VANCOUVER – Telus announced Thursday that, pending some government and debtholder approvals, it will acquire Mobilicity for $380 million.
If the deal receives the required approvals, it would ensure continued service to Mobilicity’s 250,000 customers without the risk of disruption, says the press release the companies issued.
Without this deal, Mobilicity would likely end up seeking bankruptcy protection in short order. Of course, it remains to be seen what government thinks of this and whether or not it will grant the request to shift Mobilicity’s spectrum to Telus immediately. DAVE, Mobilicity’s parent company, purchased the spectrum for $240 million in 2008 and is not allowed to sell to an incumbent until 2014, although it can sell to other companies before then. Mobilicity has its network operational in Southern Ontario, Calgary, Edmonton and Alberta.
Consumer groups are not pleased with this development. “Losing Mobilicity to Telus means we are that much closer to the big three being the only three wireless companies in Canada,” said John Lawford, executive director and general counsel for The Public Interest Advocacy Centre, in a release. “Consumers will face noticeably higher prices and less choice if only three major players control the market.”
“We call once again for (Christian Paradis) the Minister (of Industry) to clearly tell the major wireless companies that they cannot reduce consumer choice by buying up their competition” aded Bruce Cran, president of the Consumers’ Association of Canada.
Mobilicity – along with Wind and Public Mobile – have struggled mightily to gain a firmer toehold in the Canadian market since 2009 in the face of cutthroat competition from incumbents Rogers, Telus and Bell. Back in January, Mobilicity chairman John Bitove told Cartt.ca he still held out hope something could be done to combine his company and Wind, to try and build a stronger fourth national competitor, but it was not to be. Both Public and Wind are also acknowledged to be for sale.
However, according to Telus chief marketing officer David Fuller, Mobilicity approached Telus on this deal first back in December 2012 and negotiations got under way in earnest in January as the young wireless company's financial situation deteriorated. In an interview with Cartt.ca Thursday, Fuller says that despite objections there are few options left for Mobilicity. "The alternative if we don’t successfully consommate this transaction for Mobilicity is a restructuring and a bankruptcy," he said.
Fuller also added that both Mobilicity and Telus have been keeping Industry Canada in the loop on the talks, although he holds no preconceptions about what the government may decide. “We kept the government in the loop on this at each step along the way," he said. "We’ve been very open with them, as has Mobilicity… They now have all the information they need to deliberate and make their decision. We did ask for an expedited approval process, given the financial situation of Mobilicity. It’s safe to say time is not on their side.”
While this has been going on, Industry Canada has also launched a spectrum transfer review process this year (which Cartt.ca has covered closely) after Rogers said had entered into an option deal to buy Shaw’s unused AWS spectrum next year, when the five-year moratorium against selling that set aside spectrum to incumbents expires. It’s now even more difficult to envision government continuing to somehow try and go back in time and change the rules now. Shaw believes its deal with Rogers will pass muster.
(Ed note: Frankly, there seems to be very little the federal government can do about this. It can either approve this deal or let Mobilicity cease operations altogether. As we’ve written extensively this year, it is difficult to see how the Canadian wireless market is going to become anything other than it already is.)
The agreement between Telus and the company is subject to conditions including approval by the Competition Bureau, Industry Canada, and Mobilicity’s debtholders. Telus and Mobilicity have informed the government and regulators and both companies are fully committed to working co-operatively to secure timely approvals for the transaction, says the press release.
“A concern for our customers and employees led us to approach Telus, which has a reputation for a strong customer focus, as evidenced by their industry leading client loyalty,” said Stewart Lyons, Mobilicity President. “I am confident Telus will look after our employees and our customers, mitigating any disruption to their service, while offering the best outcome for all stakeholders.”
“Mobilicity has been losing a significant amount of money every month,” added William Aziz, Mobilicity chief restructuring officer. “The financial strength of Telus will allow the business to be continued in a way that will benefit customers and employees. An acquisition by Telus is the best alternative for Mobilicity.” The entire purchase price will be used to satisfy Mobilicity’s secured and unsecured debt.
“We look forward to serving Mobilicity’s customers and welcoming their employees to the Telus team,” said Fuller, who said no decision has been made on what to do with the brand, should the deal be okayed.
If the transaction is approved, Telus will retain all 150 Mobilicity employees as it integrates the Mobilicity operation into Telus over the coming months. The employees would have the opportunity to review and secure permanent, long term roles with Telus. It’s not known whether the brand will be retained as another flanker for Telus, or if the Mobilicity customer base would be folded into Koodo or the main Telus brand.
The release continues: “Mobilicity has begun proceedings in the Ontario Superior Court of Justice with a view to obtaining approval for a plan of arrangement under the Canadian Business Corporations Act. The plan of arrangement with Telus requires an affirmative vote by debtholders, after which Telus and Mobilicity will seek court approval of a transaction that will see Mobilicity emerge as a wholly-owned subsidiary of Telus. Telus has entered into support agreements with a significant number of Mobilicity’s debtholders who have committed to vote for the plan of arrangement pursuant to the terms and conditions of the support agreements.”
Telus and Mobilicity anticipate an expeditious legal and regulatory review in view of the current circumstances Mobilicity is facing, concludes the press release.
www.Mobilicity.ca
www.telus.com
