In the midst of a contest between Rogers Communications Inc. and Telus Corp. to acquire Mobilicity, employees and the founder of the small wireless carrier have put forward a proposal they say would see the discount brand live on independently.
Obelysk Inc., the private holding company of Mobilicity's founder John Bitove, said in a statement Monday it has made an offer to the federal government to "acquire the subscribers, dealers, and partial infrastructure by setting up a mobile virtual network operator (MVNO) relationship with any potential acquirer."
MVNOs do not own spectrum – the airwaves used to connect cellphones to wireless networks – but operate other elements of a cellular business such as billing, marketing and sales while purchasing service from an operator with its own network.
The Globe and Mail reported on Friday that both Rogers and Telus have submitted proposals to the federal government regarding transactions that would include the acquisition of Mobilicity.
Industry Canada has given preliminary opinions to both indicating it would approve the deals – which include the transfer of some spectrum to Wind Mobile Corp. – and negotiations are believed to be continuing.
Mobilicity, which has been under creditor protection since September, 2013, owns valuable spectrum licences that Rogers or Telus could use to extend their own networks.
It also has about 157,000 active customers for its discount wireless service and has accumulated significant losses that Rogers or Telus could use to reduce their tax bill.
Mobilicity had non-capital loss carry forwards of $567-million by the end of 2013 (this is the most recent figure the company has reported).
One of the incumbents could use those losses to realize a reduction in its tax bill of about 25 to 30 per cent of that amount, according to estimates from industry observers.
However, the value of those tax losses could be up in the air if Rogers or Telus did not also acquire the subscribers. The tax losses can be applied if the purchaser continues to operate the acquired company in a similar line of business, and buying only the spectrum and network but not preserving the operating business could make it difficult to claim the tax losses.
The price range Rogers and Telus are offering for Mobilicity is said to be above $300-million, an amount that undoubtedly takes the value of the tax losses into account.
The statement Monday on behalf of Mobilicity's founder and employees said the group would not "block the sale nor the acquisition of spectrum," but would retain the company's subscriber base and its dealer network with 150 points of distribution. It would also continue to employ 100 workers at two call centres and protect the jobs of 30 full-time Mobilicity employees, the statement said.
"This group feels it is important to continue to provide pricing competition in an industry that does not have enough low-priced customer alternatives," it said, adding that it would maintain the Mobilicity brand in the five urban markets where it operates: Toronto, Vancouver, Edmonton, Calgary and Ottawa.
The group said it would "have a roaming rate structure, utilizing the network infrastructure of the acquirer," and that "capital funding for the transaction" would come from Obelysk, although it did not disclose a price.
The statement did not say whether the group has held talks with the potential buyers directly or whether it has approached Bill Aziz, Mobilicity's chief restructuring officer.
Representatives for Mobilicity, Rogers, Telus and Industry Canada all declined to comment on the proposal Monday.
The Canadian Radio-television and Telecommunications Commission (CRTC) issued a ruling on wholesale wireless roaming services in May when it declined to support a model that would force Canada's existing wireless operators to offer access to their networks to MVNOs. As it stands, companies wishing to operate as MVNOs are permitted to do so, but must negotiate access on commercial terms.
Mr. Bitove, a Canadian businessman known for his development of satellite radio provider Sirius XM Canada, founded Mobilicity and was one of the original equity investors. However, he, along with New York-based private equity firm Quadrangle Group LLC, is in the midst of a $1.2-billion lawsuit against the federal government alleging Ottawa broke promises and caused them to lose their investment.
Mobilicity has significant secured and unsecured debt and its original shareholders are unlikely to recover any of their investment even if the company is sold for well over $300-million.