Ottawa blocks Telus’s Mobilicity deal, again

Telus won’t be going two-for-two this month.

Barely a week after announcing its deal to buy out Public Mobile, Canada’s third-largest wireless carrier has been shut down – for a second time – by the federal government in its attempt to snap up Mobilicity.

Telus originally offered last May to pay $380 million for the embattled carrier. Mobilicity, which is the customer-facing brand of Data & Audio Visual Enterprises (DAVE) Wireless, offers services in Ontario, Alberta and British Columbia, and has struggled to attract subscribers since first entering the market in early 2010.

At the time of the initial Telus offer, Vaughan-based Mobilicity had 250,000 customers, a number that has since fallen to below 200,000. As the red ink continued to flow, Mobilicity was granted court protection from its creditors under the Companies’ Creditors Arrangement Act (CCAA) on Sept. 30^th as it feverishly pursued potential suitors.

Nothing has changed

Then-Industry Minister Christian Paradis said he was rejecting Telus’s original offer in May because the five-year moratorium on transferring spectrum licenses – a condition of the 2008 AWS spectrum auction that brought players like Mobilicity and Public Mobile into the market – had not yet expired. The auction specifically set aside a portion of the AWS spectrum for new bidders, and the moratorium was designed to give them sufficient time to build their businesses in-market without fear of being snapped up by larger carriers.

Mobilicity’s spectrum grace period ends next February, and Telus, which currently has approximately 7.7 million subscribers, had been trying to get the government to change its mind on the spectrum rules. While no one in current Industry Minister James Moore’s office is confirming why Telus was turned down a second time, it’s clear the government has no intention of budging on the license transfer issue.

The Mobilicity decision stands in stark contrast to Industry Canada’s near-immediate approval of the Telus/Public Mobile offer. Unlike Mobilicity’s AWS spectrum licenses, which remain subject to the auction moratorium and transfer rules, Public Mobile’s services are delivered via so-called G-block frequencies that are not affected by these rules. This spectrum, which isn’t used by the majority of top-tier mobile devices, is also considered less valuable than the more modern AWS.

Industry Canada’s decision to kill Telus’s offer a second time puts additional pressure on Mobilicity to find another suitor before time runs out. The so-called “stay period” within which it is protected from creditors lasts until Dec. 20^th. Beyond December, the company can dip into upwards of $30 million in debtor-in-possession financing to keep its head above water through Q1 2014. The company says it’ll be business as usual for its swindling subscriber base.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. carmilevy@yahoo.ca