Mobilicity still working on Telus deal as government indicates a denial

Mobilicity’s management will continue to ask the federal government to approve a proposed deal to sell the company to Telus Corp. after the Tory government indicated last week that it would block the deal, sources familiar with the matter said. In a confidential communication with Mobilicity’s management last week, Industry Canada told the struggling new entrant carrier that the government does not want to see Mobilicity’s wireless spectrum licences transferred to Telus—an incumbent mobile provider—because of concerns related to spectrum concentration, two industry sources said Wednesday. What the government did not provide, the sources said, was a definitive answer as to whether Industry Canada will formally extend a five-year moratorium on incumbent carriers’ acquiring Mobilicity’s spectrum licences, which is scheduled to expire in February. Mobilicity, which is currently under Companies’ Creditors Arrangement Act (CCAA) bankruptcy protection, hopes the government will allow it to transfer the spectrum to Telus after that moratorium expires, and has continued talks with the government since hearing from Industry Canada last week. “The discussions are still active,” a source familiar with those talks said. Mobilicity (operated by Dave Wireless Inc.) said last month that it was filing for bankruptcy protection as it sought Industry Canada’s approval of a proposed deal to sell the company. The Wire Report reported this month that Telus is an interested buyer. Industry Canada rejected in June Telus’ first effort to acquire Mobilicity’s spectrum licences, citing the moratorium rules. The department also said at the time that it would develop new rules that would allow the industry minister to block any acquisition or spectrum transfer deal resulting in an “undue concentration” of spectrum that would reduce competition. Jessica Fletcher, a spokeswoman for Industry Minister James Moore, confirmed in an emailed statement Wednesday that the government has responded to Mobilicity’s most recent request for permission to transfer its wireless frequency licences. She said the Industry Department evaluated the transfer based on the new spectrum transfer rules, which allow companies to consult with the department to determine whether it would likely approve hypothetical deals. “Mobilicity sought views from Industry Canada on a potential spectrum licence transfer. Industry Canada considered this request under the Spectrum License Transfer Framework and provided a response in confidence,” Fletcher said. “As the Minister indicated in a statement on Canada's Spectrum Transfer Framework last week, our government will continue to enforce the moratorium on the transfer of AWS spectrum to incumbents. We will not approve any spectrum transfer request that decreases competition in our wireless sector to the detriment of consumers," she said. The sources said the proposed transaction would have allowed Telus to take control of Mobilicity in mid-February, after expiration of the moratorium on incumbents acquiring its spectrum licences. Mobilicity, which is losing roughly $4 million each month, said in court documents this month that it has secured $30 million in new financing to help it get through its bankruptcy protection proceedings, and that it has worked out a 13-week cash flow plan that would require it to start drawing from that available financing during the week of Dec. 6. Under that plan, Mobilicity would draw an average of $1 million of that financing each week through Jan. 10 if it is not sold before then. It is not immediately clear who, if anyone, would be interested in acquiring Mobilicity if Industry Canada does not allow the company to transfer its spectrum licences—which are considered its most valuable asset—to an incumbent. Fellow new entrant carrier Wind Mobile (owned by Globalive Wireless Management Corp.), is the only non-incumbent mobile provider that operates in each of the markets Mobilicity currently serves, though it too has sought a sale this year. Amsterdam-based Vimpelcom Ltd., which has a 65 per cent equity stake in Wind, said this year that it was seeking a “clean exit” from the Canadian market. Canaccord Genuity analyst Dvai Ghose said in a research note Wednesday that he believes Mobilicity’s current financing will only support the company until February, and that the new entrant will “cease operations in early 2014” if it doesn’t secure a buyer by then. If Mobilicity goes under, Ghose speculated that many of its roughly 189,000 subscribers will “migrate” to an incumbent carrier while the company’s spectrum licences sit fallow. “e believe that either the Government will be forced to change its mind and Mobilicity will be acquired by TELUS, or it will cease to operate,” he said. “ither scenario is positive for the incumbents and negative for the Government.” Other potential buyers for Mobilicity are Catalyst Capital Group Inc., a Mobilicity debtholder that could gain control of the company through its CCAA proceedings, or Feenix Wireless Inc., which is owned by John Bitove, Mobilicity’s founder and current executive chairman. Industry Canada said last week that it approved a deal to transfer new entrant carrier Public MobileInc.’s spectrum licences to Telus in support of the incumbent carrier’s deal to acquire the company. Public Mobile’s spectrum is not subject to the same moratorium as Mobilicity’s because it was not part of the spectrum blocks that were set aside for new entrant carriers during a 2008 Industry Canada auction. —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Anja Karadeglij at mailto:akarad@thewirereport.ca

Mobilicity still working on Telus deal as government indicates a denial

News | October 30, 2013

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Mobilicity still working on Telus deal as government indicates a denial

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