Telus in talks to purchase Mobilicity: report

Telus Corp. is in talks with DAVE Wireless Inc., which operates as Mobilicity, to purchase the new entrant wireless carrier for between $350 million to $400 million, The Globe and Mail reported Friday. New entrant Public Mobile Inc. has also hired an investment bank for a possible sale, the newspaper reported. Telus is in talks to purchase “all of the issued and outstanding shares in the capital of Mobilicity,” said a confidential letter, dated March 19, from Telus to Dave Wireless, and obtained by the Globe. “TELUS remains committed to pursuing the Acquisition Transaction and to working expeditiously to negotiate and execute definitive agreements in respect of the Acquisition Transaction on an accelerated timeline,” the letter said. Mobilicity entered the Canadian wireless market following Industry Canada's 2008 wireless auction, in which it licenced AWS spectrum for $243.1 million that was reserved for new entrants. The new entrant spectrum cannot be transferred to Telus, an incumbent, until 2014, according to the licence rules. The federal Industry Department would have to approve the transfer of Mobilicity's spectrum to Telus, which could be affected by Industry Minister Christian Paradis' proposal for new spectrum transfer rules that aim to ensure four competing wireless carriers in each market. “It's showing the obvious complications that the new entrants are having in getting new capital,” MacDougall, MacDougall & MacTier telecom analyst Troy Crandall said in a phone interview, adding it's now apparent that Wind, Mobilicity and Public Mobile Inc. are up for sale. “It's all coming to a head now. They know the spectrum auction will be happening and they have to submit their stuff by June. Suddenly they're realizing, 'We don't have enough money to bid on this stuff,'” Crandall said. “It's one more problem for the government to have to deal with ahead of the spectrum auction and the decision on whether they allow spectrum transfers.” The government's new rules for licence transfers, expected before the auction of 700 MHz spectrum in November, could also affect other transactions, including Rogers Communications Inc.'s proposed purchase of AWS spectrum from Shaw Communications Inc. as well as a possible sale of Wind Mobile as parent company VimpelCom Ltd. accepts offers for the Canadian mobile operator. The Wire Report reported in March that Accelero Capital, an investment firm owned by former Wind Mobile investor Naguib Sawiris, has made an offer for Wind, along with BCE Inc., Rogers Communications Inc. and Fairfax Financial Holdings Ltd. Crandall said in a previous interview that he estimates Wind Mobile's debt to be between $500 million and $800 million and that the company would sell for $500 million to $1 billion. In Mobilicity's comments to Industry Canada for its consultation on the spectrum transfer rules, the company said market forces should be relied upon and that any new rules should facilitate secondary markets for spectrum sales. “Mobilicity respectfully submits that the very announcement of this consultation with respect to license transferability a few weeks ago has already further impinged access to capital for new entrants,” the company wrote. “Ironically, this announcement has created a level of uncertainty and confusion in the minds of investors as to the liquidity of spectrum assets which in particular affects new entrants far more than incumbents and further hampers their ability to create a competitive marketplace—the very thing the Department has suggested it wants to enhance,” Mobilicity said. The company proposed that Industry Canada should help new entrants in their access to capital by allowing them to pay for their spectrum licences through installments over the licence term. Mobilicity also said the department should prohibit companies from selling spectrum licences for profit if the frequencies have sat unused. Advocacy group OpenMedia.ca, in a release Friday, urged the government to block purchases of the new entrants by incumbents. “This is further evidence that the Industry Minister needs to take bold action—not half-measures—to fix our broken cell phone market and ensure that independent providers have the resources they need to provide Canadians with the choice we need,” Steve Anderson, the group's executive director, said in a statement. Mobilicity and Telus did not respond to requests for comment by deadline. —With reporting by Simon Doyle at sdoyle@thewirereport.ca and copy editing by Danika Grenier at dgrenier@thewirereport.ca

Telus in talks to purchase Mobilicity: report

News | April 12, 2013

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