Wind Mobile Corp. has secured access to new financing of up to $425-million backed by a syndicate of three Canadian banks, allowing it to refinance high-yield debt at a lower rate as well as fund improvements and expansion of its cellular network.
The Toronto-based wireless carrier announced the closing of the senior, secured debt facility on Thursday and also said it reached a five-year deal under which Nokia Networks will be the sole supplier for Wind's LTE – long-term evolution, or 4G – network, which it plans to build next year.
Wind said TD Securities Inc., BMO Nesbitt Burns Inc. and Canadian Imperial Bank of Commerce all participated in the financing.
Toronto-Dominion Bank also acted as "lead arranger" for additional support for network purchases from Finnvera, the export credit agency of Finland, which is where Nokia is based.
"The facility enabled the refinancing of existing debt facilities and consists of multiple delayed-draw tranches to fund both operational growth and network expansion," Wind said in a statement.
Wind, which operates in urban areas in Ontario, British Columbia and Alberta, is the fourth-largest wireless carrier in Canada, but remains much smaller than the country's Big Three providers, Rogers Communications Inc., BCE Inc. and Telus Corp.
Alek Krstajic, chief executive officer of Wind, said in a statement that with the financing, new cellular airwaves (spectrum) and the partnership with Nokia, Wind can "move to the next stage in its growth and network functionality."
While most analysts have maintained that Wind does not yet present a major threat to the Big Three incumbents, Macquarie Capital Markets analyst Greg MacDonald said Thursday's announcements mark another step on the company's path to becoming a disruptor. The move shows "the economics of Wind's business model are attractive enough" to attract financing and support for its LTE buildout.
"Expect a T-Mobile-like strategy in Canada in [the second half of 2016]," Mr. MacDonald said, referencing the U.S. carrier that has been grabbing market share from industry giants Verizon and AT&T with low-priced offers and innovative pricing strategies.
At an investor conference hosted by Bank of Nova Scotia on Nov. 12, Mr. Krstajic said many financial players had been coming forward to offer "mainstream financing" for Wind.
"What you need in this business to grow is access to spectrum and access to low-cost capital. If you have those two things, you can actually operate like one of the big guys," he said. "If you have to go to the high-yield markets, like all the new entrants did, you run into real issues. It's hard to grow the business if you're paying 9 per cent on your capital in the high-yield market."
Mr. Krstajic was referring to financing the new wireless players – Wind, Mobilicity and Public Mobile – received from financial players such as hedge funds, which demanded high interest rates.
A consortium of financial investors purchased Wind from Amsterdam-based VimpelCom Ltd. in September, 2014, for $135-million. The transaction included the assumption of Wind's debt obligations, which sources said brought the deal's value to about $300-million.
"The big challenge for the company is really making sure we build a very robust network," Mr. Krstajic said at the Scotiabank conference.
He added that while the company was attracting subscribers at a brisk pace, that was thanks to its lower-price plans with unlimited options and a general sense that customers want an alternative to the Big Three carriers. "Wind has a network that is in need of improvement," he admitted.
Wind currently operates a 3G network that is patchy and can be unreliable. Mr. Krstajic said some of Wind's equipment in the western provinces "has been pretty bad" and the company planned to replace all of those radios with new ones by the end of this year.
It will also be putting to use spectrum it acquired through a swap following Rogers's purchase of Mobilicity and unused airwaves from Shaw Communications Inc. in the summer.
The company will use airwaves it won in a public auction earlier this year in its new LTE network, which it plans to roll out in most of its major areas by the end of 2016 and complete in 2017.