By Randall Palmer and Louise Egan OTTAWA (Reuters) - Major foreign telecommunications companies have decided against registering for a Canadian wireless spectrum auction, in a setback for the government's plans to introduce more competition into the mobile telephone sector. The lack of big foreign entrants in a list of bidders that the government published on Monday is good news for the dominant Canadian companies - Rogers Communications Inc, BCE Inc and Telus Corp. Shares of Rogers, BCE and Telus rose in morning trading. All three stocks had taken a beating in June on reports that Verizon Communications Inc was looking to enter the Canadian telecommunications market. Verizon later said it would not do so. In all, 15 companies registered to bid on the 700 MHz spectrum in an auction that kicks off on January 14. The process may last two to seven weeks, based on how long similar auctions have taken internationally. "We view the list as a key positive for the incumbents and a key disappointment for the government, which wants four carriers in every market," Dvai Ghose, head of research at Canaccord Genuity in Toronto, said in a research note. The Conservative government has tried to ensure a strong fourth player could challenge the incumbents in each region of Canada, and it eliminated foreign ownership restrictions on small companies to try to attract competition. There are smaller fourth players in some parts of the country. "Surely now the government realizes that the market will not support four carriers per market and must rethink its failed wireless policy," Ghose said. But Industry Minister James Moore did not concede defeat, saying the government's efforts to increase competition among telecoms had already led to lower prices. "This trend will continue as a result of January's auction," he said in a statement. "In addition to this auction, our government will continue to aggressively pursue policies that ensure consumer interests are at the core of all government decisions." He did not specify what other policies he might pursue, but if all else fails, the government has the option of trying to drive prices down through regulation. Moore last week endorsed the decision by the government regulator to study roaming rates. RBC Dominion Securities analyst Drew McReynolds cautioned against chasing Canadian telecoms stocks despite the lack of new foreign bidders, saying "regulatory risk is now the major headwind for incumbents." There remains the outside chance that a big foreign wireless player could try to buy one of the small Canadian outfits and bid on spectrum using the Canadian operator's initial registration for the auction. But McReynolds cautioned it would be "a still tough up-hill climb for any 4th player in Canada regardless of size or access to capital." Among the auction registrants is a unit of Canadian private equity firm Birch Hill Equity Partners Management Inc, which was tipped earlier as a possible bidder for small companies Wind Mobile and Mobilicity. Sources familiar with Birch Hill's plans said in August that the company had sought financial backing from Rogers in a plan that involved Wind Mobile's sharing its network with the market leader. It was not clear if this was still the plan and, if so, whether the government would allow it. Mobilicity Chairman John Bitove is listed as a bidder through a company called Feenix Wireless Inc. Separately, private equity firm Catalyst Capital Group Inc, which owns Mobilicity debt, also signed up. Both Wind Mobile and Mobilicity launched their wireless services after acquiring spectrum in 2008 and have struggled to break the incumbents' grip. Wind, however, has attracted 650,000 wireless customers, compared with 7 million to 10 million each for the Big Three. With no Verizons or AT&Ts in the mix and what he termed muted private equity interest, Ghose said the government might raise less revenue from the auction than it had hoped. He estimated the cost for each of the four prime blocks at well below the C$500 million ($485 million) he had initially assumed. Interest from a big foreign carrier like Verizon would have brought the price per block to about $1 billion, he said. The information provided on Monday did not reveal companies' bidding strategies, such as the regions where they plan to bid. There are 14 regions, with seven spectrum blocks in each. But four of those blocks are most coveted because they are aligned with U.S. airwaves. The registered companies can withdraw from the auction and get a full refund on their deposits. The government will publish the final list of provisionally qualified bidders on October 23. BCE shares climbed 1.3 percent by late afternoon on the Toronto Stock Exchange to C$44.50 on the Toronto Stock Exchange. Rogers was up 1.4 percent at C$45.47, and Telus rose 2.5 percent to C$35.44. (With additional reporting by Alastair Sharp and Solarina Ho in Toronto; Editing by Jeffrey Hodgson and Lisa Von Ahn and Chizu Nomiyama)
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