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Wireless carrier Mobilicity weighs going public

John Bitove, chairman of Mobilicity is rumoured to be considering an IPO for the wireless carrier within months.

Peter Power/Peter Power/The Globe and Mail

Wireless newcomer Mobilicity is planning to launch an initial public offering early in the new year with the goal of raising up to $100-million.

Sources say the company plans to go public as early as the first quarter of 2012, provided that equity markets are less volatile. A number of IPOs have been ready to launch since late summer, but they were put on hold because markets were too choppy as the European debt crisis unfolded.

Mobilicity's IPO may be the first of many changes to come in Canada's telecom industry. Sources say an IPO could set the stage for eventual consolidation among Canada's wireless new entrants, in particular a merger between Mobilicity and rival Globalive Wireless Management Corp., which operates under the Wind Mobile brand.

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Such speculation stems from fierce competition in the Canadian wireless space that has forced prices down to what many analysts see as unsustainable lows.

A merger between new mobile players would give those companies more pricing power, along with streamlined marketing costs that would better position them to poach more subscribers from the big three incumbents (Rogers Communications Inc. , BCE Inc. and Telus Corp. ).

Stewart Lyons, president and chief operating officer of Mobilicity, declined comment on Tuesday, saying the company does not comment on rumour or speculation. "It is business as usual," he said.

However, sources say the coming IPO is being pegged at roughly $15 to $20 per share with an eye to raising $50-million to $100-million. Mobilicity, legally known as DAVE Wireless, already has a group of about five or six investment banks in place for the IPO, with Toronto-Dominion Bank serving as one of the lead institutions.

Mobilicity is now controlled by holding company Obelysk and has financial backing from Quadrangle Capital Partners, a U.S.-based private equity firm.

As for the rumoured consolidation, both Mobilicity and Globalive have reached out to a variety of investment banks to model a potential merger, according to a source. However, others close to both Mobilicity and Globalive say no merger deal is imminent.

While preliminary talks have taken place over the past year, a key stumbling block has been uncertainty about how the federal government plans to structure the next auction of wireless licences in 2012, along with any potential changes to the sector's foreign investment rules.

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Globalive chairman Anthony Lacavera, who is also chief executive officer of Wind Mobile, declined to comment on the merger speculation. Still, he suggested industry consolidation is inevitable. "New entrant consolidation must happen," he said.

Mr. Lacavera also argued that Ottawa must set aside wireless licences for new entrants in the 2012 spectrum auction to ensure that young players can survive. "There will be no new entrants in two to three years without a 'set-aside' [of licences in the highly valuable 700-megahertz frequency]" he said.

Without access to that key wireless spectrum, new players will not be able to offer what's known as LTE (long-term evolution) to enable faster connection speeds for mobile devices, including smartphones and tablet computers. LTE, for example, is essential to ensure reliable delivery of high-quality mobile video.

According to one source, Mobilicity went on a road show this fall to gauge investor interest in a potential IPO. Sources say it has been eager to go public for at least the past six months but rocky equity markets put the plan on the back burner. Comparable U.S. publicly traded companies have seen their valuations plummet in recent months and, given there are no direct Canadian comparables, equity investors would look at U.S. newcomers for comparison purposes.

Mobilicity raised $215-million in a debt financing last April, but unlike a debt offering (directed at institutional investors), any company that goes public must ensure there is sufficient appetite from retail investors.

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