Cogeco bows out of 600 MHz auction but wireless still an option

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Cogeco Communications said that it will not participate in next year’s 600 MHz spectrum auction but will still “explore opportunities” in the wireless market.

In a surprising announcement late Thursday, the company said that basing the structure of the auction on large geographic areas makes it “uneconomical”.

“We continue to actively and strategically pursue opportunities to enter the wireless market in order to offer a complementary service to our customers and expand our business,” said Cogeco’s SVP strategy and CTO Luc Noiseux, in the statement. “Following the acquisition of spectrum licenses earlier this year, we are committed to continue exploring various business models in order to launch a profitable wireless service.”

Cogeco also called for regulatory conditions that allow new entrants to successfully compete.

In a note to clients, Canaccord Genuity analyst Aravinda Galappatthige said that he expects that Cogeco will align with a partner to reduce capex requirements, or that it may pursue an MVNO or hybrid wireless buildout if the regulatory environment changes.

“Given the company’s leverage, current regulatory spectrum framework (with large geographic areas), and the company’s inability to find a partner in the wireless space (such as Freedom), we believe it made the right decision by not participating”, continues the note. “We believe (Cogeco) will continue to allocate capital based on its previous mandate of a) reducing leverage, b) pursuing acquisitions in the attractive U.S. cable space, and c) looking for economically efficient ways to enter the wireless market.”

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