VANCOUVER – Telus announced Wednesday evening it will buy Public Mobile.
“Following our review of strategic options for our organization, Telus stood out as the company most committed to strong customer service and innovation. We are confident this is the right decision for our customers, our company, our employees and our investors,” said Alek Krstajic, Public Mobile CEO, in a joint press release. “This transaction is the best option to guarantee continued quality service for our customers and to maximize the opportunity for our employees and investors.”
Pending approval from the Competition Bureau following today’s approval by Industry Canada (see below), the transaction will ensure continuity of service and enhanced functionality for Public Mobile’s 280,000 wireless customers. Public Mobile has operations in Ontario and Quebec and its strategy thus far as been to pursue the lower end and urban segment of the market with inexpensive phones and low cost voice and text packages. It’s not known if Telus will retain any of the Public branding.
Terms of the transaction have not been disclosed and proceeds will be used to satisfy Public Mobile’s debt and equity investors. Public Mobile employees will have the opportunity to review and secure roles with Telus, added the release.
“We look forward to the successful completion of this transaction, and migrating Public Mobile’s customers onto Telus’ world-class 4G LTE network while putting their spectrum to good use for millions of customers across Canada,” said Eros Spadotto, Telus EVP of technology strategy and operations. “Public Mobile’s PCS G block spectrum is part of a developing ecosystem that is being driven by the insatiable demand consumers have for access to wireless data applications,” Spadotto added.
“Major U.S. carriers are ensuring this spectrum is purposed for the deployment of LTE networks and notably, the iPhone 5s and 5c have this spectrum ecosystem incorporated within their chipset, consistent with the trend across smartphone manufacturers to produce products that can be sold globally with a lessened need for customization on a market-by-market basis. Additionally, Public Mobile’s G block spectrum aligns well with matching spectrum Telus holds in western Canada.”
Importantly, the spectrum was acquired by Public Mobile from the open part of the 2008 auction, not from that set aside for new entrants, so is not subject to transfer restrictions.
In approving the deal, Industry Minister James Moore said in a statement: "G-block spectrum licences were acquired in the 2008 spectrum auction but were not part of the 2008 Advanced Wireless Services (AWS) set-aside. G-block spectrum is not used for the latest data plans and smart phones in Canada (except for the newest iPhones that Telus noted) and is of a significantly lesser value than other types of spectrum. This transaction does not materially change the spectrum concentration of incumbents in this country and therefore will not diminish competition in our wireless sector.
"Our government will continue to enforce the moratorium on the transfer of set-aside AWS spectrum to incumbents. We will not approve any spectrum transfer request that decreases competition in our wireless sector to the detriment of consumers. This means Canadians will continue to benefit from quality spectrum being deployed across the country, resulting in dependable high-speed wireless services with the latest technologies at the best prices. As we stated in the Speech from the Throne, we will continue to keep consumer interests at the core of our government's decisions."
Where this leaves struggling Mobilicity, which Telus attempted to buy earlier this year, is on tenterhooks. The company is losing money and customers and with the federal government dead set against any of the incumbents owning the set-aside AWS spectrum it uses, none of the big three are eligible saviours. And, with the federal government saying no to foreign telecom investor Accelero purchasing Allstream on national security grounds, the chances an outside white knight would ride in seem rather slim, too.
Wind – the other independent, wireless-only new entrant which came to market with spectrum bought in the set-aside in 2008 – is on somewhat firmer financial footing (but also for sale), with more than 650,000 subscribers, but it, too, faces an uncertain future because of the way the market has evolved, coupled with the federal government’s policy alterations.
“We did not even know that Telus had bid for Public Mobile,” said Canaccord Genuity analyst Dvai Ghose, in a note to investors Wednesday. “While no valuation was disclosed, we assume that it is relatively immaterial for Telus. Public Mobile owns 10 MHz of spectrum across Ontario and Quebec, covering 19 million PoPs… While the transaction still has to be approved by the Competition Bureau, we assume that it will be approved because 1) Industry Canada approved the transaction; and 2) if this transaction is approved by the Competition Bureau there will still be 4 players in the Quebec market (the 3 national incumbents and Videotron) and 5 players in the Ontario market (the 3 national incumbents, WIND and Mobilicity).”
Ghose speculated that “spectrum and tax losses at a reasonable valuation,” are the reasons behind the buy for Telus. While the incumbents could have purchased G band spectrum in 2008, they did not because Sprint is the only major carrier that owns the spectrum in the U.S., Ghose added, and it has historically lacked vendor support. “However, we understand that the recently launched iPhone 5C and 5S operate on the G-band. In addition, the announcement may not be that much of a surprise when one considers that Telus received regulatory approval in June to buy 10 MHz of G-band spectrum from Novus in B.C. and Alberta. Given that Public Mobile only paid $52 million for this spectrum and has tax losses, we believe that this is a small and low-risk investment for Telus.”
Today’s announcement “also highlights that the new entrants have, by and large, failed,” wrote Ghose. “It also puts to rest ridiculous speculation in the summer regarding a potential Thompson family recapitalization of Public Mobile in advance of serious expansion. While Peter Thompson’s Thomvest did assume control of Public Mobile in June, as we expected, this appears as if it was only because he planned to sell the company.”
– Greg O’Brien
