Struggling wireless company Mobilicity gets court-approved creditor protection

LuAnn LaSalle, The Canadian Press 0

Small wireless carrier Mobilicity says it has been granted creditor protection by the courts while awaiting a ruling from Industry Canada on an unspecified transaction.

Mobilicity, which has been looking for a buyer, said Monday that creditor protection gives it the necessary time and financing to complete the transaction now before the federal body for review and approval.

The Toronto company, which launched in 2010, provided no details about the transaction, but said it was in the best interests of its stakeholders.

Meanwhile, it says it will be business as usual for the company’s 250,000 cellphone customers.

“There are no changes to Mobilicity’s network and Mobilicity continues to honour prepayment plans for its customers,” the company said in a statement.

“Phone service continues to work as it always has and Mobilicity’s dealer network is open for business.”

One of Canada’s major carriers, Telus (TSX:T), tried to buy Mobilicity for $380 million last spring. However, the transaction was rejected by Industry Canada because the small company’s licence for spectrum — radio waves needed to operate cellphones — doesn’t expire until next year.

It was also rumoured that U.S. giant Verizon was taking a look at Mobilicity and another of Canada’s small telecoms, Wind Mobile, but Verizon said later said it was taking a pass on the Canadian wireless market.

The majority owner of Wind Mobile, Dutch-headquartered VimpelCom, has said it wants to sell its 65 per cent stake in the company, which has more than 600,000 wireless customers.

Canaccord Genuity analyst Dvai Ghose says he assumes Telus is trying to buy Mobilicity again and the question is whether it will be allowed to do so when Mobilicity’s spectrum licence expires in February.

“Given the government’s commitment to four wireless carriers in every market despite limited bidding interest for the 700 MHz auction in January, we assume that the government does not want to allow an incumbent to buy Mobilicity,” Ghose said in a research note.

He noted that Mobilicity isn’t on the initial bidders list for the auction next January and there aren’t any foreign bidders either.

“We wonder why the government would want to regulate wireless when many areas of the economy seem less competitive, including broadband. According to the CRTC’s own studies, wireless prices are not particularly high in Canada relative to other countries.”

A total of 15 Canadian participants — including Rogers (TSX:RCI.B), Bell (TSX:BCE) and Telus — put down a refundable, five per cent deposit for the Jan. 14 auction, according to the recently released list by Industry Canada. Together those three companies dominate the Canadian markets with combined 25 million customers

Regional players included Quebecor’s Videotron (TSX:QBR.B) in Quebec, MTS Inc. (TSX:MBT) in Manitoba, Saskatchewan Telecommunications and Bragg Communications, which operates EastLink in Atlantic Canada.

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