Telus agrees to buy Mobilicity

17 May 2013

Nationwide Canadian operator Telus has entered into an agreement with Mobilicity to acquire the financially-struggling smaller cellco for CAD380 million (USD373.6 million), subject to regulatory, antimonopoly, shareholder and debt holder approval. If the deal is completed, the entire purchase price will be used to satisfy Mobilicity’s secured and unsecured debt. Mobilicity currently has around 250,000 customers on its network covering Toronto, Ottawa, Calgary, Edmonton and Vancouver.

William Aziz, Mobilicity’s chief restructuring officer, stated: ‘Mobilicity has been losing a significant amount of money every month. 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.’ Stewart Lyons, Mobilicity’s president, added: ‘A concern for our customers and employees led us to approach Telus, which has a reputation for a strong customer focus… 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.’ If the transaction is approved, Telus says it will retain all 150 Mobilicity employees whilst integrating its operations over the coming months.

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 debt holders, after which Telus and Mobilicity will seek court approval of a transaction to make Mobilicity a wholly-owned subsidiary of Telus. Telus has entered into support agreements with ‘a significant number’ of Mobilicity’s debt holders who have committed to vote for the plan of arrangement pursuant to the terms and conditions of the support agreements. The statement adds that ‘Telus and Mobilicity anticipate an expeditious legal and regulatory review in view of the current circumstances Mobilicity is facing.’

However, necessary approval by the Competition Bureau and Industry Canada (the federal ministry responsible for telecoms) is by no means guaranteed, as the 2100MHz wireless spectrum bought by Mobilicity in 2008 is covered by regulations banning its transferal to a large incumbent wireless operator (i.e. Rogers, Telus or Bell) until early 2014, as part of a government strategy to raise competition. The authorities must decide whether to apply the letter of the law and block the transaction, or waive the condition and allow the purchase, which according to Telus’ chief marketing officer David Fuller, will ‘save Mobilicity from bankruptcy.’

Canada, Innovation, Science & Economic Development Canada, Mobilicity, Telus Corp (old), Telus Corporation, Telus Mobility (old)