A man using a mobile device outside Rogers Communications’ head office in Toronto on April 22, 2014.Fred Lum/The Globe and Mail
Telus Corp. and Rogers Communications Inc. are in a race to acquire Mobilicity and the federal government appears poised to approve a deal with one of the suitors.
At least one of the proposed transactions includes the transfer of cellular airwaves to new entrant wireless carrier Wind Mobile Corp.
The blessing of a sale to one of Canada's largest wireless carriers would appear to be a dramatic change in policy for the government which has worked hard to spur competition in the wireless industry and support alternatives to the dominant carriers. However, the involvement of Wind is believed to be a key factor in Ottawa's reasoning.
The Globe and Mail has obtained copies of two opinion letters from Industry Canada related to proposed transactions involving Mobilicity, which has been under creditor protection since September, 2013.
Ottawa has previously blocked the Toronto-based carrier's attempts to sell its licences for cellular airwaves to Telus on multiple occasions. Mobilicity's main asset is the spectrum it purchased for $243-million in 2008 in an auction that included a set-aside for new entrants to the wireless industry. The federal government has cited its spectrum transfer policy in blocking the Telus deals, and said it will not allow deals that lead to an undue concentration of spectrum in the hands of Canada's incumbent national carriers.
But letters this month written by Peter Hill, director of the spectrum management operations branch of Industry Canada, indicate the government would approve transactions involving either Rogers or Telus.
On June 11, Mr. Hill wrote to David Watt, the interim senior vice-president of regulatory affairs at Rogers, in response to a request for a "preliminary assessment" of "a series of spectrum licence transfers involving [Mobilicity]" as well as Rogers. The letter, which is redacted in parts, names at least one more party to the proposed transactions.
After reviewing the government's spectrum policy objectives and the change in spectrum concentration levels were the transactions to occur, the letter concludes that the "proposed integrated transactions would be approved, subject to our subsequent review of the definitive agreements effecting such transfers."
Mr. Hill wrote a similar letter on June 18, addressed to both Stephen Lewis, senior vice-president at Telus, and Bill Aziz, Mobilicity's chief restructuring officer.
That letter, which is not redacted, names Wind Mobile and states that the deal would see Telus acquire 100 per cent of Mobilicity's common shares and commit to transferring Mobilicity's spectrum in the Eastern Ontario/Outaouais region to Wind.
The letter similarly concludes that the government would approve the "proposed integrated transaction," subject to the review of definitive agreements.
"Our preliminary assessment is that the result of the proposed transfers would not impair the ability of existing and future competitors to provide services in the affected licence areas," Mr. Hill wrote in identical paragraphs found in both letters.
"We do continue to be interested in acquiring Mobilicity and recently put forward a proposal in which we committed to transferring at no cost some of Mobilicity's spectrum to Wind, or if that company didn't want it, another company, or Industry Canada for reallocation," Telus spokesman Shawn Hall said Friday.
In both letters Mr. Hill sets out reasons why the government might see the deals as acceptable in terms of competition in the wireless industry.
"We note that these transfers involve some spectrum that is currently not being used to provide service and that the transfers would provide an opportunity to put such spectrum to use for the benefit of Canadians," Mr. Hill wrote in the Rogers letter.
In the Telus letter, he noted that recent spectrum auctions and policy changes – related to the AWS-4, AWS-3 and 2,500-megahertz bands – "have had a substantive impact on the spectrum concentration landscape in Canada."
Mobilicity does not appear to have definitively chosen a buyer at this point, although sources say an announcement is expected within the next week. The company will have to present a proposed transaction to the Ontario Superior Court judge who has been supervising the creditor protection process.
"We continue to pursue a going-concern transaction that is in the best interest of stakeholders and we continue to engage with a number of parties," Mobilicity spokesman Joel Shaffer said Friday evening. "However, we can't comment on the specifics of any potential transaction or the actions of others."
"There's a mild bidding war going on," said a source close to Mobilicity. The price range is said to be above $300-million.
Another source with knowledge of the discussions said "people have been working around the clock," to conclude a deal.
Mobilicity, which has been in legal limbo for close to two years, had 157,000 "active" subscribers at the end of April, according to court filings.
Mobilicity's spectrum would be valuable to Wind, which purchased the same type of airwaves in 2008 and could use more of them now to upgrade its network to LTE (long-term evolution or fourth-generation) service. Wind had 800,000 subscribers as of December.
A representative for Industry Canada was not immediately available for comment Friday evening. Alek Krstajic, chief executive officer of Wind, declined to comment, as did Aaron Lazarus, a spokesman for Rogers.