Instant view: Canada to liberalize telecom market

(Reuters) – The Canadian government decided on Wednesday to liberalize the telecommunications market, scrapping foreign investment limits on carriers with less than a 10 percent market share.

Industry Minister Christian Paradis also said the government would auction off 700 MHz wireless spectrum in the first half of 2013, and he set the condition that companies with two or more blocks of spectrum were required to serve rural communities.

Following are comments from analysts:

GREG MACDONALD, ANALYST, MACQUARIE

“This is positive for the smaller players, especially the likes of Manitoba Telecom. … I don’t know whether this will result in a bid for Manitoba Telecom, but the stock when it opens tomorrow may factor in some of that speculation.”

MICHAEL GEIST, LAW PROFESSOR AT UNIVERSITY OF OTTAWA

“I frankly don’t think it’s all that surprising. … If there’s any surprise it’s why has it taken so long and was the government is still relatively timid, particularly with respect to the foreign investment issue.

“It was more aggressive on these issues back when it was a minority government, when one might have thought it would be a little more cautious. Now that it’s got a majority, it’s still seemingly unwilling to jump in with both feet on issues like foreign investment restrictions.

“This ultimately felt like lobbying coming from both sides of the fence. … This seems to be an attempt to split down the middle by not creating a set-aside, a cap is not the same as a set aside, but at the same time providing some measures that may prove advantageous to some of the small players.”

CARMI LEVY, INDEPENDENT ANALYST

“It’s certainly an interesting place to start. If the government was going to move towards loosening the rules, this is probably the most balanced way to do it, it starts us down the road of greater foreign ownership in the telecom space but at the same time it attempts to protect the incumbent players.

Minister Paradis was walking a tightrope in going down this route, especially after the government stepped in and blocked the Potash Corp deal in 2010.”

This doesn’t just touch telecom, it certainly sets a precedent for virtually every other sector in which the government has influence. This is a much bigger story than simply telecoms. It really illustrates broader economic policy direction.”

(Reporting By Euan Rocha, Alastair Sharp)

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