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Quebecor eyes purchase of wireless startup Mobilicity

The offices of Quebecor Inc. seen in Montreal on May 8, 2013.

christinne muschi The Globe and Mail

Quebecor Inc. is showing interest in purchasing struggling wireless startup Mobilicity, a move that could potentially change Canada's national wireless landscape at a time of faltering competition.

Bank of Nova Scotia analyst Jeff Fan said in a research note that the Montreal company signed a non-disclosure agreement with Mobilicity ahead of a key spectrum auction that began on Tuesday, suggesting it may harbour ambitions of securing more wireless licences outside its home market of Quebec.

Mobilicity, which is operating under the Companies' Creditors Arrangement Act (CCAA), has previously been the subject of multiple bids. Wireless giant Telus Corp. has attempted to buy the company twice, but those efforts were rejected by the federal government. U.S.-based Verizon Communications Inc., meanwhile, issued a preliminary $350-million offer for Mobilicity over the summer before pulling the plug on its Canadian expansion plans.

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Quebecor, which operates cable, Internet and wireless businesses in Quebec as Vidéotron Ltée, declined to comment. Mobilicity was not immediately available for comment.

This is not the first time that Quebecor has toyed with the idea of expanding beyond its home province. Sources have previously said the Montreal-based company gave serious consideration to launching a national wireless network before the last government spectrum auction in 2008. It eventually decided to launch in Quebec only.

Additionally, years ago, Quebecor held early-stage talks with Mobilicity on a potential network-sharing deal.

If it is serious about its acquiring Mobilicity now, Quebecor stands to gain wireless licences while also increasing its customer base. Mobilicity had roughly 189,239 customers at the end of last year.

Moreover, Quebecor may have other incentives to try to build a national wireless business now. The Conservative government in Ottawa has pledged to introduce legislation this year to provide new-entrant carriers with cheap access to incumbent networks for domestic roaming. The move is meant to give newer wireless carriers greater certainty about their costs if they choose to offer nationwide mobile phone and data plans for smartphone users.

Ever since a 2008 auction of wireless licences was set up to promote new wireless companies, the federal Conservatives have attempted to engineer more competition in Canada's telecom market. It has acted to thwart the three largest wireless companies – BCE Inc., Rogers Communications Inc. and Telus Corp. – from buying out the smaller ones, which have struggled to gain a foothold in a capital-intensive industry.

If Quebecor managed to secure more licences outside of Quebec (it already owns a small bit of spectrum in the Greater Toronto Area that it plans to eventually sell to Rogers Communications Inc.), either through Mobilicity or on its own, the move would alter the character of a company that has largely remained a Quebec-only powerhouse.

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It would also offer a positive twist to the federal government's attempt to ensure a large, financially viable wireless competitor to the Big Three.

Wind Mobile, another wireless challenger, said publicly in December that it would participate in the Mobilicity auction process. Wind, however, pulled out of the wireless auction because its foreign backer pulled the plug on its financing, casting even more doubt on the government's attempt to ensure sustainable competition in the $20-billion wireless sector.

As new entrant carriers go, Quebecor is well positioned to outbid Wind on any deal for Mobilicity and to line up the requisite financing to consummate a deal.

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