Anthony Lacavera, Chairman, Globalive and WIND Mobile, speaks at a press conference on December 11, 2009, responding to the Government of Canada's decision to vary a previous Canadian Radio-Television and Telecommunications ruling and allow Globalives brand, WIND Mobile, to enter the market without delay. JENNIFER ROBERTS FOR THE GLOBE AND MAILJENNIFER ROBERTS/The Globe and Mail
Apparently there's a telecom company in Canada worth $1-billion that has been flying under the radar until now – because a surprise bid for Wind Mobile from a company called Fongo Inc. suggests that either that is what Fongo is worth or this is an offer that deserves a healthy dose of skepticism.
The expectation is that Wind Mobile, which is up for sale, will fetch bids in the $500-million to $1-billion range. Fongo, which bills itself as "Canada's fastest growing mobile telecommunications company" is basically proposing a merger, with Wind's current owner getting $1 and 49 per cent of Fongo. Do the math. To get to $500-million, that suggests Fongo must be worth $1-billion. To get to $1-billion for Wind, Fongo would have to be worth $2-billion.
Fongo doesn't offer any details on its own value but it does say it's backed by venture capital investment and an investment from the government of Canada. A quick check of the Fongo web site suggests its backers aren't valuing the company quite so richly just yet. In November, it announced an $850,000 investment from the federal government. At that point, Fongo had $1.7-million from investors. Backers included VC provider Tech Capital Partners and angel investors. That suggests Fongo is a long way from being valued in the billions.
Now, there's an outside shot that there's such a wonderful strategic advantage from combining Fongo's business of providing cheap calling with Wind that Wind's owner, Vimpelcom, will ignore valuation and decide to stay in the Canadian market as a junior partner to capture all the upside. But that's a long shot.
So is this a real, viable bid for Wind? Hard to say without further detail. But at first glance it sure appears to have a steep hill to climb.
At the moment, it seems like this could just be a way to put Fongo on more peoples' radar. It certainly grabbed attention, and even a few headlines.
Wind was certainly dubious.
Simon Lockie, Wind's chief regulatory officer, tweeted: "I hereby publicly offer to buy Fongo for $1 and half my sandwich. Hopefully the story gets picked up before I get too hungry to deliver."
(Boyd Erman is a Globe and Mail Reporter & Streetwise Columnist.)
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