Industry Minister reportedly ready to deny TELUS’ third bid for Mobilicity

Ian Hardy

February 11, 2014 11:09am

Mobilicity is currently under court protection from its creditors and it could be an interesting week for the struggling wireless carrier. Previous reports indicated they had enough money in the bank to last until mid-February, but after holding an auction to sell off its assets, it was recently discovered that there are potentially three offers on the table from WIND Mobile, Videotron and TELUS.

During the 2008 spectrum auction, Mobilicity invested $243.1-million for 10 licenses in Toronto, Vancouver, Calgary, Edmonton and Ottawa, and the carrier has about 175,000 subscribers. WIND reportedly bid $190 million, Videotron $200 million, and TELUS upwards of $350 million.

For TELUS, this is the third attempt to acquire Mobilicity. Industry Minister James Moore previously shot down the idea as it went against the government’s 2008 agenda to inspire more wireless competition, stating the “spectrum set aside for new entrants was not intended to be transferred to incumbents. We will not waive this condition of licence and will not approve this, or any other, transfer of set-aside spectrum to an incumbent ahead of the five-year limit.”

It seems, if a spokesman for the Industry Minister is not bluffing, that TELUS will not be able to say “3rd time’s a charm.” In an interview with Reuters, Jake Enwrigh echoed that “the minister has made his position clear already on spectrum transfers. We’ve been clear that we will not approve any spectrum transfer that results in undue concentration.”

Time will tell to fully understand the fate of Mobilicity. We could possibly get an update by the end of the week or early next week. In the meantime, many Canadians are awaiting the results of the 700 Mhz spectrum auction that’s currently in progress.

Source: Reuters

  • deltatux

    Not surprising, but what if a small company buys Mobilicity and TELUS buys them in proxy. Not sure if the government would be happy about that… Though I think that’s what’s going to happen…

    • Raphael Del Castillo

      I think it wouldn’t be possible because the spectrum itself is reserved for the new comers I don’t think they would be able to buy it either way. But I am hoping for wind over video tron to acquire mobilicitu

    • Walter

      What small company did you have in mind? My money is still on Wind buying Mobi.

    • Omis

      Does Wind even have money for this? It would be nice but I dont think it’ll happen. I just wish they would put mobilicity out of its misery. The saddest thing ive ever seen is a guy at work, who is with mobilicity, holding his phone out the window trying to get signal.

    • jimin

      haha! I’m sorry but this is funny!! at least the way you put it is!

    • Sweet

      I never had problems with reception in downtown Vancouver when I was with Mobilicity.

    • gommer strike

      Ah yes of course, because *you’re* not having problems, then nobody else should, either.

      You’re downtown. How’s the coverage in Fort Langley?

    • Sweet

      “Ah yes of course, because *you’re* not having problems, then nobody else should, either.”

      That’s not what I said, nor implied. @Omis:disqus’s message implied that Mobilicity has poor reception, and I gave a counter-example. Get over it.

    • Walter

      Well wind has already made a bid for mobi.

    • imota

      “Holding his phone out the window trying to get signal..”

      This happened to me when I was with Wind Mobile, not Mobilicity. In fact, as a Mobilicity’s customer, I have never had any problems with reception in Toronto. I love the company (Mobilicity) and I hope they soon get acquired by Videotron.

    • Omis

      Probably depends where you are, and what phone you are using. I am with wind in toronto and dont have a problem with them. But man is it ever funny to watch this guy try to get a signal. I am not really to slag mobilicity. Just trying to say the government would be doing the company and its customers a favour if it allowed the deal to go through.

  • Todd Forgrave

    simply prolonging the envitible per what Deltaux sugested

  • Bri Bru

    I just hope government makes the right decision to make everyone happy (or not necessarily the big three). Btw, I thought the government had planned on releasing the result of the auction like the week before last week?

  • Matt Dickerson

    so mobilicity goes under, everyone looses their jobs, the customers flee to the big three and wind… not sure how this is better than telus acquiring them?

    • Omis

      Doesn’t make sense at all.

    • Omis

      Doesn’t make sense at all.

