It was a sigh of relief so powerful it lifted the share prices of Canada’s Big Three mobile network operators–as well as those of smaller regional players–to one-day gains of 4, 5 and even 7 percent.

The domestic incumbents–including No. 1 Roger Communications Inc (TSX: RCI/B, NYSE: RCI), No. 2a BCE Inc (TSX: BCE, NYSE: BCE) and No. 2b TELUS Corp (TSX: T, NYSE: TU)–surged from oversold levels after the Sept. 2, 2013, announcement by Verizon Communications Inc (NYSE: VZ) that it was buying joint venture partner Vodafone Group Plc’s (London: VOD, NSDQ: VOD) 45 percent stake in Verizon Wireless for USD130 billion.

In interviews before and during Verizon’s discussion with analysts the morning after the big deal’s announcement CEO Lowell McAdam made it very clear that the biggest mobile network operator in the US had no intention of entering the Canadian market. Mr. McAdam averred that Verizon “never seriously considered” such a move.

Nevertheless, Canadian telecommunications stocks had been tumbling since mid-spring, spun by Verizon Chief Financial Officer Fran Shammo’s statement at a June 17 conference sponsored by The Wall Street Journal that the company was considering a wireless venture in Canada. “We’re looking at the opportunity,” Mr. Shammo said. “This is just us dipping our toe in the water.”

A Verizon spokesman later said that an acquisition of Wind Mobile, owned by privately held GlobalLive Communications Corp, was “one of many” options the company was considering.

A Wind acquisition, it was surmised, would give Verizon entry to the January 2014 spectrum auction sponsored by the Canadian government.

Rules controlling the spectrum auction, written with the explicit purpose of encouraging the emergence of a fourth nationwide wireless operator, favored Verizon over the domestic incumbents Rogers, BCE and TELUS.

The government divided the most valuable parts of the spectrum in the 700 megahertz band into four blocks and capped the amount of prime spectrum the incumbents can buy. The restrictions limit Rogers, BCE and Telus to bidding on just one of four blocks of 700 megahertz spectrum, prized for its ability to penetrate dense urban areas. New entrants can bid on two prime blocks, which, the carriers argued, favors foreign companies.

Verizon is no longer a threat. But the auction will be conducted under existing rules, despite very public lobbying efforts by Canada’s Big Three.

A more critical factor for Canadian wireless companies–as it is for US-based carriers–is the potential data-driven growth on the horizon.

Evidence continues to mount in support of the proposition that the mobile phone is humankind’s primary tool. With the rise of smart phones, e-mail is displacing text messaging, but social networking, audio streaming, music and games are also seeing strong growth.

And these are data-intensive activities.

Cisco Systems Inc (NSDQ: CSCO) forecast data growth of 13 times 2012 levels through 2017. Sweden-based vendor Telefonaktiebolaget SM Ericsson, known in the US simply as Ericsson (NSDQ: ERIC), expects 12 times 2012 levels through 2018. Qualcomm Inc’s (NSDQ: QCOM) prediction of 1,000-fold growth by 2020 dwarfs those figures.

Deals in the wireless telecom space used to be about subscribers, footprints and networks. But now the race now is for spectrum, which according to industry as well as government officials is in limited supply.

“Spectrum,” in short and as it pertains to the telecommunications industry, is the functional equivalent of wireless capacity.

Wireless carriers basically bid on and buy licenses from the government to transmit on certain frequencies. But there are only so many usable frequencies, and their use isn’t organized very efficiently. Access to spectrum is a limiting factor for wireless services, and insufficient spectrum limits a carrier’s coverage, service quality and data connection speeds.

Acquiring spectrum is increasingly necessary to feed data-hungry smartphones and tablets. The Verizon-driven selling was overdone, as the company would have likely made a disciplined, measured entry into Canada with marginal initial impact on the Big Three.

Rogers, BCE and TELUS together account 90 percent of Canadian mobile-phone customers, even as the federal government has tried to foster more competition by reserving airwaves for new entrants and barring the larger carriers from taking over the smaller companies.

Even after the recent recovery, valuations for Canadian wireless service providers underestimate the data-driven growth ahead.  Given the uncertain rate environment these yield stocks might not get back to previous highs over the next few months. But they should come close.

BCE was probably the least threatened of Canada’s Big Three because it derives less than 30 percent of earnings before interest, taxation, depreciation and amortization (EBITDA) from wireless services.

However, including the broadcasting assets acquired in the August 2013 deal for Astral Media Inc on a pro forma basis within the Bell Media segment boosts BCE’s so-called growth assets to approximately 70 percent of EBITDA.

