Chris Sorensen
Business Reporter
Bell Canada Inc. and Telus Corp. plan to jointly invest an estimated $1 billion in new network technology that will end Rogers Communications Inc.'s monopoly on devices such as the iPhone and BlackBerry Bold in Canada.
In a widely anticipated-move, the two phone companies said today that they will "overlay" a third-generation, or 3G, wireless technology that's linked to the GSM (Global System for Mobile) standard onto their existing CDMA (Code Division Multiple Access) networks by 2010, in time for the Winter Olympic Games in Vancouver.
Both Bell and Telus already offer a high-speed 3G technology based on the CDMA platform and have an agreement in place that allows subscribers to roam on each other's wireless networks, providing national coverage.
However, GSM-based wireless technologies have emerged as the global standard, with some 80 per cent of devices around the world now running on GSM-based networks.
That has given GSM carriers, including Rogers, Canada's only GSM provider, a key advantage because most handset manufacturers tend to make their devices for GSM carriers months or years before they offer a CDMA model.
For example, Apple Inc.'s popular iPhone is currently available only as a GSM device.
Darren Entwistle, the CEO of Telus, said during a conference call with analysts and investors that offering two 3G networks side-by-side will help to "future-proof" Telus as the entire wireless industry moves toward a common standard over the next few years.
"This will enable a smoother transition to a fourth-generation wireless network," Entwistle said.
Entwistle stressed that Telus is not swapping its legacy CDMA network, meaning that Telus customers using CDMA-based devices won't be forced to make a switch. Instead, the phone company will build a second voice and data network using the same HSPA (High Speed Packet Access) technology that rival Rogers uses to run high-end devices such as the iPhone and BlackBerry Bold, among others.
The Star first reported in January that Telus was exploring the possibility of adopting GSM-based technologies and that Bell faced a similar decision.
In addition to being able to offer a wider selection of devices, Telus and Bell may also have an opportunity to take advantage of lower prices for handsets and more revenue from international roaming agreements.
However, analysts note that most of those financial advantages may be muted initially because devices running on HSPA technology tend to be expensive smartphones that offer thinner margins, and because most international roaming is still done with second-generation GSM phones.
"The benefits are hard to quantify and may not materialize for some time," said Jeffrey Fan, an analyst at UBS Investment Research, in a note to clients.
Telus didn't disclose exactly how much the effort would cost, but said it wouldn't need to adjust its 2008 capital expenditure guidance of $1.9 billion. Spending next year will be higher than forecast at $750 million, Telus said.
Bell also declined to comment on how much it planned to spend on its HSPA build-out , but analysts estimate it will cost as much as $1 billion split between the two carriers.
"Investing in broadband networks and services and accelerating wireless are strategic imperatives for the Bell team, and they are key to achieving our goal - to be recognized by customers as Canada's leading communications company," said George Cope, the CEO of Bell Canada.
Cope recently took over as CEO from Michael Sabia in connection with the outstanding $52 billion privatization of parent BCE Inc. by the Ontario Teachers' Pension Plan and U.S. private equity investors. The transaction is scheduled to be completed by Dec. 11, but investors are concerned that the ongoing global financial crisis may derail what's been described as the biggest-ever leveraged buyout.
The two carriers have selected Nokia Siemens Networks and Huawei to supply the necessary telecommunications equipment for the HSPA overlay.
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