $2.35 MHz/pop, Videotron spent $0.99 and Freedom spent $0.78.

Other winners included Iristel Inc., which serves the North under the brand Ice Wireless, Bragg Communications Inc., which is based in the Maritimes and operates as Eastlink, SaskTel, TBayTel and Xplornet. SSi Micro Ltd. and Novus Technologies were qualified bidders but did not win any licences.

Analysts had expected wireless operators to collectively spend about $3 billion on the airwaves, which are not seen to be as important for 5G as the 3500 MHz spectrum slated for auction in 2020 or 2021.

Analysts expected only moderate competition between the Big Three given the international preference for 3500 MHz and precedent from the U.S. In the American 600 MHz auction, AT&T spent about US$1 billion on spectrum while Verizon and Sprint sat out.

Innovation, Science and Economic Development Minister Navdeep Bains: “Where there’s strong regional competition, Canadians pay one third less on their cellphone bills.”

Peter J. Thompson/Financial Post/File

The Big Three already have 700 MHz spectrum, so “presumably now require less incremental spectrum,” Desjardins analyst Maher Yaghi noted to clients in his 2019 preview.

Plus, Verizon’s former CFO said the 600 and 700 bands “don’t play well together,” Yaghi noted.

Still, spectrum is critical for mobile providers. Both Freedom and Videotron got their start after the 2008 spectrum auction that set aside 40 per cent for startups thanks to a political push for more wireless competition. Regional cable giants Shaw and Quebecor eventually purchased the new entrants.

RBC analyst Drew McReynolds’ original forecast predicted the Big Three would spend roughly the same in the auction (about $750 million each). But he “would not read too much into BCE’s surprising lack of 600 Mhz spectrum or Rogers’ greater than expected cash outlay,” McReynolds wrote in a note to clients Wednesday.

It’s important to consider their existing spectrum portfolio, the upcoming 3500 MHz auction in 2020 and potential differences in approach to 5G architecture, he noted.

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