New wireless player Mobilicity wants Canadian developers of mobile apps to be able to raise money the same way junior resource companies can — with flow shares that give investors tax incentives.
Mobilicity executive chairman John Bitove is proposing what he calls “Canadian app flow through shares,” which would be used by developers to raise the cash need to support the development of new apps.
Flow through shares in the resource sector provide tax incentives to investors by allowing deductions for expenses and investment tax credits.
“We do it in natural resources, there’s no reason why we shouldn’t do it in app development,” Bitove said in an interview Tuesday after a speech to the Canadian Telecom Summit in Toronto.
“I think the Canadian wireless industry needs more Canadian-oriented apps . . . We would, in effect, be incubating an industry in Canada that is one of the fastest growing global industries — which is app software,” Bitove said.
Software applications allow consumers to do everything from play games to check the weather to learn a language to get their airplane boarding passes.
Bitove said helping to fund app development would also increase the adoption of smartphones, which are sold by wireless carriers like Mobilicity and its competitors. He noted that according to a recent Google study, there are about 25 apps installed on the average Canadian smartphone.
Wireless carriers also earn revenue from monthly data plans that allow consumers to listen to music, send email or stream live TV on their smartphones.
There are a number of app developers in Toronto because that’s where the funding is, Bitove said.
“I think if we create the infrastructure — i.e. flow through shares — they can stay in Labrador or Baie Comeau or in Prince George and do what they’re doing,” he said, adding the federal government has indicated it’s going to create ways for them to secure funding.
Apple, Samsung and Research In Motion (TSX:RIM) all have app stores with thousands and thousands of applications for consumers and businesses.
But Bitove noted that apps can be just as speculative as natural resources, noting that every one won’t be a winner. By promoting and investing in “app exploration,” Canadians have the chance to contribute to entrepreneurship, he said in his speech.
Bitove also said he would like to see public-private partnerships to build out networks serving small communities and rural Canada because they would bring advanced technology to these areas much faster.
Mobilicity, which launched in 2010, had more than 200,000 subscribers at the end of 2011 with both smartphone and talk and text users.
Meanwhile, Anthony Lacavera, chairman and CEO of Wind Mobile, said he still believes there should be some kind of consolidation among new players Wind, Mobilicity and Public Mobile to compete against Rogers (TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T).
“The incumbents are way too strong for the fragmented new entrants to compete with,” said Lacavera, who will speak at the telecom summit on Wednesday.
“I don’t think it has to happen long-term, but it isn’t on the near-term horizon.”
He said Wind Mobile will focus on capturing smartphone users and put less emphasis on talk-and-text users. Wind is aiming for 60 per cent of its base to be smartphones users by the end of the year, he said, adding it’s now 40 per cent.
Wind Mobile has about 446,000 customers, he said.
Industry Minister Christian Paradis said there’s still an urban-rural divide in broadband services, such as the speeds at which the Internet is delivered. He said he expects industry players to close the gap and extend their rural footprints.
“It’s quite simply unacceptable,” Paradis said in prepared remarks for a speech Tuesday at the telecom summit.
“To succeed, Canadians living in a rural environment must have access to the same services that their urban counterparts have,” he said.
Paradis also said the upcoming federal auction of radio waves of will help bring faster networks to rural Canada. The auction is expected next year.
“And to support competition and investment, we’ll be applying caps in both auctions. This will enable at least four companies in each licence area to secure spectrum. It will also support competition in the market and greater choice for Canadians.”