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The Wind Mobile store located on Queen St. West near Spadina Ave. on July 3 2014. New York-based Blackstone Group LP had a good look in recent months at investing in Wind, the largest of the independent wireless companies in the country, sources said. The private equity firm concluded that for now there are too many variables it cannot control.

Fred Lum/The Globe and Mail

Another big buyer has looked at the Canadian wireless market and decided it is just too complicated and risky to compete with the Big Three, as Blackstone Group LP is said to be backing away from any attempt to purchase Wind Mobile.

New York-based Blackstone Group LP had a good look in recent months at investing in Wind, the largest of the independent wireless companies in the country, sources said. The private equity firm concluded that for now there are too many variables it cannot control.

Wind's owner, an Amsterdam-based wireless company, wants at least $300-million, and on top of that the network requires upgrades to be able to use the latest phones, which will push up the total investment perhaps to around $500-million. Even after putting up all that money, a buyer still would not be able to be sure enough of getting to profitability.

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Blackstone came to the conclusion that until some of the uncertainties are resolved, a bid at the current price would be unwise, said one of the sources.

A large risk factor is the ability to merge Wind with other smaller players to create a large enough independent to battle the large incumbents, Rogers Communications Inc., Telus Corp. and BCE Inc. Putting together smaller competitors is also crucial to ensure independents fighting for market share aren't undercutting one another.

That would require finding a way to buy independent rival Mobilicity, which is under creditor protection, and a way to ensure that there is no battle with Quebecor Inc. should it decide to try to become a national wireless carrier.

Another big roadblock is the government's unwillingness to allow the sale of spectrum owned by independent wireless companies to the so-called Big Three of Telus, Rogers and BCE. The government put in place the rule to try to ensure a fourth competitor, but it is becoming counterproductive, say those who have explored putting money into the industry.

The sale ban means that anyone investing in Wind has to be very confident that the wireless company can become consistently profitable, because there is no easy way to sell the spectrum if not. The government has driven home that risk by consistently blocking Mobilicity's attempts to sell to Telus.

So now Wind owner, VimpelCom Ltd., must decide whether to try stand firm on its price demands. VimpelCom wants out soon, with the head of its telecom holding company arm saying recently that the company is not ready to fund Wind until March of next year, when there is another spectrum auction.

One of the issues for the seller is even if it does get $300-million, it won't get a lot of the money. That price has to cover Wind's debt as well.

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A good piece of any purchase price will flow to vendors that are owed money, and to a Los Angeles-based hedge fund that has inserted itself in the situation with an eye to potentially working with possible buyers.

Distressed debt specialist Tennenbaum Capital Partners has been buying up debt from vendors that have sold goods and services to Wind. In any Wind purchase in the $300-million range, where Vimpelcom wants the bidding to start, a good chunk of the proceeds will go to pay off those vendor obligations. That means some of the money will end up in the hands of Tennenbaum – which will do well since it bought the paper at a big discount – rather than to VimpelCom.

That gives Tennenbaum some clout if it works with a potential buyer such as Blackstone, by providing a sort of head start on paying off the price and limiting the amount of new money that has to go into the deal.

So for all the government's agonies in trying to create a sustainable fourth player, the situation remains largely as it has been for a year or more. Wind is for sale. So is Mobilicity. Both are digging deep holes, costing their original backers hundreds of millions of dollars they will never get back.

From Verizon Communications Inc. to Blackstone, potential saviours keep looking, drawn by the chance to get into what looks from a distance like a very profitable wireless market with high revenue per user at what appears to be a discount.

But when they get close, and dig in to what it would take to make a fourth wireless carrier work in Canada, those people keep turning around and walking away. At some point, it's not hard to imagine both Wind and Mobilicity simply giving up on the business, having exhausted their options.

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For both companies, and for the federal government's pledge to create a fourth carrier in every market, the prospects of a rescue are looking increasingly dim.

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