Mobilicity’s future no longer appears simple, and it’s anything but unlimited. A little more than three years after the company launched its mobile service, promising consumers simple and unlimited wireless plans, the new entrant wireless provider is running out of money, creditors—and options. What’s more, Mobilicity’s subscriber base, which is its only source of regular revenue, appears to be dwindling, while its spectrum, the company’s other greatest asset, is held hostage by regulatory uncertainty. Mobilicity's situation is “a complex question of distressed corporate finance,” and one with no easy answers, Iain Grant, a telecom analyst with research firm the SeaBoard Group, said in a telephone interview. “They’ve been under financial distress for the better part of a year,” he said. “Once you start peeling back the layers, this becomes a really complex story.” Mobilicity (operated by Dave Wireless Inc.) spent $243 million on wireless spectrum licences as a “new entrant” carrier in Industry Canada’s 2008 AWS auction, landing it 10 MHz across southern and eastern Ontario, and another 10 MHz covering cities in Ontario, Alberta, and British Columbia. In April 2010, it reached a five-year deal with Swedish equipment supplier Ericsson to manage its HSPA wireless network, a move that was designed to limit the company’s operating costs by tying its expenses to customer growth. “s a low-cost mobile operator, it makes a lot of sense to partner with best-in-class providers who can deliver significant cost-efficiencies and allow us to focus on our customers,” Dave Dobbins, Mobilicity’s then-president and CEO, said in a release at the time. But the company’s plan to attract low-spending customers who didn’t want to be tied into lengthy service contracts sputtered as it was forced to compete both with new entrant carriers Wind Mobile and Public Mobile Inc., and a series of discount brands offered by incumbent providers BCE Inc., Rogers Communications Inc., and Telus Corp. As a result, a network that was designed to reach up to 16 million Canadians saw its subscriber base peak at around 250,000 subscribers at the end of 2012, according to court filings. That number has since fallen to about 200,000 subscribers, the Financial Post reported this week, making it increasingly harder for the company to maintain its retail locations and a total staff of about 150 employees. Mobilicity is now more than $500 million in debt, and industry analysts and insiders say the company is at the mercy of its debt holders. “The whole Mobilicity business model was very clever … You have low fixed costs, and you’re billing the variable costs, so as they grew, they would pay their suppliers more,” Grant said. “But to build a national mobile carrier is not something which is a three-year business plan,” he said. “You’re going to have debt.” In an effort to recoup debt holder losses and limit the company’s decline into further debt, Mobilicity reached a deal this May to sell the company to Telus for $380 million. Then-industry minister Christian Paradis blocked that deal in June, citing restrictions on Mobilicity’s new entrant spectrum licences that prohibit them from being transferred to an incumbent until Feb. 11, 2014. Paradis also indicated at the time that the government may prevent the incumbents from acquiring Mobilicity’s spectrum even after that moratorium expires, a situation that could leave the company’s most valuable asset in limbo by prohibiting the companies that would pay most for the spectrum from buying it. Barry Allan, founding partner at Toronto-based Marret Asset Management Inc.—one of Mobilicity’s largest bondholders—said in a phone interview last week that this uncertainty is the greatest stumbling block to the company’s board and debt holders in figuring out what to do with the company. “What are the rights to transfer the spectrum for the people who have built out the new entrants that have failed? … What are their rights in terms of selling that spectrum in an open bidding process?” Allan said. “The government has not provided clarity to these questions.” If Mobilicity can sell its spectrum to an incumbent, it’s possible the company could still pay back much of its debt. Telus would still be interested in acquiring Mobilicity, its spectrum, or some of its other assets if it is permitted to do so after the Industry Canada moratorium expires, Josh Blair, Telus’ chief corporate officer, said in an interview with The Wire Report last week. “We remain interested in acquiring Mobilicity if the government will permit it,” he said. Otherwise, the company would have to look elsewhere for possible buyers, probably another wireless carrier trying to make a splash in Canada’s wireless market. One advantage Mobilicity has, financial analysts and industry insiders said, is its large tax losses, which would serve as a form of tax rebate for anyone who buys the company. For much of this summer, many people in Canada's telecom industry speculated that Mobilicity's buyer would be Verizon Communications Inc., the largest U.S. wireless provider with more than 100 million subscribers. Any hopes of Verizon riding in as Mobilicity’s white knight were shattered last week when Verizon’s CEO, Lowell McAdam, said the company will not be coming to Canada at this time. Grant said a sale of Mobilicity or its spectrum will depend on who ends up with control of Wind Mobile, which is also considered up for sale. (The company is currently controlled by Globalive Wireless Management Corp. while Amsterdam-based VimpelCom Ltd. has expressed interest in selling its non-controlling 65 per cent equity share.) Wind, which entered the wireless market following Industry Canada’s 2008 spectrum auction, had a subscriber base of around 620,000 customers at the end of June. “No one is going to buy Mobilicity,” Grant said. “What they would do is they’d buy Mobilicity and Wind because Mobilicity, by itself, they’ve demonstrated to all of us, probably doesn’t make a lot of sense.” Complicating matters is a Sept. 17 deadline to apply to take part in Industry Canada’s auction of 700 MHz spectrum, which is scheduled to start in January. Registered bidders are prohibited from engaging in any merger and acquisition talks with other bidders after that deadline passes, meaning Mobilicity could be left helpless to determine its own fate between September and the auction’s close. Allan said Mobilicity may still be able to raise enough money to take part in the auction—which analysts say would cost hundreds of millions of dollars—if the government clarified its spectrum transfer rules, prior to the Sept. 17 deadline, and said whether Mobilicity can be sold to an incumbent when its spectrum transfer moratorium is lifted in February. “There is capital that is willing to fund spectrum acquisitions for companies like Mobilicity, because the 700 MHz spectrum is extremely valuable,” Allan said. Without access to that valuable spectrum, Mobilicity’s opportunities to grow the company will be limited since it won’t have a cost-effective path to expand or upgrade its network. At that point, Grant said, the company’s best option may be to shut down the company and sell off whatever assets it can use to repay debt holders. Those assets include cell towers, transmitters and other equipment, as well as leases it has to place towers on various rooftops in some of Canada’s biggest cities. Mobilicity could also try transferring its subscribers to Wind, a deal FP reported last week was in the works before Mobilicity quickly denied it. Many of those subscribers, Grant said, are likely already fleeing to Wind, which offers similar unlimited plans and whose network supports the same phones as Mobilicity’s. “If you, as Mobilicity, do not transfer your subs to Wind, they’re going to go anyway,” he said. If all other options fail, Mobilicity’s last option could be a bankruptcy filing that would allow it to restructure the company and its debt or to liquidate the company’s assets. Consumers, though, are often wary of signing up for services from a company engaged in a bankruptcy filing, and any effort to liquidate Mobilicity’s assets could be hampered, again, by restrictions on its ability to sell its spectrum licences. Mobilicity, which declined to comment for this story, appears to be facing increasingly limited options to keep its doors open. “The debt holders are the ones who are keeping the lights on, and it is their decision, or at least their continued funding, which keeps it operational,” Grant said. —With reporting by Nicholas Kyonka at firstname.lastname@example.org editing by Anja Karadeglija at email@example.com.