Ottawa Will Likely Reject a Second Telus–Mobilicity Deal

by Istvan Fekete on October 4, 2013

Earlier this week, Mobilicity secured court protection from creditors and new financing, in an attempt to stay alive for a while. The struggling wireless startup became the first carrier to come under the protection of the Companies’ Creditors Arrangement Act, and declined to reveal the identity of the potential buyer. This also triggered a new wave of rumours about a second phase of Telus–Mobilicity talks.

You may recall that Telus has bid $380 million to acquire Mobilicity earlier this year and both parties seemed to be happy with the deal. It is how much the wireless startup is worth in today’s market (well, this could be the summer’s market, because today it could worth much less).

Back then, Mobilicity had roughly 250,000 customers, but as of the end of September this number has dropped to 200,000.

The company’s fate raised concerns about the government’s wireless policy for some analysts, who have questioned the Ottawa dream of beneficial competition in the Canadian wireless landscape. Fact is, besides triggering a slight wireless pricing adjustment — limited to certain areas — the “competition” only “helped” to push the small companies to their financing limit, as we have seen with Public Mobile and Mobilicity.

Now, a second Telus bid could save the wireless startup, but as the government already highlighted when rejecting the initial offer, it could be against Ottawa’s wireless principles.

Or maybe not.

Mobilicity needs to survive only until February 2014, when the standstill agreement expires: starting then — theoretically — the wireless startup can ink a deal with any incumbent, because the federal ban on such deals expires.

However, the Globe and Mail has heard that Ottawa will look unfavourably on efforts by Telus to purchase Mobilicity and the spectrum it uses. If the rumours are correct and the anonymous bidder is indeed Telus, the government will likely reject the second bid as well, for one simple reason: by accepting the merger, the government’s heavily publicized position changes. And they don’t want us Canadians to think that.

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Written by: Istvan Fekete. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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