Stocks drop after report Verizon tables Wind Mobile offer

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TORONTO (NEWS1130) – Shares of Canada’s largest telecom companies fell sharply following a report that US telecom operator Verizon Communications Inc. (NYSE:VZ) has made an initial offer for Wind Mobile and is starting talks with Mobilicity.

The entry of Verizon into the Canadian market could pose a significant challenge to the country’s domestic wireless carriers, which historically have faced limited foreign competition due to federal ownership rules.

Shares of Vancouver-based Telus (TSX:T), the country’s third-largest wireless carrier, were down 10 per cent shortly after the Toronto Stock Exchange opened Wednesday. Those shares dropped $3.37 to $30.

Shares of Rogers Communications (TSX:RCI.B) were down nine per cent, falling $4.14 to $41.75, and BCE (TSX:BCE), parent of Bell Canada, fell about five per cent, giving up $2.10 to trade at $41.22.

At the Nasdaq market, where Verizon’s shares are listed, the company’s stock slipped less than one per cent, dropping 13 cents to US$50.31 at mid-morning.

All three of the Canadian telecommunications companies get significant portions of the profit from their wireless businesses, which provide services to consumer and business cellphones and smartphones.

The Globe and Mail report said that Verizon has an offer on the table that values privately owned Wind Mobile at $700 million, although it didn’t say how much of the company would be owned by the U.S. carrier.

It also said Verizon has begun talks with Mobilicity, another of Canada’s smaller wireless carriers.

There has been ongoing speculation that a big foreign carrier may be interested in buying one of more of the smaller Canadian wireless carriers, which emerged after a 2008 auction of federal licences set aside spectrum for new entrants.

However, it’s unclear how far the federal government will go in relaxing its foreign ownership rules in order to enable its stated goal of having a fourth national wireless carrier to compete with the Big Three.

The paper says its story on Verizon is based on two sources close to the situation but that the companies’ spokespeople hadn’t confirmed the information.

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