Court gives Mobilicity more time to secure restructuring approval

25 Oct 2013

Canadian newspaper The Globe & Mail reports that a court decision yesterday (24 October 2013) gave financially stricken cellco Mobilicity extra time to restructure its business and potentially complete a sale to larger rival Telus at the second attempt, via protection originally granted under the Companies’ Creditors Arrangement Act at the end of September. The Ontario Superior Court of Justice extended a ‘stay period’ during which Mobilicity is shielded from any new or existing legal actions until 20 December from the original expiry date of 30 October. The second-tier mobile operator wants additional time to try and secure federal government permission for a sale of the company – with Telus strongly rumoured to be the candidate buyer. Telus was blocked from acquiring the younger, smaller firm in June by Ottawa under a frequency transfer policy opposed to national incumbents acquiring 2100MHz AWS spectrum auctioned to new entrants in 2008. The original expiry date for the embargo on selling AWS spectrum to an incumbent in Mobilicity’s case is February 2014 – however, TeleGeography notes that the telecoms ministry Industry Canada has made it clear that this by no means guarantees permission for such a deal beyond this date, as all proposed transfers will be dealt with individually under a remit to prevent ‘undue’ concentrations of spectrum, protect fair competition as the ministry sees it, and promote a goal of having four active wireless carriers in every region of Canada. The Globe & Mail adds that Telus is currently attempting to resurrect the proposed CAD380 million (USD368 million) buyout of Mobilicity by lobbying the government to ease the ‘regulations on the purchase of existing Canadian wireless companies,’ according to an update in the federal lobbyist registry. For its part, Mobilicity’s lawyer told the court yesterday that it was continuing ‘active and dynamic’ talks with Industry Canada on its proposed sale, without naming a prospective buyer.

The paper continues that, according to a monitor’s report filed by Ernst & Young, Mobilicity’s cash position on 12 October 2013 was estimated to be CAD7.4 million, with the balance expected to fall below CAD2 million by 6 December. As of 30 September the company had 189,239 active subscribers, down from 235,980 on 31 December 2012. Mobilicity’s revenue for the third quarter of 2013 was CAD18.9 million, according to other court filings, whilst it posted an operating loss of CAD8.2 million and net loss of CAD24.6 million in the three-month period.

The same Ontario court also yesterday approved a CAD30 million debtor-in-possession (DIP) financing from a group of Mobilicity’s noteholders which is designed to allow the cellco to remain operational until spring 2014. Also on Thursday, the Globe reported that private equity firm Catalyst Capital Group, which holds approximately 30% of Mobilicity’s senior secured debt, asked the same court to adjourn a separate motion to challenge the DIP financing package, although Catalyst reserved the right to pursue the motion at a later date.

Separately, it was revealed that Mobilicity’s president and chief operating officer Stewart Lyons will leave the company at the end of this month.

Canada, Mobilicity, Telus Corp (old)