10-16-13 11:03 AM EDT | Email Article
     By Ben Dummett 

TORONTO--In a potential blow to the Canadian government's efforts to foster greater competition in the country's wireless sector, private-equity firm Birch Hill Equity Partners Management Inc. pulled out of Canada's upcoming spectrum auction.

The government plans to auction off next-generation wireless spectrum in January. It will allow providers of mobile services to offer richer video and broadband services to consumers. Currently, the country's incumbent wireless operators, BCE Inc. (TU), Telus Corp. (TU) and Rogers Communications Inc. (RCI), dominate this market. The government had hoped the auction would entice new entrants to enter the field, driving down prices for mobile services and spurring greater innovation.

Birch Hill, a Toronto-based private-equity firm, was one 15 bidders that had indicated in September they planned to participate in the auction. But the firm has now dropped out, according to the web site of Industry Canada, which is running the auction.

A Birch Hill spokesman declined to comment.

The move comes after analysts had already suggested the list of qualified bidders lacked the financial muscle to compete against the incuments. The government had hoped a big foreign carrier such as Verizon Communications Inc. (VZ) would join the auction. But that didn't happen.

Remaining bidders still include Canada' major mobile phone providers, as well as Globalive Wireless Management Corp., Canada's biggest mobile-phone startup. Globalive, which offers it services under the Wind Mobile banner, as well as Mobilicity, another start-up, had aspirations of challenging the country's incumbent operators. But both have struggled to gain market share and attract financing. And each has so far unsuccessfully sought buyers.

Birch Hill's decision "reinforces the incumbents' strength, lack of interest in new entrants and the fact that auction proceeds may be very disappointing for the government and encouraging for the incumbents," Canaccord Genuity said.

A government spokeswoman couldn't immediately be reached for comment.

Write to Ben Dummett at ben.dummett@wsj.com


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(END) Dow Jones Newswires

October 16, 2013 11:03 ET (15:03 GMT)

Copyright (c) 2013 Dow Jones & Company, Inc.
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