Less than a year after having its hand slapped over such a proposal, Canadian telecommunications giant Telus is again set to acquire smaller rival Mobilicity.
Mobilicity, which is controlled by Data & Audio-Visual Enterprise Holdings, announced that the proposed $350 million deal was made under arrangements of the Companies Creditors Arrangement Act, which it has been operating under since last September. As part of that arrangement, the Ontario Superior Court of Justice appointed Ernst & Young as “monitor” to “assist” beleaguered Mobilicity and its shareholders through a credit protection process and approved $30 million in Mobilicity’s debtor-in-possession financing from some of its current shareholders.
The proposed deal will see Telus acquire virtually all of Mobilicity’s assets, including approximately 165,000 wireless customers and more importantly the carrier’s 1.7/2.1 GHz spectrum licenses. Mobilicity noted that it contacted 25 organizations about a possible deal, with five submitting a proposal and only the Telus offer deemed “to be an acceptable transaction.”
“The transaction is a good outcome from Mobilicity’s restructuring efforts and extensive sales process,” said William Aziz, Mobilicity’s chief restructuring officer. “I am confident the transaction will serve the best interests of Mobilicity’s customers and employees.”
Telus had attempted to purchase Mobilicity last May in a deal valued at $370 million. That deal gained approval from the courts, but was shot down by the Canadian government citing the initial requirement of Mobilicity’s 1.7/2.1 GHz spectrum licenses to be used by new entrants into the market. Industry Canada used the denial as the basis for its attempts to infuse new competition in the country’s wireless space through rulemaking for the recently completed 700 MHz auction and its planned auction of 2.5 GHz spectrum set for next year.
“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.”
However, following that denial, Mobilicity has continued to flounder as shown by its customer base having shrunk from the approximately 250,000 customers it claimed during Telus’ original attempt to acquire the carrier. Mobilicity also pointed to the fact that the moratorium on the transfer of its licenses has expired and other changes to the country’s wireless market.
“In addition to being in the best interests of the company and its stakeholders, Mobilicity believes that the transaction will not affect competition in the Canadian wireless sector, satisfies the criteria considered by Industry Canada in determining whether to approve a transfer of spectrum licenses and meets Industry Canada’s policy objectives in respect of utilizing spectrum for advancing network expansion into non-urban areas,” Mobilicity noted in a statement.
Following its failed attempt to acquire Mobilicity, Telus was granted approval to acquire Public Mobile, which like Mobilicity has struggled to gain a foothold in Canada’s wireless market dominated by Rogers, Bell Canada and Telus.
In clarifying its position on the two deals, Industry Canada noted that the G-Block spectrum acquired by Public Mobile for $54 million during the 2008 1.7/2.1 GHz spectrum auction were not part of the spectrum bands set aside for new entrants into the space. Industry Canada had prevented Telus from acquiring Mobilicity earlier this year citing the licenses controlled by Mobilicity were purchased with the express consent of being used by a new entrant into the Canadian wireless market.
“G-block spectrum licenses were acquired in the 2008 spectrum auction, but were not part of the 2008 advanced wireless services (AWS) set-aside,” explained James Moore, current Minister of Industry at Industry Canada. “G-block spectrum is not used for the latest data plans and smartphones in Canada and is of a significantly lesser value than other types of spectrum.”
Financial terms of the Public Mobile deal were not released, though Telus did say that proceeds from the sale would be used to satisfy Public Mobile’s debt and equity investors. Public Mobile served approximately 280,000 customers across portions of Ontario and Quebec.
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