Public Mobile Agrees to Private Equity Firm Acquisition

by Istvan Fekete on June 7, 2013

Toronto-based investment firm Thomvest Seed Capital Inc. and New York-based Cartesian Capital — a private equity firm — are the new owners of Public Mobile, the struggling wireless startup. The two have committed themselves to fully fund Public Mobile to a “cash flow positive position” without disclosing the amount they have agreed to pay.

The news comes hot on the heels of Industry Minister Christian Paradis rejecting the Telus–Mobilicity deal, underlining once again the government’s firm decision to stick with its own guidelines in an effort to finally create a competitive Canadian wireless market.

“Despite the current uncertainty in the Canadian wireless industry, Public Mobile’s strong performance and rapid growth continue to attract financial backing from blue chip investors. This financing is an enormous vote of confidence in Public Mobile’s business and a significant milestone in our company’s history,” Alek Krstajic, Public Mobile’s founder and CEO, said in a statement. “The support of Thomvest and Cartesian enables Public Mobile to continue the rapid expansion of our subscriber base from a strong and well-funded position.”

As we’ve previously heard, Public Mobile, the smallest of the wireless startups, was put on sale by its owners as it struggled for survival in a highly uncompetitive market. The wireless player was founded almost entirely by U.S. telecom venture funds, including M/C Venture Partners of Boston and Columbia Capital of Alexandra, Va., alongside Canadian funds from Rho Venture, Kesington Capital Partners and Ignition Partners. Public Mobile paid $52.38 million for four wireless licences in the 1.9 GHz band covering Toronto, Montreal, and Ottawa in 2008 and launched in 2010.

Now, after three years in the market, its backers have decided to hand over their Canadian business. During the past 36 months, Public Mobile has managed to grow to 199,000 subscribers and — from the perspective of the new owners — its strong performance has generated fast growth.

According to their statement, they look forward to the upcoming wireless auction, as they aim higher by acquiring spectrum.

“In the coming months, the Canadian wireless industry will see consolidation and an important spectrum auction,” said Paul Pizzani, partner at Cartesian. “Public Mobile is well positioned two grow in scale by oursuing these consolidation opportunities and by nodding for national spectrum in the 700 Mhz auctions.”

Now it remains to be seen whether the new owners are not “brokers” who are after the money, but “industrialists” like Wind Mobile’s Naguib Sawiris, who predicted three years ago the sale of Mobilicity and Public Mobile. He was confident back then that Wind Mobile would acquire both of them.

In an interview with the Globe and Mail Sawiris stated that the big 3 (Rogers, Bell and TELUS) are “a joke”. Sawiris said “I have been offered by two of them to buy me out at a very significant profit. But that means I’m a broker, not an industrialist. It’s against my saga, against my history. I’m not the kind of guy who goes out for the money. It’s about success. And this, I would consider it as a bribe.”

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

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