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Verizon Shakes Up Canadian Media Sector With Possible Wind Mobile Deal

Shares in Rogers Communications, BCE and Telus Corp., which bundle cable TV, wireless phone and Internet services here, fell on news that the U.S. telecom giant might be coming north.

Verizon Communications, on a possible Canadian shopping expedition, has sparked a sell-off of top Canadian media stocks.

Shares in Rogers Communications, BCE and Telus Corp. fell off a cliff this past week, before recovering somewhat on Friday, after the Globe and Mail newspaper said Verizon was eyeing a $700 million deal to acquire upstart Canadian wireless phone provider Wind Mobile.

The prospect of New York-based Verizon and its deep pockets shaking up a Canadian mobile phone market dominated by BCE, Rogers and Telus is welcomed by the federal government as it eyes more competition and lower wireless phone charges for frustrated consumers.

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Wind Mobile and rival upstart wireless players Mobilicity and Public Mobile launched in recent years to make Canadian market inroads against the big three wireless players.

But Telus Corp., in May of this year, unveiled deal to acquire Mobilicity -- the latest sign that Canadian media giants are quickly becoming major telecom players.

And the disconnected dots of evolving Canada’s foreign ownership rules allowed Ottawa three years ago to overrule the country’s telecom regulator and allow Wind Mobile to have its corporate ownership concentrated in Egypt, via Orascom Telecom Holding.

Orascom earlier this month withdrew a regulatory application to acquire control of Wind Mobile, which opens the way to a possible takeover by Verizon.

Financial analysts reacted to the news Verizon could be coming north by downgrading shares in Rogers and Telus.

“In our view, Verizon entering Canada would be a game changer for the Canadian wireless market given the company’s significant resources and scale,” said RBC analysts Drew McReynolds and Haran Posner in an investors note on June 27.

Analysts venture Verizon will set up in major Canadian markets, including Toronto, as it looks to serve U.S. wireless customers traveling north of the border.

That strategy would rule out Verizon becoming a national carrier to directly challenge BCE, Rogers and Telus as they bundle their wireless offerings with video-rich Internet and cable TV packages.

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BCE this coming week will complete its $3 billion takeover of Astral Media to drive video content like The Movie Network pay TV service, including HBO and Showtime series fare, down its growing mobile and online platforms.

BCE’s Bell Media division already owns the top-rated CTV conventional TV network and a string of cable channels like The Sports Network. Elsewhere, Rogers Communications, Canada’s largest wireless player with major media holdings of its own, is growing its Sportsnet cable sports channel and City conventional TV network.

The one strong emerging wireless player is Quebecor, which has become a major regional wireless player in Quebec via its cable and telecom division Videotron.

Quebecor also includes the TVA French language TV network in Quebec.