    • Sweet

      The same thing would happen if Telus would acquire them. Telus only wants Mobi’s spectrum and taxable losses.

    • Johnny2times

      Correct. Ie. PM takeover.

    • Matt Dickerson

      right, but there are conditions that would apply to the purchase, correct? conditions such as the existing customers getting to keep their price plans, an elongated window that the brand must continue on and thus employees have jobs (a longer exit window). all these conditions are for not if they go bankrupt.

    • Sweet

      I highly doubt there would be any condition allowing existing Mobi customers to continue with their existing plans. Telus may offer Mobi employees jobs with Telus, but only if Telus has open positions. I don’t see Telus keeping Mobi employees if Telus doesn’t need them.

      I agree they won’t shut down the Mobi brand right away, but I highly doubt they would keep the Mobi brand longer term when they already have Koodo which is pretty successful.

    • Matt Dickerson

      Regardless of all of it, do you agree that the conditions of purchase > bankruptcy?

    • Sweet

      Being bought is definitely better than letting Mobi go bankrupt.

  • Tech Guru

    Isn’t the five year ban up like today? they had their shot and failed..If TELUS wants to buy them so be it

    • jimin

      Good point

    • Delphus

      Right, try telling that to Harper and cronies…

      “Oh wait, we made a promise?!? No we didn’t!!!”

  • Conception

    I’ve been with Mobilicity from the beginning and I’m still a Mobilicity customer until the very end…but, my patience is running thin. I’m hoping for Wind to buy them so I don’t have to manually go to them. Might save some administrative headache.

    • Sweet

      I switched from Mobi to Wind in December. It was very easy. All you need is to bring your Mobi account number and, of course, your phone.

      I left Mobi before they got bought out so I could take advatage of Wind’s $39/month promo deal.

    • Wild

      You should have jumped ship in December as I did. I highly doubt you will be offered the same Mobilicity program or price but I will tell you that I am much happier with Wind now.

    • Conception

      Ya, I just didn’t want the headache of transferring. I mean, there will be about 175,000 of us give or take a few thousand according to Mobilesyrup’s end of 2013 subscriber list who are in the same boat. So if there’s a promo plan in the next little while then I’ll make the switch. I think Wind will just bump us over to the $50/month plan and take as much $ as they can…I don’t think they’ll Grandfather plans and prices. The way they do business is one of the reason’s I never went with Wind in the first place…

  • John_JJP

    So, the auction was in 2008 and there was a 5 year limit .. and it’s 2014 now.. Isn’t that 6 years? (Yes, I am sure there are many other factors the government uses in their math)

    • Sweet

      It’s 5 years from the time the licences are activated. Mobi’s licence wasn’t activated until 2009.

    • Patrick Cuyegkeng

      2014-2009=5? Do you know what month Mobi’s license went live? It’s really just a matter of months at this point, if anything at all.

    • Walter

      It won’t matter since the government won’t let Telus or any of the other incumbents have Mobi’s licenses.

    • Patrick Cuyegkeng

      But if they cite the 5-year restriction as the legal rationale to disallow the purchase, and the 5-year restriction has ended, what legal grounds do they still have to prevent a sale? “Because I said so” does not generally stand up in court, and you could bet that Mobilicity investors would take this to court if the difference is $150m dollars.

    • Walter

      But that is the thing. The government is not citing the 5 year restriction. What the government is saying is that by allowing Telus to buy Mobi, that would be 1 less independent mobile operator. Thus defeating the purpose of bringing in competition to the market

    • Jean B.

      This has nothing to do with courts. Industry Canada needs to put its seal of approval on the deal. If it doesnt, it wont go through. Its basic telecommunication regulation stuff.

    • Delphus

      In the conditions of the sale of the spectrum, one of the stipulations is that the spectrum cannot be acquired by one of the incumbents for a period of 5 years.

      That makes it a legal statement, therefore debatable in court.

    • Comrade Yeti

      +1, and its why Mobilicity’s creditors are taking the government to court. They have an asset they want to sell and the government is changing the rules on them. It will be interesting as if IC digs in, they could owe ‘damages’ to the creditors by forcing them to accept a lower offer.

