On November 29, 2013, Canada’s Competition Bureau (the Bureau) issued a no-action letter in respect of the proposed acquisition by TELUS Communications Inc. (Telus) of Public Mobile Holdings Inc. and its operating subsidiary, Public Mobile Inc. (Public Mobile), giving Telus the green light to acquire Public Mobile’s four spectrum licenses. The Bureau’s review is noteworthy for several reasons: First, it resulted in a remedy. Second, the remedy is behavioural in nature. Third, there is no “consent agreement”, which is the usual way of formalizing a remedy. And, fourth, the precise form of the commitment made by Telus is not clear. A position statement accompanied the Bureau’s announcement.
In its position statement, the Bureau characterized the wireless telecommunications industry as having high barriers to entry and expansion, readily accessible information about competitor pricing, and the existence of industry organizations that could facilitate the dissemination of market and pricing information amongst competitors, all of which are factors the Bureau states could potentially raise concerns not only of unilateral, but coordinated conduct. The Bureau also characterized the industy as having a high concentration of market share, with the vast majority of wireless subscribers served by three national incumbents (Telus, Rogers and Bell). Following Industry Canada’s 2008 spectrum auction, the Bureau states that national incumbents responded to increased competition from new entrants (WIND Mobile, Public Mobile, Mobilicity and Videotron Mobile) by lowering prices, accelerating the introduction of new products, plans and services, and expanding the overall range and diversity of wireless products, plans and services available to customers.
While the parties will continue to face competition from the other national incumbents post-transaction, the Bureau focused its analysis on the degree to which the non-incumbents were likely to provide effective remaining competition in Southern Ontario and Greater Montreal, where Telus’ “value conscious” Koodo brand, and Public Mobile’s wireless networks overlap. Based on its market contacts, a review of the parties’ and third parties’ strategic documents and business plans (including information on customer switching data), the Bureau concluded that the remaining non-incumbents in Southern Ontario (Wind Mobile and Mobilicity) and Greater Montreal (Videotron) were likely to continue to provide effective competition post-transaction.
In deciding to issue the no-action letter, the Bureau also considered Telus’ commitment to offer a $19/month “Unlimited Talk” plan on substantially the same terms as Public Mobile’s current plan until at least December 31, 2014. Through its review, the Bureau had learned that Public Mobile intended to discontinue the plan due to financial sustainability issues, and was concerned the timing for the elimination of the plan would be accelerated as a result of the proposed transaction. Telus’ commitment to retain the plan until the end of 2014 addressed the Bureau’s concerns. The Bureau did not, however, require Telus to enter into a consent agreement to formalize what is, in effect, a behavioural remedy.
The transfer of Public Mobile’s four spectrum licenses to Telus was also subject to review by Industry Canada, which approved the licence transfer on October 23, 2013 on the grounds that the transaction would not materially change the spectrum concentration of incumbents in Canada, and therefore would not diminish competition in the wireless sector. As noted in Public Mobile’s Press Release, Public Mobile acquired its spectrum licences from the open part of the spectrum auction and not the AWS set-aside for new entrants; thereby allowing Public Mobile to transfer its spectrum licences to Telus without any restriction.