Telus Agrees to Acquire Mobilicity for $380 Million

by Istvan Fekete on May 17, 2013

Telus has entered into an agreement to acquire Mobilicity for $380 million, an unprecedented move in the Canadian mobile market, the incumbent announced. The deal was pretty foreseeable, as earlier this month Mobilicity reached out to the government for financial help.

The news comes after the struggling wireless startup had scoured the globe for a buyer without obtaining any tangible results. As the court filing obtained by the Globe and Mail shows, financial advisers have contacted more than 30 potential purchasers, which include incumbents, local players, international telecoms, and even US private-equity companies.

Telus even confirmed that it was approached by Mobilicity back in December. “In December of last year, Mobilicity first approached us about a deal. One of the reasons they felt TELUS would be a great fit is they genuinely appreciate our customer focus and the improvements we’ve made over the past few years. We have the best client loyalty in the business and it continues to get better. Mobilicity approached TELUS as the best option for their company and customers. They have considered all of their options – and when I say all, I mean all,” TELUS Vice President of Corporate Communications Nick Culo writes.

But the dark clouds have kept on gathering above the wireless startup. After growing to 250,000 customers and having 150 employees on board, Mobilicity faced the harsh reality: it needed to either find a buyer or restructure its capital and secure additional funding, otherwise the road would lead to a dead end.

And finally, the rich prince on a white horse came: Telus. Happy ending, and hopefully they will live happily ever after.

Unfortunately for wireless customers, the story doesn’t end here – it is only the beginning.

For a start, this means a big hit for wireless competition, because one wireless startup is down, although it could secure less than 1% of the 27 million Canadian mobile subscribers. But let’s not forget that another two wireless startups are reportedly up for grabs.

After the news broke, critics warned that this would prompt higher prices for monthly cellphone services if the deal went through.

For Mobilicity customers, this means they will be approached in the Telus way, and they will benefit from the incumbent’s national coverage and faster data speeds on its 4G LTE network.

For Mobilicity’s 150 employees, the deal means they will have an option to retain a permanent position at Telus.

The deal is subject to conditions, including approval by Industry Canada, the Competition Bureau, and Mobilicity’s debt holders.

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Written by: Istvan Fekete. Follow by: RSS, Twitter, Facebook, or YouTube.

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