Mobilicity asks court to rule on spectrum transfers, cites government ambiguity

Mobilicity is asking the Ontario Superior Court to consider whether it could approve a transfer of the new entrant provider’s spectrum licences as part of its bankruptcy proceedings, and in the absence of an Industry Canada decision on any proposed spectrum transfer, court documents show. In an affidavit submitted to the province’s top court Monday as part of the company’s ongoing bankruptcy proceedings, William Aziz, Mobilicity’s chief restructuring officer, said Industry Canada has frustrated Mobilicity’s efforts to sell itself or its assets by refusing to say whether it would approve a transfer of the company’s spectrum licences. “Industry Canada has indicated to the Mobilicity Group that it is unable to provide an assessment or approval of a sale to an unnamed third party purchaser or a blanket approval of any proposed transaction structure due to limits imposed by the Revised Transfer Framework,” Aziz said in the affidavit in reference to new Industry Canada rules, released last year, that require the industry minister to approve spectrum transfers. “Industry Canada’s approach is incompatible with the real-time restructuring situation within which the Mobilicity Group must operate,” he added. In a requested court order accompanying Aziz’ affidavit, Mobilicity proposed the court rule that it can reassign the company’s spectrum licences as part of a court-supervised sales process. It suggested that the court has the authority to do so under Section 11.3 of the Companies’ Creditors Arrangement Act (CCAA) — under which Mobilicity has filed for bankruptcy protection — which says that a bankruptcy court can assign a company’s “rights and obligations” to “any person who is specified by the court and agrees to the assignment.” “The Mobilicity Group requires certainty and clarity with respect to the transfer or assignment of the Mobilicity Spectrum Licences as part of the Court-approved Sale Process,” Aziz said in the affidavit. “I believe the exercise of the CCAA Court’s discretion with respect to any Sale Transaction … is important to the restructuring and sale process of the Mobilicity Group’s assets.” Mobilicity, which launched services as a new entrant wireless provider following a 2008 spectrum auction, is prohibited under the auction rules from transferring its spectrum licences to incumbent carriers BCE Inc., Rogers Communications Inc. or Telus Corp. until a five-year moratorium on transferring those licences to the incumbents expires on Feb. 10. In its new policy on spectrum transfers released in June, Industry Canada said the company would still require the minister’s permission to transfer those licences as part of a sale after the moratorium expires. The department also indicated at the time that it may not allow the incumbents to acquire the new entrants carriers’ spectrum licences, stating that the rules would allow the minister to block transfer that could result in “an undue concentration” of spectrum. Both of those policies are designed to support the government’s policy objective of maintaining a fourth wireless player to compete against the incumbents in each region of the country, Industry Canada has said, adding that the increased competition will help provide lower prices and other benefits to consumers. “Well before this summer's public debate on wireless policy, our government introduced a number of measures to create more choice in Canada's wireless market and to defend consumers,” Industry Minister James Moore said in a mid-September statement about wireless competition. “As a result, prices have come down, the number of jobs in the wireless sector has increased and consumers have more choices.” Mobilicity asked Industry Canada in September whether it would approve a proposed sale of the company to Telus after the moratorium expires. The government — which rejected a previous Telus attempt to acquire Mobilicity in June — said in October that it does not want to see the new entrant’s wireless spectrum licences transferred to Telus, sources said. In his affidavit, Aziz said Mobilicity and its investors “knew and understood” that the company “would be able to transfer the Mobilicity Spectrum Licences, including to an incumbent” after the five-year moratorium expires. Some of those investors provided funding to the company “on this basis,” he added, and on the basis that “Industry Canada would not intervene” in any “future insolvency proceedings.” He did not state how those investors came to those conclusions. Aziz said Mobilicity has continued to consult the government on its potential sale plans since September, and added that the government has not provided “any constructive guidance” that could “clarify what transaction or transaction structure would, in Industry Canada’s view, comply with the Revised Transfer Framework.” He said Mobilicity, which launched a court-supervised sales process in November, has received multiple bids for either the company or its assets, and that the likelihood of regulatory approval is one of the factors it must consider when determining which bid to accept, if any. “Given the position of Industry Canada vis-à-vis the Mobilicity Group’s efforts to complete a going concern transaction for its business, it is impractical to properly evaluate the bids without a clear understanding of the rules,” Aziz said, noting that the company has enough cash to continue operating until the second week of February without taking on new financing. “This creates significant uncertainty and serious timing concerns in the Court-approved Sale Process and may frustrate the Court-approved Sale Process entirely.” As part of the proposed order in which Mobilicity has asked the court to take control of the spectrum transfer process, the company said it would give Industry Canada 10 days’ notice of any deal it would take to the court that would require a bankruptcy judge to approve a spectrum transfer. In an email statement provided to The Wire Report on Tuesday, Aziz said the company has asked the court to take control of any proposed spectrum transfer to help ensure a speedy sale process. “This motion is contingency planning to ensure a fair and reasonable process and that any potential transaction be able to be consummated and completed with the requisite certainty and speed envisioned under the CCAA court-approved sales process,” he said. The court has not yet said whether it agrees with Mobilicity that it has the authority to approve spectrum transfers, or whether it will agree to the proposed order outlining how it would do so. Jake Enwright, Industry Minister James Moore’s spokesman, indicated Tuesday that he expects the court will deny Mobilicity’s request. "Our thoughts are with Mobilicity's employees who may have been impacted by this restructuring,” Enwright said in an emailed statement. “Our government will not approve spectrum transfer requests that decrease competition in our wireless sector. We look forward to the court's positive ruling on this matter.” —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Mobilicity asks court to rule on spectrum transfers, cites government ambiguity

News | 01/07/2014 10:53 pm EST

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