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Mobilicity ‘close to transferring users to Wind Mobile’

5 Sep 2013

Canadian newspaper The National Post writes that financially-crippled cellco Mobilicity is nearing a deal to transfer its approximately 200,000-strong user base to fellow second-tier Canadian operator Wind Mobile. According to two industry sources cited by the paper, loss-making Mobilicity is negotiating a deal with Wind under which the latter would acquire Mobilicity’s customers for a negligible price, while Mobilicity’s debtholders would retain its assets including mobile spectrum licences and tax losses with the potential of recuperating value from a subsequent sale to a separate buyer. According to the report, Mobilicity is aiming to shut down its operations by the end of this month.

Three months ago a proposed CAD380 million (USD366 million) takeover of Mobilicity by larger operator Telus was effectively blocked by a federal spectrum licence transfer policy which aims to prevent transactions resulting in ‘undue concentrations’ of mobile frequencies, chiefly to stop national incumbents Rogers, Bell and Telus from acquiring newer market entrants while promoting the vision of four competitive players in every Canadian region. A subsequently rumoured approach from US-based Verizon for Mobilicity did not transpire. A ‘last resort’ transfer of customers between the respective 3G networks of Mobilicity and Wind would be relatively straightforward as Wind’s coverage includes all the main cities covered by Mobilicity – Toronto, Vancouver, Edmonton, Calgary and Ottawa – and uses the same 1700MHz/2100MHz (AWS) frequency band.

Mobilicity is more than CAD450 million in debt and incurring losses of around CAD30 million a month according to court filings in May 2013, and although it recently raised CAD75 million to keep it from bankruptcy, it continues to lose money steadily, and its debt holders do not want to commit any further financing, although they must be in agreement on any transaction such as a sale or transfer of all/part of the company/assets. While it had more than CAD400 million in tax losses at the end of 2012, its investors will want clarification on whether this asset will legally retain value if the cellco ceases operations.

Wind’s CEO Anthony Lacavera has repeatedly said that his company would look at acquiring Mobilicity, but it is unknown if his plans included the possibility of taking on his struggling rival’s customers without assets such as spectrum licences. Wind, Mobilicity and fellow second-tier cellco Public Mobile have all talked of their desire for consolidation to create a stronger competitor ahead of Canada’s upcoming 700MHz 4G licence auction, but they are running out of time. The deadline for initial bids is 17 September 2013, and rules prevent participants from continuing takeover negotiations until after the auction has been completed in January.

Canada, Freedom Mobile (owned by Videotron), Mobilicity

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