    • Jean B.

      Yes, and when the 5 years are gone by, it is only subject to Industry Canada approval and Competition Bureau.
      You can’t use the 5 year non-transferability argument and then says “Well if it expired, therefore it MUST be transferable”.
      That is a fallacy argument.

    • Sweet

      A while ago I read it was activated in the middle of February of 2009. We might be able to find the exact date on Industry Canada’s site. I’ll check.

  • Jackie

    Deny Telus and allow Videteon or Wind to buy

    • Sean

      If Mobi owes you and iinvestor group milions of dollars, you would pick TELUS to buy Mobi. Why would you want to walk away from an extra $150 million… hmm.

    • Jackie

      Because the government won’t allow it

    • Walter

      Simply because the guy that wants to buy them has enough spectrum as it is and won’t continue to grow mobi business.

    • Sean

      Unless of course the court rules the highest bidder buy MOBI , overriding government regulation perhaps? Which results in TELUS buying them out?

    • Walter

      I don’t know if the court could just up and do that. Maybe if Telus tried to sue the government.

    • Sean

      I believe that’s what the investors are wanting and I’m pretty sure that what Mobi is trying to get the courts to do.. guess we will have to wait and find out !

    • thomas nguyen

      where is the proof where TELUS has the spectrum? I read a report on the national speed test a while back, and that reported TELUS had the least amount of spectrum our of the Big 3

    • Walter

      Just because they have the least doesnt mean that they don’t have enough. Almost every other week you can read a news report of telus rolling out LTE somewhere.

    • thomas nguyen

      lte uses different spectrum than the congested HSPA spectrum, you can be low on one, and still have bandwidth on another.

      850/1900 for hspa,
      2100 for LTE. they do not share, plus Spectrum is split up with Paired/unpaired, if you have multiple unpaired, they are alot slower and can handle less traffic than continuous paired spectrum.

    • alphs22

      Because this will send the right message to any future investors who may want to enter the Canadian wireless market.

      “Come on over here, but if you try to sell, we’re going to meddle and make sure you don’t get fair value for your assets!”

      If the gov’t keeps blocking, Mobi investors are in line to lose $50m of their initial investment + the operating losses over the last 5 years. There’s a $140m difference between TELUS’ bid and the next highest bidder. You think any other foreign investors would want to set up shop here after this?

      The 5-year clause expires this year. Let Mobi sell itself to the highest bidder and stop meddling. Blocking TELUS’ bid is a short-sighted move that’s only going to hurt wireless competition in the long term.

    • Victor_Creed

      You think any foreign investors would anyway?

    • Jean B.

      Who cares about the investors, they knew the risk in investing into a telecom corporation. Low yield in first years and high upfront infrastructure costs.

    • Delphus

      wow, with this type of mentality the capitalist world was built….

    • Jean B.

      And you live in this system, better know it before you pour tons of money.
      At the get go, Mobi investors probably expected to get bought out by a bigger player and cash out; thing is the gvt saw it coming a mile away…
      In no way should we feel bad for them.

    • thomas nguyen

      so what you are saying, is don’t invest in Canada, because if you do and you dont succeed, the government will block any acquisition that doesnt work with their plan?

    • Jean B.

      No, you are putting words in my mouth.
      What I am saying is investors all over the world know the risks affiliated with investing in a new entrant wireless service provider (in any country). Consequently, I will not pity them.
      And yes the government has the right to block transactions that don’t work in their plan. Im not saying that this is a good thing, Im only saying that they can if they want.

    • thomas nguyen

      that makes a bit more sense. But still see the blocking of transaction goes against the any business practice, which ultimately scares away new investors.

      speaking on behalf of MOBI, they might know the risk to start, but they didnt know the outcome of being in-eligible to be bought out by 1 company over another. like any other industry, no-one blocks a bankrupt(ed) company from selling their company to another due to changes in legislation. just seems that the Government just wants to do whats best for them, not what is best for Canada/the users.

      one way to look at it, blocking this bid will:
      force Mobilicity to go Bankrupt
      force Mobilicity to choose a lower bid (losing more investment they put in)
      puts the workers from mobilicity in jeopardy of losing their job (we dont know if the bidding company will hold on to the current workers, but at least TELUS said they would).

      all in all, it doesnt look good for the industry, or the users (clients) or the workers.

