Fourth bidder drops out of Canada's wireless spectrum auction

OTTAWA (Reuters) - In another setback for the Canadian government's plan to introduce more competition in the wireless sector, private equity firm Catalyst Capital Group has withdrawn from a government auction of prized wireless airwaves.

Catalyst becomes the fourth entity to opt out after a total of 15 players initially registered to bid in the January 14 auction of 700 MHz spectrum, according to an update posted on the industry ministry's website late on Wednesday.

The government's rules for the upcoming auction, as well as for one held in 2008, are aimed at lowering consumer prices by breaking the stronghold that Canada's three dominant players -Rogers Communications Inc, BCE Inc and Telus Corp - have on the country's mobile phone business.

Ottawa says the upcoming auction is designed to ensure there is a fourth competitor in every wireless market in Canada.

But new entrants have found it hard to survive in the Canadian market, and some analysts and company executives have complained that government policies have confused and spooked investors eyeing a move into the country's telecoms industry.

With no major foreign companies signing up for the 2014 auction and the list of bidders shrinking, the path is clear for the Big Three telecom companies to pick up new spectrum without much competition, one analyst said.

"This suggests to us that investors should not expect any viable incremental players to enter Canadian wireless," said Dvai Ghose, head of research at Canaccord Genuity, in a note to clients.

"In our view, the government's dream of a viable fourth player in every market is in tatters and its $9 million publicity campaign has achieved very little," he said, referring to an advertising war between the federal government and the Big Three earlier this year.

It was not immediately clear why Catalyst, the single largest debt holder in struggling wireless startup Mobilicity, withdrew from the bidding process.

The other bidders that have withdrawn are Birch Hill Equity Partners, Vecima and a company listed as 1770129 Alberta, connected with Corridor Communications.

The remaining 11 bidders are Bell, Telus, Rogers, Manitoba Telecom, Saskatchewan Telecommunications, Quebecor Inc's Videotron, Globalive, Bragg Communications, TBayTel, Novus and Feenix Wireless.

(Reporting by Louise Egan; Editing by Peter Galloway)