Verizon Communications Inc. (VZ - Analyst Report) has reportedly postponed the acquisitions of Canadian telecom provider Wind Mobile and Mobilicity. The company is waiting for the government auction in Canada for wireless licenses in January next year before entering the Canadian market. Previously, Verizon proposed to acquire Wind Mobile for $700 million and reportedly entered a non-disclosure agreement with Mobility for a buyout.
According to reports, the company is now focusing on participating in the upcoming auction of the 700-megahertz band spectrum. News reports also suggest that if Verizon wins, it might reconsider its purchase plans or go ahead next year.
Despite the small stature, we believe these companies would mark a significant stepping stone for the company in Canada. Wind Mobile, which began its operations in 2009, has around 600,000 customers, which has almost surpassed wirelesses subscriber base of the fourth largest wireless Canadian carriers - Saskatchewan Telecommunications Holding Corporation. Further, Mobilicity – an acquisition targeted by Telus in the past – has around 250, 000 subscribers. Although Mobilicity has undertaken no major expansion in the last two years, it continues to operate in key areas like Greater Toronto Area, Ottawa, Calgary, Edmonton and Greater Vancouver.
We believe the company’s entry into new markets like Canada would provide a significant opportunity to grow beyond the saturation of the U.S. wireless market.
However, the news of possible takeovers in Canada by telecom giant Verizon has stirred volatilities for tier one Canadian telecom carriers like TELUS Corporation (TU - Analyst Report), BCE, Inc. (BCE - Analyst Report) and Rogers Communications Inc. (RCI - Analyst Report). The market has been on the sidelines over these carriers, which pulled down their market valuation. To tide over the debilitating scenario, Rogers attempted to hinder Verizon's possible market entry by proposing a buyout to these two carriers in private equity bids. We believe with more companies eyeing Canadian takeover, Verizon will face many contenders ahead.
Verizon, currently has Zacks Rank #3 (Hold).