    • Jean B.

      Please explain to me why you would want foreign investments? it seems like this is your ultimate goal.

      What the government wants it the good of the masses in the telecommunication industry in opposition to the few. And frankly I kind of see where they are trying to go. Create a fourth player, may it be Wind/ Videotron or what ever other corporation is ready to pour over a billion dollars in infrastructure.

      Now on Mobilicity, the Catalyst Capital Group owns 30% of their debt. The main focus of this private equity group is to invest in struggling corporations to flip them and make easy money. This is a very high risk field, hence why I do not pity them as stated above.

      There is no debate over if Mobilicity is going bankrupt, it is dead an buried. Now the question is how much money will they get back from the parting out of their assets?

      As for the jobs, i prefer a provider that cuts in jobs now and stays a flot to produce exponentially more employment possibilities in the future than an a fusion with one of the big three in which jobs are ‘kept’ on the short term.

    • Guest

      Lets dig into this in the above post, if you want that is.

  • Sweet

    This is potentially good for consumers, but definitely bad for Mobilicity investors.

  • Samuel Gomez Recuero

    Telus was allowed to acquired a new entrant not too long ago. The chances for them to be approved for this one are non existant.

    • Patrick Cuyegkeng

      Public Mobile was different. The spectrum PM was using had no limitations on the transfer of sale (it was frequency basically nobody wanted when it was auctioned/sold), so really there was nothing IC could really do to stop the sale from a spectrum consolidation standpoint.

  • hoo dat

    This is taking protectionism too far. How can the government in all probability allow a company to completely collapse just to prove a point? There are 2 perhaps 3 entities out there who are willing to bid on Mobilicity but only one with deep enough pockets to actually make it work and to bid an amount that’s approaching fair under the circumstances. This government is desperately trying not to be seen to be failing and they’d rather see employees lose their jobs and customers lose their services to do it, not to mention the hundreds of millions of dollars in investment obliterated, and perhaps billions in investments that are just not going happen after this disgraceful display. This doesn’t foster competition, it destroys it.

    • HiKsFiles

      The needs of the many outweigh the needs of the few
      – Spock

    • Walter

      2 things here. If Telus had bought out Mobi then Mobi’s employee’s would still be out of work. Second is that if Telus were to buy Mobi, do you honestly think Telus will continue Mobi’s business philosophy? Cause I am willing to bet they won’t.

    • hoo dat

      Firstly, in both previous bids Telus has guaranteed all Mobilicity employees a job. As Mobilicity had only 125 people working for them at the time of their first bid submission, I can’t see this as being anything but an easy task for Telus. Secondly, you’re right, Telus wouldn’t carry on with Mobilicity’s pricing and/or marketing philosophy, why would they? Accroding to Mobilicity’s own bankruptcy court filings their current subs are actually costing them money, their ARPU is now approaching $25, dropping from nearly $30 18 months ago due to foolish and money losing lifetime promotions and other crazy decisions. Whether Telus takes them over or not Mobilicity as you know it is dead, no-one could possibly operate them as they are currently being run, with the current level of income being brought in, and expect them to survive. I don’t like the idea of the Big3 assuming any of the newer entrants’ spectrum but if the government keeps this level of interference up in what is supposed to be a free market then we can basically not only kiss Mobilility and WIND good bye, but investment, both foreign and domestic, will just dry up and we’ll be worse off than when we started.

    • alphs22

      Basic econ is not the strong suit of most MobileSyrup readers. They demand unlimited $30-40 plans without realizing that the company they’re buying the service from is dying due to said plans.

      Then they want another company with a low ARPU that’s bleeding money, to buy out a dying company with an even lower ARPU? Lol.

    • Walter

      I don’t demand $30 and $40 dollar plans. I expect fair value. I have stated I would pay $80 for what I have with Wind now and I still would be saving money over the Big 3.