Second-quarter financial and operating results were in line with consensus expectations, with revenue actually coming in ahead of forecasts due to better results from BCE’s wireline segment.

Revenue grew 1.5 percent to CAD5 billion, while EBITDA was up 1.1 percent to CAD2.07 billion. Net income was CAD571 million, or CAD0.74 per share, down 22 percent from CAD732 million, or CAD0.94 per share a year ago. Adjusted earnings were CAD0.77 per share, better than a consensus estimate of CAD0.76.

Wireline revenue generating units (RGU) were better than expected, management noting that revenue strength is better than it has been in a while. Total TV subscribers were up 5.3 percent and high-speed Internet subscribers were up 1.5 percent. Total network access service landlines were down 7 percent.

Increased smartphone adoption and use of data services, such as mobile television, contributed to revenue and EBITDA improvements for BCE’s Bell Wireless division. Wireless accounted for 29 percent of second-quarter EBITDA, versus 67 percent for TELUS and 64 percent for Rogers.

Wireless net activations were up a better-than-expected 2.8 percent year over year. Wireless average revenue per user (ARPU) was up 2.7 percent to CAD56.85, while churn–or customer turnover–was essentially steady at 1.27 percent.

In fact Bell Wireless posted the best year-over-year ARPU growth among the Big Three and has grown on this basis for 14 consecutive quarters, increasingly enabled by rising demand for data.

The percentage of postpaid subscribers with data-intensive smartphones ticked up 15 basis points to 70 percent. BCE’s 4G LTE network now covers 73 percent of the Canadian population, up 24 percent year over year. The latter–and BCE’s ability to reinvest in network quality–put it in good position to benefit from the broad trend described by Cisco, Ericsson and Qualcomm.

Management revised upward its 2013 revenue growth to be between 2 percent and 4 percent and EBITDA growth of 3 percent to 5 percent due to the acquisition of Astral. BCE expects to begin realizing the full benefits of the purchase in 2014.

The stock tumbled from an all-time closing high of CAD48.43 on the Toronto Stock Exchange (TSX) on May 21, 2013, to CAD41.57 on June 26. It rallied into mid-July before hitting CAD41.59 in mid-August. The trend has been positive since then, with a sharp spike following Verizon’s clarification of its intentions vis-à-vis Canada.

But, even after bouncing from near 12-month lows, there’s still compelling value based on its ability to generate cash flow from its recent media acquisition and, more importantly, due to the increasingly intense drive for mobile data.

BCE suspended its dividend for two cycles in 2008, but this was related to a proposed leveraged buyout of the company initiated in July 2007 but cancelled on Dec. 11, 2008.

Since then BCE has raised its dividend nine times, from CAD0.365 per share to the current rate of CAD0.5825.

BCE–with the highest yield among Canadian mobile network operators at 5.2 percent as of this writing–is a buy under USD45 for consistent and long-term growth and income.

Rogers, Canada’s No. 1 mobile network operator in terms of number of subscribers, is challenged by a competitive landscape that would only get tougher if the Canadian government’s goal to usher in a fourth nationwide wireless services provider is successful.

Nevertheless, during the second quarter Rogers posted a 6.9 percent uptick in wireless activations, tops among its peers, though wireless ARPU grew just 0.3 percent to CAD59.30. Churn was 1.17 percent.

Overall revenue growth of 3 percent to CAD3.2 billion was underpinned by 3 percent in each of wireless and cable and 7 percent revenue growth in media.

Adjusted operating profit increased year over year by 2 percent to CAD1.3 billion, driven by a 3 percent increase for wireless, a 7 percent increase for cable and a 14 percent increase at Rogers Business Solutions, offset by a 19 percent decrease for the media segment.
Wireless data revenue grew by 18 percent and now comprises 46 percent of wireless network revenue. Customers with smartphones now represent 72 percent of overall postpaid subscribers.

Rogers has raised its dividend every year since 2005. Since the company doubled the rate from CAD0.125 per share to CAD0.25 in January 2008 it’s raised the dividend another five times–or once a year, announcing the increase along with annual results in February–to the present rate of CAD0.435. Management is on track to announce another increase along with financial and operating results for 2013 in February 2014.

Rogers hit an all-time closing high of CAD52.35 on April 10, 2013. After Verizon revealed its interest in Wind Mobile in mid-June the stock sank to CAD40.35 on June 27. It spiked higher by 7.2 percent the day after the Verizon-Vodafone announcement. But it remains in value territory.

Rogers Communications–currently yielding 4 percent–is a buy under USD44.

