Telus has tried repeatedly to purchase Mobilicity, but Ottawa has blocked the deals.Fred Lum/The Globe and Mail
Pressure is building to conclude a deal to acquire small wireless carrier Mobilicity, with Rogers Communications Inc. and Telus Corp. both in the running.
The Globe and Mail reported on Friday that both Rogers and Telus recently submitted proposed transactions to the federal government for its preliminary review.
Letters from Industry Canada this month in response to the proposals indicate the government would approve either transaction, subject to its subsequent review of a definitive deal.
Despite the preliminary approvals, Ottawa could still stand in the way of a deal. A source familiar with the negotiations said Sunday afternoon that there is a sense the clock is ticking for all parties involved.
If an agreement is not reached within the next week or so, the source said, the federal government could decide to simply put the matter over until after the election in October, at which point the values and bidders could have shifted significantly.
Toronto-based Mobilicity has been looking for a buyer for well over two years and has been under creditor protection since September, 2013. Telus has tried repeatedly to purchase the carrier, but Ottawa has blocked the deals and until recently it did not seem the federal government would permit a sale to one of Canada's dominant three wireless providers. Any deal would also require the approval of the judge in the creditor protection proceedings.
However, the latest proposal from Telus includes the transfer of some of Mobilicity's spectrum – the airwaves used to deliver cellular service – to new entrant Wind Mobile Corp., which is believed to be part of the reason for Ottawa's shift.
Industry Minister James Moore has also emphasized in several public statements that the concentration of spectrum holdings has shifted significantly under his government's watch. That is due to recent policy changes allowing for more spectrum to be put to mobile use, as well as three public auctions in little more than a year plus the 2008 auction that first reserved airwaves for new entrants.
While Canada's dominant carriers together held 98 per cent of available mobile spectrum in 2006, Mr. Moore has said he expects new players to control 25 per cent by this summer. Wind has also emerged as a more viable competitor in recent months, with new ownership, a new CEO and a swath of new airwaves it purchased for a low price.
"We will not approve transactions that decrease competition in the wireless sector," Jake Enwright, press secretary for Mr. Moore said Sunday.
Telus confirmed its renewed interest in Mobilicity on Friday. Spokesman Shawn Hall said the company "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."
Reached Sunday, Mobilicity spokesman Joel Shaffer referred to a comment offered on Friday evening, when he stated: "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. However, we can't comment on the specifics of any potential transaction or the actions of others."
Mobilicity purchased spectrum licences in the AWS-1 (advanced wireless service) frequency range for $243-million in a 2008 auction. The company also had 157,000 subscribers at the end of April, which Telus could assume as it did with the customers of Public Mobile, which it acquired in 2013.
Mobilicity has also accumulated significant losses that could be valuable to Rogers or Telus, with non-capital loss carry forwards standing at $567-million as of the end of 2013, the most recent figure reported in the creditor protection court proceedings. Industry observers say one of the incumbents could use those losses to realize a reduction in its tax bill of about 25 per cent to 30 per cent of that amount.
On top of Mobilicity's spectrum, subscribers and tax losses, Rogers stands to further benefit from a potential transaction with the carrier. Sources familiar with the negotiations say the proposed deal in that case would also involve the transfer of some spectrum to Wind Mobile and would see Rogers complete its option to purchase unused spectrum licences from Shaw Communications Inc.
The two companies struck a broader deal that included that option in early 2013, before the government introduced a new spectrum transfer policy and repeatedly indicated it would not permit transfers to one of the wireless incumbents.
Representatives for Rogers, Shaw and Wind all declined to comment Sunday.