Will Mobile Phone Rates Fall as Shaw Buys Wind Mobile ?

cellphoneThe Globe & Mail reported that Shaw Communications is buying Wind Mobile in  a $1.6 billion deal. Primarily a cable and telecommunications company, Shaw wants to compete in the mobile phone business.  Share prices of the big 3 wireless provider — BCE, Rogers, Telus — fell on the news, anticipating that increased competition will force down mobile phone rates and profits in the industry.

The deal requires regulatory and government approval, and is expected to close in 2016.

With Wind, Shaw gets a traditional cellular network to complement its existing WiFi and cable services. The Wind addition also gives Shaw greater economies of scale, in bundling cable/internet/wireless services for customers, and being able to offer lower prices.

The big question is whether mobile phone rates for Canadians, among the highest in the world, will fall from this new competition. With 4 major competitors, the Canadian wireless market begins to look more like European wireless markets , which have more competitors and lower prices.

However, some analysts believe Shaw will not undercut other competitors in price, acting more like a cooperative cartel member.

We shall see.