Verizon’s $700 million bid for Wind Mobile has prompted Mobilicity shareholders Catalyst Capital Group, to open talks with the U.S. carrier, the Financial Post reports. Catalyst owns more than 30% of the struggling startup’s senior secured credit.
Catalyst Capital Group Inc. isn’t interested in buying Mobilicity, but the successful private equity firm is trying to parlay its senior debt position in the struggling wireless newcomer into a role with U.S. giant Verizon Communications Inc.’s plan to enter the Canadian market with an acquisition of rival Wind Mobile.
Sources told the Financial Post that Toronto-based Catalyst has been in discussions with Verizon Communications Inc. as the second-largest wireless provider in the U.S. prepares to enter the Canadian market. The discussions, described by an insider as “still in the introductory and early stages,” are in conjunction with Verizon’s talks with Wind Mobile’s owners to acquire the wireless startup for as much as $700-million. Catalyst is said to “be involved in the process for Wind,” although an outright bid by the private equity firm on its own is unlikely.
The discussions reportedly are still in the early stages, according to people familiar with the matter. This however shows the new direction for Catalyst in terms of its investment in Mobilicity. As Newton Glassman, co-founder and managing partner of Catalyst pointed out, the private equity firm isn’t interested in the struggling wireless startup on a stand-alone basis, because “Mobilicity on its own is a flea on an elephant’s butt of wireless telecom in Canada.”
Glassman has recently voiced his company’s willingness to help Ottawa succeed its plan to have four wireless players in each province. He is also said to be one of the bidders for Wind Mobile.
Even so, Mr. Glassman reiterated his firm’s support for the small carrier, which is currently carrying $508-million in debt. “We will not stand in the way of any transaction for Mobilicity so long as our legal rights are respected as written in the indenture,” he said. “Anybody trying to take property that belongs to us will have a vigorous fight on their hands.”
That is the message Catalyst has likely brought to Verizon.
While there is no word about where the discussions stand, Verizon’s bid for Wind Mobile could be a low-cost way to enter the Canadian wireless market. Wind Mobile currently has 600,000 subscribers. If Verizon agrees to acquire Mobilicity as well, we could see a powerful entrance with almost a million subscribers starting day one.
But the Financial Post speculates that Verizon aims higher. Ten percent of the wireless market is too small for the U.S. carrier. Its next step could even be a bid for its earlier investment, Telus.