TORONTO – Low-cost wireless provider Public Mobile said today it has been acquired by Thomvest Seed Capital Inc., the Toronto-based investment vehicle of Peter J. Thomson, and Cartesian Capital, a New York-based private equity firm. Financial terms were not disclosed.
While Public Mobile is privately held, it is thought that the two companies were already significant shareholders before this announcement. Thomson is chairman of Thomson family investment company Woodbridge, which has held various telecom and media investments in Canada over the years and the Thomsons, as many will know, are Canada’s richest family and own assets worth tens of billions of dollars.
With the acquisition, Thomvest and Cartesian invested the first tranche of a commitment to fully fund Public Mobile to a cash flow positive position, and Thomvest became the company’s controlling shareholder, reads the press release issued Thursday morning. The new owners also said they would definitely bid on spectrum in the auction of 700 MHz spectrum coming in 2014.
“Implied in this announcement is that the exiting shareholders include OMERS, Columbia Capital and M/C Venture Partners (the latter two have extensive wireless holdings). Public paid ~$50 million for spectrum in Ontario and Quebec. We estimate all-in capital at ~$400 million,” said BMO Capital Markets analyst Tim Casey in a note to clients this morning. He and others have estimated Public Mobile has about 250,000 customers.
“It is not, in our view, a strategic asset,” continues Casey’s research note. “Investors will likely speculate that Thomvest intends to consolidate the Canadian new entrants. We estimate that would carry a more than $2 billion price tag, including acquiring Wind and Mobilicity and acquiring 700 MHz spectrum and building out LTE with years before any FCF. That seems unlikely to us.
“Despite the current uncertainty in the Canadian wireless industry, Public Mobile’s strong performance and rapid growth continue to attract financial backing from blue chip investors. This financing is an enormous vote of confidence in Public Mobile’s business and a significant milestone in our company’s history,” said Alek Krstajic, Public Mobile’s founder and CEO in the release. “The support of Thomvest and Cartesian enables Public Mobile to continue the rapid expansion of our subscriber base from a strong and well-funded position.”
Public, with G-band spectrum purchased in the 2008 AWS auction and not set-aside spectrum, is unlike the other newcomers such as Videotron, Wind and Mobilicity since there is no moratorium on when it can transfer spectrum and is available to be sold to any bidder at any time.
“Thomvest’s strategy is to partner with entrepreneurs to build companies that transform their industries,” said Stefan Clulow, managing director at Thomvest in the same release. “Circumstances in the Canadian wireless industry have created a window for Canada’s fourth wireless player to emerge. We are pleased to partner with Cartesian and the Public Mobile team to pursue this opportunity.”
“In the coming months, the Canadian wireless industry will see consolidation, and an important spectrum auction,” added Paul Pizzani, partner at Cartesian. “Public Mobile is well-positioned to grow in scale by pursuing these consolidation opportunities and by bidding for national spectrum in the 700 MHz auction.”
Public also said the transaction has received the continuing support and partnership of its key handset maker, ZTE Corp. and the Export-Import Bank of China (Exim).
Launched in 2010, Public Mobile provides unlimited talk, text, Android data services and Siren music to value conscious customers in Ontario and Quebec with no contracts.
Thomvest is a venture capital firm with over $200 million under management that focuses on early and growth stage investments in adtech, financial technology, enterprise SaaS, security software, and telecommunications.
New York-based Cartesian Capital Group is a global private equity firm that manages $2 billion in capital.
