TELUS in Talks Acquire Mobilicity; Public Mobile Hires Bankers to Find Buyer

Earlier this week the trio of newer wireless entrants WIND Mobile, Mobilicity and Public Mobile exited the CWTA over allegations the lobby group favoured our ‘Big 3’ carriers. Was that move foreshadowing a sign of things to come?

The Globe and Mail reports this morning all three companies are now up for sale, as sources say TELUS is in exclusive talks with Mobilicity to buy out the carrier. Also, Public Mobile has commissioned investment bankers to seek a buyer for the company. WIND Mobile is already up for sale with previous reports citing Rogers was a potential buyer and even a buyer from the United States.

Telus Corp. of Vancouver has entered talks to buy Mobilicity in a deal that sources say could value the target at between $350-million and $400-million. Meanwhile, Public Mobile – the smallest of the three independent wireless companies that launched operations in 2009 and 2010 – has hired investment bankers to find a purchaser. The two companies join Wind Mobile, the largest independent company, which has already been put on the block by its Dutch owners.

The Federal Government has long tried to introduce wireless competition and it was five years ago wireless spectrum auction rules were created to allow new competitors to rise. However, those plans look in jeopardy as new entrants have limited market share and lack newer and faster LTE networks, which the incumbents possess (oh, and the iPhone, too).

The report says TELUS has been in talks with Mobilicity since February and both companies have signed a letter to have exclusive negotiations, with an extension added last month. In a confidential letter dated March 19, 2013, obtained by The Globe and Mail, TELUS’ vice-president of corporate development wrote the following to Mobilicity president Stewart Lyons, and Michael Levin, managing director of investment banking at Canaccord Genuity:

“TELUS remains committed to pursuing the Acquisition Transaction and to working expeditiously to negotiate and execute definitive agreements in respect of the Acquisition Transaction on an accelerated timeline,”

The letter goes on to say TELUS seeks to buy out “all of the issued and outstanding shares in the capital of Mobilicity.”

As for Public Mobile, the smallest of the newer wireless entrants is estimated to be worth $100 to $150 million according to an unnamed source. The sale of the company started due to one of its backers, OMERS Private Equity, wanted out of the company.

The next wireless spectrum auction is coming up soon and bidders need to declare themselves by early June. This means the financial backers of these smaller companies are either scrambling to come up with capital to jump into bidding, or seek to find a buyer before the deadline. One of Mobilicity’s key bondholders, Catalyst Capital Group Inc., just yesterday was successful in seeking a legal application in Ontario Superior Court to cancel a $75 million loan to the company, which earlier this year helped Mobilicity stay afloat.

Just last month Ottawa promised to increase wireless competition in Canada and stressed it wanted four wireless providers throughout the country. If any deals are struck for the sale of the newer wireless entrants, Ottawa will have to decide whether or not they be able to proceed. Welcome to the wireless quagmire known as Canada, folks.