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A Telus store on Queen St. East in Toronto's Beaches neighbourhood is shown on March 5, 2014.

Fred Lum/The Globe and Mail

Telus Corp. has lost a court challenge over the federal government's policy on airwaves earmarked for smaller competitors in the wireless industry.

The Federal Court of Canada this week dismissed a challenge the Vancouver-based company brought in July 2013 ‎complaining about a shift in Ottawa's policy on the transfer of spectrum from new entrants to Canada's dominant cellular players.

Telus brought the legal action after the government blocked its first attempt to acquire wireless startup Mobilicity for $380-million.

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Mobilicity first acquired spectrum licences in a 2008 auction when Ottawa reserved 45 per cent of the airwaves – which are used to build cellular networks – for new entrants to the industry in an effort to encourage competition with the country's dominant three players, Telus, BCE Inc. and Rogers Communications Inc.  (BCE owns 15 per cent of The Globe and Mail.)

The licence terms for new entrants barred their transfer or sale to an incumbent for a five-year period. But the government blocked its sale of those licences to Telus in the spring of 2013. At the time, the five-year period had not expired.

The government also released a new spectrum transfer framework that required ministerial approval of transfers and said Ottawa would not approve deals that led to the undue concentration of spectrum in the hands of an incumbent. This framework was the subject of Telus' court challenge as the company argued the government changed the rules of play.

The government has subsequently blocked further attempts by Telus to acquire Mobilicity, which has been under creditor protection for more than a year and has not been able to find another buyer.

The court ruled this week that the government's original rules did not state or imply that after the five-year period expired, anyone could freely acquire the set-aside spectrum.

Telus had argued that it based its bidding strategy in the 2008 auction on the idea that incumbents would eventually be able to purchase the set-aside airwaves.

But Federal Court Justice Roger Hughes ruled this week there was no evidence that Telus suffered a loss as a result of its claim to have relied on the government's earlier spectrum policy.

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"The most that can be said is that Telus made a business gamble and lost. It is not the Minister's fault," the judge wrote.

He ordered Telus to pay the government's court costs of about $12,000.

"We do not comment on private business transactions," Jake Enwright, spokesman for Industry Minister James Moore, said Saturday when asked for comment on the outcome.

"Our policy has always been clear - we will not approve spectrum transfer requests that decrease competition in the wireless sector," he added.

A spokesman for Telus was not immediately available for comment.

Telus has brought multiple legal actions over the government's spectrum policies and in January it lost another challenge at the Federal Court over the provisions setting aside airwaves for new entrants in the auction for 700-megahertz spectrum held this year.

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In September, the original equity investors in Mobilicity filed a lawsuit seeking $1.2-billion in damages, alleging the government broke promises it made to induce them to invest in the wireless industry.

U.S. private equity firm Quadrangle Group LLC and John Bitove's Data & Audio-Visual Enterprises Investments Inc. (DAVE) claim Industry Canada encouraged them to invest in a cellular startup to take on the incumbent wireless carriers.

The lawsuit alleges the government offered certain assurances in return, including conditions around wholesale roaming, cell tower sharing, foreign ownership restrictions and, finally, that investors would be able to sell to the incumbent providers after five years if necessary.

Last month, the case was transferred to the commercial list of the Ontario Superior Court of Justice, which deals with matters involving complex business litigation.

A lawyer for the claimants in the case said the court will hear a motion by the government to dismiss the claim sometime in the new year.

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