Like its peers BCE and Rogers, TELUS’ strategic focus is on growing its wireless and data wireline segments while managing the decline in legacy wireline services.

TELUS’ shares sold off from CAD37.68 on the TSX on May 22, 2013, to as low as CAD29.82 on June 27, a 20.8 percent decline reflecting its leverage to wireless and the potential threat of Verizon’s entry into Canada.

TELUS reported second-quarter net income of CAD286 million, or CAD0.44 per share, down from CAD299 million, or CAD0.46 per share. Adjusted earnings were CAD0.54 per share versus a consensus expectation of CAD0.53. EBITDA were CAD1.04 billion.

Revenue, however, was up 6.1 percent to CAD2.83 billion from CAD2.67 billion a year earlier. Management reported 6 percent growth in both wireless and wireline revenue, which was supported by continued subscriber additions and higher ARPU across all growth services including wireless as well as wireline services Optik TV and high-speed Internet.

Management noted during its discussion of second-quarter results that 60 percent of its network access line losses were to wireless local loop. TELUS’ TV and high-speed Internet additions for the quarter were tops among its peers. Its 31,000 TV additions topped cable operator Shaw Communications Inc’s (TSX: SJR/B, NYSE: SJR) loss of 26,600 subscribers.

TELUS posted 0.4 percent net growth in wireless subscribers with approximately 100,000 additions, while wireless ARPU was up 1.4 percent to CAD61.12. Churn was 1.03 percent.

TELUS exposure to wireless–it accounted for 67 percent of second-quarter EBITDA versus 64 percent for Rogers and 29 percent for BCE–is a net positive in light of the Cisco/Ericsson/Qualcomm data-explosion forecasts.

Smartphone penetration is currently 71 percent of TELUS’ postpaid base, while 43 percent of network revenue is attributed to data. There’s still significant room for growth on both metrics.

TELUS has a consistent track record of dividend growth in its history, including seven increases since the Great Recession bottom in March 2009. The current dividend rate of CAD0.34–which if the recent pattern holds will be boosted to approximately CAD0.37 in November–is up from CAD0.2375 at the end of 2009.

TELUS–currently yielding 4 percent–is a buy under USD33.

Quebecor Inc (TSX: QBR/B, OTC: QBCRF) is the early favorite among analysts in the “who benefits most from Verizon not coming north” contest.

BCE, Rogers and TELUS are restricted to bidding on one block each during the Canadian government’s upcoming spectrum auction. Quebecor’s participation is unrestricted. With the US behemoth–capable of shelling out USD130 billion for 45 percent of Verizon Wireless, there’s no telling what it could have spent to gain a foothold in Canada–out of the auction Quebecor’s competition now seems packed with many Davids but no Goliaths.

Quebecor is in a very strong position to buy a block of spectrum that will not be very expensive.

Wireless is already generating solid growth for Quebecor, which probably would have fared well in an auction that included Verizon.

Verizon would have had to build a network from scratch or establish roaming agreements with other companies in Quebec, where Quebecor’s Videotron mobile unit operates, even if the US giant had acquired Wind Mobile or Mobilicity. Wind and Mobilicity don’t have wireless networks in Quebec.

Quebecor reported a 15 percent increase in second-quarter adjusted income from operations to CAD52.9 million, or CAD0.82 per share. Revenue was up to CAD1.09 billion. Videotron mobile unit posts solid sales and customer growth, while ARPU increased by 5.9 percent.

Quebecor–more a growth than income story with a current yield of just 0.4 percent–is a buy under USD24.

Manitoba Telecom Services Inc (TSX: MBT, OTC: MOBAF) posted solid second-quarter numbers, strengthening the case that the CAD520 million sale of Allstream, announced on May 24, 2013, has made the company a stronger, more focused enterprise.

Management declared a CAD0.425 per share quarterly dividend, consistent with the prior quarter’s rate, after reporting a 0.2 percent rise in revenue to CAD247.4 million. EBITDA ticked up 0.5 percent to CAD121.4 million, while free cash flow grew by 28 percent to CAD41.2 million.

The company also reported cost cuts totaling CAD19 million.

Wireless revenue was up 4.5 percent, while wireless subscriber data revenue surged by 21.9 percent. “Strategic” services revenue, including wireless, Internet (3.6 percent) and IPTV (4.1 percent) all grew. MTS increased the number of customers with bundled services by 5.1 percent to 99,418.

Manitoba Telecom Services, which only last month earned its way off the Dividend Watch List as well as an upgrade from sell to hold, is now a buy under USD33.