(The Canadian Press) Shares of Canada's largest telecom companies fell sharply following a report that U.S. telecom operator
Verizon Communications Inc. (
NYSE:VZ,
Stock Forum) has made an initial offer for Wind Mobile and is starting talks with Mobilicity.
The entry of Verizon into the Canadian market could pose a significant challenge to the country's domestic wireless carriers, which historically have faced limited foreign competition due to federal ownership rules.
Shares of Vancouver-based
Telus Corp. (
TSX: T.T,
Stock Forum), the country's second-largest wireless provider, were down 7.6% to $30.82 at midmorning but had been down further early in the session.
Rogers Communications (
TSX: T.RCI.B,
Stock Forum), with the Canada's largest base of wireless customers, fell 8.43% to $42.02 while
BCE Inc. (
TSX: T.BCE,
Stock Forum) gave back 4.2% to $41.50.
Verizon gained 0.38%to US$50.63 on the New York Stock Exchange.
All three of the Canadian telecommunications companies get significant portions of the profit from their wireless businesses, which provide services to consumer and business smartphones and cellphones.
Desjardins analyst Maher Yaghi noted the potential downside for some of Canada's telecom companies.
``The news, if true, would mean a significant move that could disrupt the Canadian wireless market,'' Yaghi said in a research note.
``We believe Verizon has several advantages it could use to become successful in the marketplace, such as its advantage with U.S. roaming, capital strength and, importantly, its handset-buying power,'' he said.
Yaghi said that BCE, Quebecor (
TSX: T.QBR.B,
Stock Forum) and Bell Aliant, which transferred its wireless business to Bell several years ago in a reorganization of BCE's holdings, are best positioned to weather the storm.
``BCE remains the least exposed to wireless among the incumbents. Quebecor is essentially a regional fourth player in Quebec with a growing wireless base and strong brand recognition in the area. Bell Aliant has effectively no exposure to wireless and is turning its trajectory around following several years of decline.''
The Globe and Mail report said that Verizon has an offer on the table that values privately owned Wind Mobile at $700 million, although it didn't say how much of the company would be owned by the U.S. carrier.
Wind Mobile is 65% owned by Russian owned, Dutch-headquartered VimpelCom while the remaining 35% is owned by founder Anthony Lacavera.
The Globe also said Verizon has begun talks with Mobilicity, another of Canada's smaller wireless carriers.
There has been ongoing speculation that a big foreign carrier may be interested in buying one of more of the smaller Canadian wireless carriers, which emerged after a 2008 auction of federal set aside spectrum for new entrants.
However, it's unclear how far the federal government will go in relaxing its foreign ownership rules in order to enable its stated goal of having a fourth national wireless carrier to compete with the Big Three.
The paper says its story on Verizon is based on two sources close to the situation but that the companies' spokespeople hadn't confirmed the information.