Canada blocks Telus/Mobilicity deal

Canada blocks Telus/Mobilicity deal

05 JUN 2013

Canadian new entrant Mobilicity is facing an uncertain future after a deal with “big three” player Telus hit the skids.

Yesterday, Christian Paradis, the country’s Minister of Industry, said that an application to transfer Mobilicity’s spectrum licences to Telus would not be approved, because when issued they were reserved for new entrants for a set period.

“We will not waive this condition of licence and will not approve this, or any other, transfer of set-aside spectrum to an incumbent ahead of the five-year limit,” Paradis said.

Telus said: “Today’s decision is unfortunate for Mobilicity’s 250,000 customers, 150 employees and debtholders, who now face considerable uncertainty due to the pressing financial challenges facing the company.”

In a statement, Industry Canada noted that foreign investment restrictions have been lifted for companies with market share of less than 10 per cent, which includes Mobilicity.

It also noted that in the coming weeks, improvements to the policy on spectrum licence transfers will be released.

The regulator cautioned: “proposed spectrum transfers that result in undue spectrum concentration – and therefore diminish competition – will not be permitted” – indicating that even after the expiry of the restrictions on the new entrant licences issued in 2008, deals involving incumbents may not be straightforward.

According to Reuters, the executive behind fellow new-entrant Wind Mobile has said that his company is interested in a tie-up with Mobilicity, having done due diligence last year – and that the government’s ruling on the Telus matter had removed “ambiguity” about the sale of transfer assets.

With Telus, and fellow incumbents Rogers Wireless and Bell Mobility out of the running, the valuation of Mobilicity is likely to be surprised.

Outside of in-market consolidation, it is unclear that there will be much appetite to invest in a failed business whose primary asset is spectrum, if this comes with limitations on its further sale.

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Steve Costello

Steve works across all of Mobile World Live’s channels and played a lead role in the launch and ongoing success of our apps and devices services. He has been a journalist...More

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