Industry Canada to participate in court-sanctioned talks on Mobilicity deal

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TORONTO – Mobilicity announced Friday that Industry Canada has agreed to participate in court-sanctioned talks that could allow Telus (TSX:T) to get the ministry’s approval to buy the financially troubled wireless carrier, as proposed under a $350-million conditional deal announced last week.

The company, which has been operating under court protection from creditors since September, said that Industry Canada advised Mobilicity on Thursday that it would participate in meetings to be mediated by Warren Winkler, a former chief justice of Ontario.

“If needed, Mobilicity expects that mediation would proceed over the next few weeks,” said a statement issued Friday afternoon by Mobilicity, which is under creditor protection under the Companies’ Creditors Arrangement Act.

Mobilicity announced last week that it has agreed to be purchased by Telus, saying it believed the latest proposal would satisfy Industry Canada’s criteria with little or no disruption to its customers or the competitive landscape.

The Harper government has said repeatedly that it favours strong competition and innovation in wireless communications and that it wants at least four rivals in each region of the country. It is also opposed to the sale of certain wireless spectrum held by smaller players such as Mobilicity to the industry giants.

“Our government’s spectrum transfer policy remains unchanged,” Jake Enright, a spokesman for federal Industry Minister James Moore, said Friday in a phone interview from Ottawa. “We will not approve spectrum transfer requests that decrease competition in our wireless sector.”

The Canadian wireless telecom industry has been dominated for several years by three companies — Rogers (TSX:RCI.B), BCE’s Bell Canada (TSX:BCE) and Telus. In the early years of the industry, which began to take its current form in the 1990s, there were several other competitors that have since been absorbed by the Big Three.

Mobilicity was one of a new round of competitors that emerged with a 2008 Industry Canada auction of spectrum — the radio waves required to carry the voice and data traffic over wireless networks. Apart from Quebec-based Videotron, the telecom arm of Quebecor (TSX:QBR.B), most of the other new entrants have struggled to carve out a significant market shares.

Any deal between Telus and Mobilicity would also require approvals from the Ontario Superior court of Justice, the Competition Bureau — also part of Industry Canada — and Mobilicity’s creditors.

Note to readers: This is a corrected story. A previous version erroneously reported that the industry minister spokesman Jake Enright said the government’s policy was in disarray and that an alternative for Mobilicity may be to shut down. The remarks were wrongly attributed to him.

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