Thank you very much for inviting us today. On behalf of Mobilicity I am very pleased to be here to submit this presentation.
I would like to start by giving Mobilicity's perspective on some of the challenges and difficulties of a small carrier starting up in Canada.
As you may know, Mobilicity was one of several new entrants that entered into the market for the supply of wireless telephone, messaging, and data services in Canada. For $243 million, Mobilicity obtained spectrum in the AWS auction in 2008 and its entry ticket to compete in the Canadian wireless industry. Many more millions of dollars and a few years later, Mobilicity now serves Ottawa, Toronto, Vancouver, Calgary, and Edmonton.
Like other startup companies, Mobilicity has had to overcome many challenges before seeing success: misinformed consumers who are locked into legacy contracts with outrageous termination fees; incumbents that create flanker brands or give their existing flanker brands a complete makeover just to avoid competing with us head to head using their main brands; mandatory regulations such as roaming and tower sharing that did not transpire exactly as planned because of mandatory rules, but negotiated terms. That is just to name a few.
Spectrum and capital are two common challenges that wireless startups face. How do we ensure that we acquire enough spectrum to minimize any capacity issues with respect to our customers and enable us to build our own next big thing—commonly known as LTE—the same way the incumbents have already done from the extra spectrum they acquired or were gifted years ago? Indeed, how do we scream above the loud voices of the incumbents who keep telling people they need more spectrum to meet capacity needs, when in fact they already hold more spectrum than most other carriers in the world?
If spectrum is the real estate land that one acquires in order to build a beachfront hotel, then one must raise enough capital to construct and promote this beachfront hotel. Millions of dollars are required to purchase spectrum, build networks and IT systems, and market the brand, just to name a few. I would like to mention that these millions of dollars must all be spent before Mobilicity sees a single dollar of revenue in return. After Mobilicity starts receiving revenue from its customers, millions of additional dollars will be required to purchase more spectrum, expand and build a faster network, improve capabilities of the IT systems, and for more marketing and promotions.
This only illustrates the capital intensiveness of the wireless business and the challenges Mobilicity faces as David battles three Goliaths on a day-to-day basis.
Mobilicity therefore supports, with open arms, the changes to foreign ownership rules. Easing foreign ownership restrictions can potentially make raising capital easier, or decrease some of the costs to capital. These two benefits are almost unique to new entrants when compared with incumbent carriers who already have unfettered access to low-cost capital through their many revenue streams, their bank accounts, or the abundance of lower-risk capital investors domestically.
Indeed, due to the higher risks to new entrants, it is only logical to expect that the costs of borrowing for new entrants are to be higher than for incumbents. If easing foreign ownership can lower the interest of borrowing—or the cost of capital—by one dollar for Mobilicity, this is one extra dollar that Mobilicity can use elsewhere to lower plan costs, improve the network, or bring better quality of services to Canadians.
Thank you for your time.