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Mobilicity Seeks Financing to Bid on AWS-3 Spectrum

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The struggling Mobilicity is asking the Ontario Superior Court of Justice to give it one more chance to increase its value and finally ink a deal with a buyer. According to materials filed with the court and obtained by the Globe and Mail, the wireless startup has sought funding from existing creditors and other sources to participate in the forthcoming AWS-3 spectrum auction.

Mobilicity Magenta

Actually, the only chance to make Mobilicity appealing to any interested buyer is by participating at this spectrum auction and obtaining licenses. However, the re-energizing comes at a cost: Mobilicity needs to come up with at least $62.5 million in refundable deposits by the end of January in order to participate in the spectrum auction.

Maybe it’s time to call Catalyst Capital Group’s chairman Newton Glassman to finally keep his promise. Back in November, he said loudly that Catalyst Capital will support Mobilicity’s bid on the AWS-3 spectrum because it’s the only way to sell the carrier at the right price

Back then, Glassman was confident that Mobilicity would merge with a carrier despite the limited number of buyers: Quebecor or Wind Mobile could be one of the options.

Now there is a twist: since Ottawa has set aside 60% of the available spectrum for wireless startups, they can obtain premium spectrum at a low price. However, they can only bid on areas where they operate, so Mobilicity can obtain licenses in Ontario, B.C., and Alberta for the opening price of $62.5 million. That’s if Wind Mobile doesn’t participate.

Industry Canada discourages wireless players from publicly discussing auction strategy and Wind Mobile has not formally said it will take part in the auctions. However, the company’s CEO Pietro Cordova said in December that Wind is evaluating various paths it could take to secure more spectrum, the valuable airwaves used to carry cellular signals.

“We have many options [for spectrum] but they all fall into a few categories: You participate in an auction; you buy existing spectrum from people that are either under-utilizing it or not using it at all; or you partner up with people who have spectrum but maybe need Wind to pursue a different strategy,” Mr. Cordova said in a Dec. 16 interview.

Fortunately for Mobilicity, Wind Mobile hasn’t yet shown interest in participating in the auction, although Lacavera hailed the government’s move to set aside airwaves for new entrants when the announcement was made last year. This could suggest that Wind may speculate in a merger with Mobilicity or somehow obtain the licences without competing with a carrier that should have run out of cash — according to a company announcement. A merger with Wind could make sense, but we’ll find out in May whether this happens of not, as the court protection — if approved — will end that month.

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