Canadian Government Likely Unable to Stop Telus from Acquiring Mobilicity

by Jeff Wiener on April 22, 2014

Yesterday we heard that beleaguered Canadian mobile carrier Mobilicity had once again accepted an acquisition offer from Telus, the third such offer tendered in the last six months. As writers here noted, with the previous two deals quashed by government regulators one might think that a third kick at the can is simply a waste of time, but you’d be surprised just how much can change in a short amount of time, meaning that for Telus, the third time may indeed be a charm.

Over the past six months Industry Canada has repeatedly rejected such an acquisition, citing a detrimental effect on wireless competition in the country. Its certainly no surprise to hear that Ottawa is no fan of the current state of affairs in the Canadian wireless industry, evidenced by the informational campaign the government launched against the Big Three, arguing that Canada had some of the worst wireless service in the developed world.

But that said, times have changed, and given that the government’s 5-year moratorium on selling wireless spectrum has now ended and the fact that Mobilicity stands on the brink of collapse, unable to find a buyer, it seems that Ottawa may not have any legally defensible reason to continue to oppose continued consolidation, no matter how bad it may be for the market as a whole.

Now don’t get me wrong, should Telus’ acquisition of Mobilicity go through I will fully understand the rationale behind the decision. As it stands Mobilicity offers little competitive influence on the market, it has negligible spectrum holdings, and it currently resides in bankruptcy protection. This means, of course, that Mobilicity needs to be purchased by someone, but still I cringe at the thought that one of the Big Three (Telus in this case) is furthering its ironclad grip on the Canadian market.

I’ll admit that for once I couldn’t agree more with Ottawa’s position on the wireless industry, it’s dominated by a triumvirate of incumbent players who, while competing against other, seem to work together to maintain their respective positions of dominance. Such a situation has produced some of the highest prices for wireless service, while the service provided is most often sorely lagging behind that of other developed nations.

But again, the fact remains that there are few other options for Mobilicity, the company can’t continue to exist as an independent entity, there are no other buyers, and it seems that most bureaucratic roadblocks have been removed. There is a glimmer of hope, however, in that Ottawa has promised to reject any such third bid by Telus to acquire Mobilicity, but as I mentioned, even if the government does attempt to intervene, there may not be any legal foundation to base its rejection of Telus’ request on.

As the Globe and Mail’s technology reporter Omar El Akkad notes, “Now that the moratorium has expired, Telus and Mobilicity can argue tha tOttawa has no legal footing to continue blocking the acquisition – setting up a potential court battle. I fOttawa rejects the deal again, it may set the stage for Mobilicity’s exit from the Canadian marketplace entirely, which may be more detrimental to wireless competition in Canada than the acquisition itself.”

In the end, try as we might to block incumbents like Telus from further solidifying their position atop the Canadian wireless market it looks like the government may have run out of legally grounded objections in this case, leading me to believe that the Mobilicity deal will go through…eventually.

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