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The Canadian Press - ONLINE EDITION

Wind CEO: Competition in wireless sector slowed by failure to unite new entrants

TORONTO - The head of Wind Mobile says Canada's new wireless companies should have worked harder to combine forces against the three big incumbent carriers after Ottawa opened up the market a few years ago, but he insists competition will survive.

"We should have worked harder to partner with Mobilicity and Public at the outset, instead of building three networks and competing with each other in the Toronto market, for example," Wind chief executive Anthony Lacavera said in interview ahead of his speech Tuesday at the Canadian Telecom Summit.

"Wind obviously suffered by growing more slowly as a result of splitting the market with them. Meanwhile the incumbents just sat back and watched the new entrants sort of beat up on each other and they really didn't have much impact on the incumbents."

Still, Lacavera said it's important to make a distinction between his company and fellow entrants Public Mobile and Mobilicity, which sought creditor protection last year. Public Mobile has since been acquired by Telus (TSX:T) and Mobilicity continues to operate under court supervision.

He said the financial problems of two other small carriers, coupled with Wind's inability to raise additional investment to fund its growth and participate in January's key licence auction, have overshadowed Wind's success at the operational level and the success of Videotron, EastLink, MTS Allstream and SaskTel in their respective regions.

"A variety of analyst reports have suggested that Wind is on very shaky ground and the end is near, if you will. But that's just categorically wrong. The operating results are very strong," Lacavera said.

He said Wind is approaching break-even in its operations and, by that measure, will become profitable from 2015 onward.

As of last week, Toronto-based Wind had a total of 735,000 subscribers in the three provinces where it operates — Ontario, Alberta and British Columbia. That's up from about 702,000 at the end of March when, as Lacavera said, many analysts were surprised that Wind had added 26,000 subscribers to its based over a three-month period.

Despite the Wind's relatively rapid rate of subscriber growth, its base is dwarfed by those at the three biggest carriers, with Rogers Communications Inc. (TSX:RCI.B) alone having 9.4 million subscribers at the end of the first quarter. Telus had about 7.82 million and BCE's Bell affiliates (TSX:BCE) had 7.76 million, according to industry statistics.

A number of industry observers have said they are skeptical that Ottawa's policy of increasing competition in the sector will be successful in bringing down prices and stimulating innovation because of the enormous costs involved.

Lacavera said he believes Canada can support four competitive wireless carriers in every region.

"Despite incumbent rhetoric and despite analyst criticism, I actually think the government has successfully implemented a fourth-carrier policy and the results of it are clear — we have Wind in Ontario, B.C. and Alberta, we have Videotron in Quebec, EastLink in the East and MTS and SaskTel in Manitoba and Saskatchewan," he said.

Lacavera admitted that Wind is having major challenges in attracting investors — domestically or internationally.

The federal government's decision to block Wind majority owner Vimpelcom from buying Lacavera's minority stake, coupled with Ottawa's decision to block an Egyptian business group from buying the Allstream wireline business from Manitoba Telecom for security reasons, have been incredibly disruptive, Lacavera said.

"The difficulty is that the security concerns they have are unspecified, so we really have no way of resolving them," Lacavera said. "The ability to finance Wind from a foreign investment perspective was significantly damaged when the Allstream decision came down."

— Follow @DavidPaddon on Twitter.

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