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Mobilicity has been on the market for years, but has struggled with regulatory hurdlesKevin Van Paassen/The Globe and Mail

Mobilicity is assessing two "serious" takeover offers as part of its sales process, with Telus Corp. and Quebecor Inc. emerging as the leading bidders for the struggling wireless carrier.

Telus, which made two unsuccessful attempts to buy Mobilicity for $380-million last year, is now offering $350-million for the startup, sources familiar with the situation say. Although less generous than its previous proposals, the amount is significant enough for Telus to maintain an edge over other suitors. The next highest bid is from Quebecor's Vidéotron Ltée unit, which is offering approximately $200-million for Mobilicity, according to the sources.

The chasm between the top two offers underscores the struggle Mobilicity faces as part of its court-supervised sales process. Mobilicity, which has spent years searching for a suitable buyer, has been under court protection from its creditors since the fall. Although a federal ban preventing the carrier from transferring its wireless licences to established players such as Telus is set to expire in about two weeks, the Conservative government will not approve any deals that result in diminished competition.

As a new entrant carrier, Quebecor does not face the same regulatory restrictions as Telus in purchasing Mobilicity. Still, there is no guarantee that Mobilicity's various stakeholders will endorse Quebecor's offer since $200-million is insufficient to repay even its first-lien note holders. As a result, Mobilicity is preparing to ask an Ontario court to force a sale to Telus if the company does not receive more lucrative offers.

Other companies have also participated in Mobilicity's sales process, but are not considered to be serious contenders, including Wind Mobile and Cogeco Cable Inc. For its part, Wind publicly announced in December that it was considering taking another run at buying Mobilicity, but its ability to line up financing remains in doubt.

Bill Aziz, Mobilicity's chief restructuring officer, would not comment on the Telus or Quebecor offers. But he said Ottawa is not encouraging Mobilicity to accept any specific offer. "We continue active discussions with multiple parties. The process remains confidential and is before the courts," he said in an e-mail.

Telus, Quebecor and Cogeco declined comment.

"We believe QBR [Quebecor] is being opportunistic and is assessing this more for financial reasons rather than strategic reasons," wrote Jeff Fan, an analyst with Scotia Capital Inc., in a research note to clients. "If it does not make sense financially we do not believe QBR will pursue the opportunity."

He contends that Quebecor is "keeping its options open," especially since it can also pick up additional spectrum in the current 700 megahertz auction for "bargain prices."

Quebecor is believed to be mulling a national expansion of its wireless service. If so, the federal government's plans to introduce a cap on domestic roaming rates could minimize its build-out costs. Domestic roaming gives smaller players access to large carriers' networks in areas where they don't own spectrum.

Otherwise, Mr. Fan believes Quebecor could use Mobilicity's spectrum to expand its network sharing agreement with Rogers Communications Inc. beyond Quebec. "The solution would allow the government to claim victory on keeping the fourth operator in place to improve competition … and enable QBR to extract some efficiencies on its 4GLTE [fourth generation, long-term evolution] build-out in Quebec."

But others disagree. Dvai Ghose, an analyst with Canaccord Genuity, said, "we find the thought of a national network and spectrum sharing deal between Vidéotron and Rogers to be nothing more than farcical."

Mobilicity paid $243.1-million for licences reserved for new entrants during the 2008 spectrum auction. It was expected to end 2013 with more than 175,000 active customers and almost $500-million in tax losses – assets that would be of value to both Telus and Quebecor.

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