Bell and Telus work together to roll out new wireless networks
Published Friday October 10th, 2008
MONTREAL - Competition is expected to heat up in Canada's cellphone market as rivals BCE Inc. (TSX:BCE) and Telus (TSX:T) team up to jointly develop a faster national wireless network.
The companies said Friday they are each working to launch a fourth-generation network using technology that they say will be the new global standard in the coming few years.
By the 2010 Olympic Games in Vancouver they plan to first install high-speed networks, using a version of the global system for mobile communications - GSM - already used by industry leader Rogers Communications (TSX:RCI.B) and many others around the world.
Building a national network estimated to cost between $800 million and $1 billion will allow all three Canadian wireless giants to compete on similar platforms that support the newest handsets and fastest services.
By working together in an extension of a partnership started in 2001, Bell Canada and Telus will reduce their costs and speed up the startup of the new network. It will overlay existing 850 and 1,900 MHz frequencies rather than use newly acquired spectrum.
Some of the infrastructure will also be used to eventually launch of a network using technology known as LTE, for long term evolution.
Telus CEO Darren Entwistle said the shift to the world standard will be a win for Canadian consumers.
It will provide greater wireless functionality, including international roaming, fast network speeds and the latest mobile devices.
Rogers has frequently been able to hit the market with the newest models of products that are made first for GSM networks, which are the standard in Europe, many parts of Asia and on the biggest American cellphone services
"The investment allows Telus to continue to drive innovation for Canadians," he said in a conference call with analysts.
The new network will continue to support the existing code division multiple access - CDMA - technology now used by both companies.
The faster service could allow them to run trendy new smartphones like the iPhone and Blackberry Bold, which are now available in Canada only from Rogers.
It will also permits increased play for heavy data users, lucrative customers who are expected to grow in the coming years.
Bell Mobility president Wade Oosterman said the investment is not contingent on the planned December close of the privatization of Canada's largest telecom company.
While he wouldn't comment on the status of the $52-billion sale to a consortium led by the Ontario Teachers' Pension Plan, Oosterman said the sizable investment demonstrates Bell's confidence in its performance despite world market turmoil.
"When we look at our industry and our place in it and the things we are trying to accomplish, we have no hesitation whatsoever in making this announcement of this investment at this time," he said in an interview.
Oosterman said increasing choice to consumers will foster competition, which tends to benefit the end user and spur innovation.
"What we will do is deliver a superior network and superior choice to clients," he said.
The companies have selected Nokia Siemens Networks and Huawei to provide equipment for the next-generation network.
Globalive CEO Anthony Lacavera said the new network is very good news for his company's efforts to build a national cellphone network.
"This is a first step in creating a lot more of a competitive dynamic in GSM in Canada," he said in an interview.
Lacavera said the addition of Bell and Telus helps Globalive more with offering features and flexibility than necessarily having "a significant impact on roaming costs."
Partnering with one or more of the Canadian incumbents would give them access to the deep vendor relationship of its funding partner. Orascom Telecom Holdings S.A.E. has more than 100 million cellphone subscribers and very strong buying power for handsets, he said.
Although the announcement was expected, telecom analyst Carmi Levy of AR Communications said it was a great move.
"The future for high speed bandwidth looks very rosy today as a result of this announcement," he said in an interview.
It will mean increased competition, which will keep a check on prices and ensure transparency in offerings to customers, Levy said.
Moving to third-generation wireless networks from second-generation provides a jump in performance similar to upgrading from dialup services to high-speed Internet access on computers.
"When 4G does come, it will be like 3G on steroids. It will give us that much more speed, bandwidth, capability and stability," Levy said
It will allow faster and richer interactive services, quicker downloadings, improved streaming of movies and video email, he said.
RBC Capital Markets analyst Jonathan Allen said the collaboration between Bell and Telus will given them a better chance to capture marketshare and in-bound roaming from Rogers.
Dvai Ghose of Genuity Capital Markets said the delay in launching the 3G network until 2010 will help Rogers to maintain its short-term advantage.
But then the Bell and Telus investment will have a short payback period, he wrote in a note to clients.
Each company purchases about three million handsets annually, and could save about $150 million because CDMA handsets tend to be $50 more expensive than GSM units because the CDMA platform lacks economies of scale.
BCE shares closed down $1 to $33, a decline of nearly three per cent on the Toronto Stock Exchange. Telus shares lost 3.34 per cent to $35, while Rogers shares closed down nearly 10 per cent to $29.24.
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