Mobilicity is attempting to lay the groundwork to ask an Ontario court to force the sale of its wireless licences to Telus Corp. or another large carrier after a federal ban on such deals expires next month.
Mobilicity plans to ask the Ontario Superior Court of Justice to issue an order that could pave the way for the transfer of its spectrum licences to another carrier, even if the federal government objects to a potential deal, according to court filings.
Specifically, Mobilicity is trying to use a section of the Companies’ Creditors Arrangement Act (CCAA) that allows courts to assign “the rights and obligations” of a debtor company to another party.
Mobilicity, which is currently evaluating bids as part of a court-supervised sales process, has been under court protection from its creditors since the fall. Its motion hinges on the argument that CCAA legislation supersedes other federal laws including the Radiocommunication Act, which gives the industry minister the power to issue spectrum licences and amend their terms. Mobilicity contends that the Ontario court has the authority to assign the carrier’s spectrum licences to a potential buyer, arguing that Ottawa has created uncertainty with its new rules governing spectrum transfers.
“In the circumstances, it is impractical to properly evaluate the bids without a clear understanding of the timing and the ability to transfer the Mobilicity Spectrum Licenses to any third party,” reads the notice of motion.
Mobilicity’s legal manoeuvre is considered a long shot, according to sources. Not only are there precedents affirming the jurisdiction of regulators such as Industry Canada, but the CCAA legislation was never intended to have judges prefer the interests of investors over broader government policy objectives such as competition, one person said.
Mobilicity estimates that it has enough money to continue operating until the second week of February. It is unclear whether it will draw on its debtor-in-possession financing after that time.
“As part of the CCAA court-approved sales process, the company and the monitor are required, among other factors, to take into account the speed, certainty and value of the competing transactions and the timing of completing any transaction,” Bill Aziz, Mobilicity’s chief restructuring officer, said in an e-mailed statement.
“With this in mind, Mobilicity has submitted a motion to the Ontario court as part of the ongoing sales process to establish a procedure and process by which the CCAA Court in the future, if needed, would consider the assignment of all or any of the Mobilicity spectrum licences under the provisions of the CCAA. This motion is contingency planning to ensure a fair and reasonable process and that any potential transaction be able to be consummated and completed with the requisite certainty and speed envisioned under the CCAA Court approved sales process.”
Mobilicity paid $243.1-million for licences reserved for new entrants during the 2008 spectrum auction. In doing so, it agreed to a five-year ban on transferring its licences to an incumbent carrier. That prohibition is to expire on Feb. 12, but it is unclear whether the company faces future transfer restrictions since Ottawa introduced new rules for such deals last June.
“Our thoughts are with Mobilicity’s employees who may have been impacted by this restructuring. Our government will not approve spectrum-transfer requests that decrease competition in our wireless sector. We look forward to the court’s positive ruling on this matter,” said Jake Enwright, press secretary to Industry Minister James Moore.