A decade-long legal fight between investors and the federal government over failed wireless startup Mobilicity has ended with a major win for the investors.
As reported by The Globe and Mail, Ontario Superior Court Justice Peter Osborne ruled that Ottawa acted negligently when it changed spectrum rules mid-game, wiping out investors’ chances to recover their money.
Back in 2008, the government encouraged new players to join the wireless market by auctioning off special licences. Investors Quadrangle Group and Obelysk Media, led by businessman John Bitove, bought $243 million worth of these spectrum licences under the impression that if their company failed, they could later sell to a big telecom like Telus.
But in 2013, the government changed the rules, banning such sales. That move, Osborne said, “caused a material and immediate devaluation” of Mobilicity’s main asset—its spectrum. In 2014, the group sued Industry Canada for $1.2 billion.
“The actions of the Government were capricious, and they were inconsistent with the expectations which were in turn based on the representations made,” Osborne wrote in his decision. He said investors spent “billions of dollars under the assumption that the rules would be respected.”
To make matters worse, the Conservative government at the time interfered with Telus’s attempt to buy Mobilicity during its financial struggles. Osborne found that officials “unnecessarily, but intentionally, inappropriately, and for tactical purposes” blocked the sale (three times)—even threatening Telus’s future access to spectrum. Industry Canada asked the court to dismiss the case in 2015.
Mobilicity was later sold to Rogers for $465 million—$82 million less than what Telus had offered. One year after buying the start up, Rogers shuttered the brand and moved it over to Chatr.
The judge said the government must now repay the investors for their original investments plus interest. Obelysk called the ruling a win but said it’s still reviewing next steps.
A government spokesperson said they are reviewing the decision and wouldn’t comment further as it may be appealed.
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So the Conservative government made a boo-boo and now Liberal government gets the bill. And nobody asked taxpayers are they OK with it when Conservatives made their decision, like nobody is going to ask them are they OK now with government forking over $500M.