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Canada’s Mobilicity granted creditor protection

Canadian wireless carrier Mobilicity said it received creditor protection from the Ontario Superior Court of Justice enabling the beleaguered company to seek out new funding. Mobilicity is controlled by Data & Audio-Visual Enterprise Holdings.

“[Companies’ Creditors Arrangement Act] protection will allow Mobilicity the necessary time and financing to advance and complete a going-concern transaction, which is before Industry Canada for its review and approval,” the company noted. “Mobilicity believes that the proposed transaction is in the best interests of its stakeholders and hopes to advance the transaction in the near term.”

As part of the move, the court has appointed Ernst & Young as “monitor” to “assist” Mobilicity and its shareholders through the process. The court also approved $30 million in Mobilicity’s debtor-in-possession financing from some of its current shareholders. The company added that it will maintain business as usual through the CCAA process.

“It is business as usual for Mobilicity’s wireless customers,” the carrier explained. “There are no changes to Mobilicity’s network and Mobilicity continues to honor prepayment plans for its customers. Phone service continues to work as it always has and Mobilicity’s dealer network is open for business.”

The Canadian government earlier this year dismissed an attempt by Telus to acquire Mobilicity, citing the initial requirement of Mobilicity’s 1.7/2.1 GHz spectrum licenses to be used by new entrants into the market. The move came after a court had approved the Telus proposal.

Industry Canada used the issue to move forward with plans to bring new competition into the Canadian wireless market that is dominated by a trio of players: Telus, Bell Canada and Rogers.

“Our government has been clear that spectrum set aside for new entrants was not intended to be transferred to incumbents. We will not waive this condition of license and will not approve this, or any other, transfer of set-aside spectrum to an incumbent ahead of the five-year limit,” said Christian Paradis, then Minister of Industry. “Our government will continue to allow wireless providers access to the spectrum they need to compete and improve services to Canadians. We are seeing Canadian consumers benefit from our policies and we will not allow the sector to move backwards. I will not hesitate to use any and every tool at my disposal to support greater competition in the market.”

Mobilicity followed that denial by moving forward with a “recapitalization plan,” that included the potential sale of its assets to another party. U.S.-based Verizon Communications was rumored to be in talks regarding a potential takeover of Mobilicity, but that deal fell through following Verizon’s move last month to acquire Vodafone’s 45% stake in Verizon Wireless for $130 billion.

Mobilicity was not on the list of companies qualified to participate in Canada’s planned 700 MHz spectrum auction scheduled for Jan. 14.

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