      @Hoo dat – Foreign investment has already dried up. But that is because the big 3 are protected not the new entrants.That is why Wind where they are now and part of the reason Verizon

    • Alex Randell

      Foreign investment in Canada’s wireless industry is dead now anyway. This decision, regardless of what it is, will have zero effect on it. Our policies are so fickle and restrictive, any foreign entity that may have been interested in investing here has long since been scared away.

      TELUS promised to keep all Mobilicity staff. I’d say those jobs will last six months at most. TELUS is already fully staffed and the infusion of Mobi subscribers won’t require any further resources. They’ll “hire” all Mobi staff initially, but efficiencies will be found in short order when the headlines die away and it’ll be business as usual with the occasional Mobi staff person being kept on where needed, but most will be out the door as they’ll be last in.

      The only two entities to benefit from allowing this takeover are Mobi shareholders and TELUS. TELUS (or Bell or Rogers) don’t need any more inducements to become bigger and more controlling in the industry and, sorry, but if you decide to roll the dice by investing in a wireless start-up in Canada knowing the environment here, you can’t be surprised by the Government enforcing, or even changing the rules.

    • Jean B.

      You can keep a low ARPU and make money out of it. Simply cutting operational costs (system optimization, staffing, etc).
      But you knew that, you were just trying to make a point.
      I have a feeling you work in the industry… Don’t know why.

    • thomas nguyen

      you want to have the highest ARPU, but if you have a low one and start cutting staff/ “optimizing” as you state, you now have a lower customer support due to less staff, making your company worth less to the people that are paying the bills, making them lose more money.

      clients wants: most value for their money

      business wants: high ARPU to offset the cost of giving that value.

      your idea is to give the people a low plan, but fail to provide the administrative support (client care, troubleshooting, etc) to optimize operation cost to make money… that doesn’t seem like good business practice at all. maybe that’s why MOBI is now losing money per person compared to most wireless carrier.

    • Jean B.

      You should get confortable with Free Mobile, a new French mobile carrier (A maverick Brand as the ‘wonks’ like to call them). They offer almost no phone customer service, all is done online and through forums. This is the future! Might as well get into the 2020 standards before its time and cut costs.

      Forgot to mention their ARPU is 13,5 euro (20.17CAD at today’s exchange rate).

      So yes this is possible, it is not a wild dream.

    • gommer strike

      But how is that different from any other acquisition? Did Target hire ex-Zellers’ employees, or just go find a new batch of people?

      Yes people will lose their jobs, but other people gain them…can’t say it’s a wash, but at the same…people lose jobs, others gain them, soooo…

      If Shaw bought them out, would you expect them to “retain” Mobi’s business philosophy? No. Shaw is Shaw, and we aren’t the ones to dictate how they should run their business. Same if Videotron wins the deal. Would you say the same to Videotron?

    • Walter

      To your first point. Telus has already stated that they will keep Mobi’s employees. But who is to say they won’t lay them off 6 – 12 month down the road.

      To your second point. Both Shaw and Videotron would be and are new entrants. They don’t need to copy Mobi’s plans. But they could and do drive down prices. Shaw and Videotron are not in the same boat as Telus.

  • Blocknards

    i don’t know why Shaw, or SaskTel, or MTS doesn’t make a bid to expand, unless they’re poor.

    • thomas nguyen

      shaw has no infrastructure, and licensed out their spectrum with Rogers, Sasktel has no interested in building a national network, and neither does MTS.

  • Peter

    I do not agree with the governments position on this. If they prevent mobilicity from being bought out by the highest bidder it will send a negative message to any foreign entrant thinking about coming to Canada. Thus fewer competitors would want to come here.
    And is it not obvious to everyone that all the new entrants had one strategy from the start? Which was get as many clients as possible AT ANY COST so they can be bought out by the big three. Sadly for them, the government is blocking their sale. What a joke this is becoming.

    • Victor_Creed

      Foreign investors have zero interest in Canada anyway. That point is moot.

    • Peter

      I disagree, there is interest in coming to Canada, the margins are bigger. What they have to deal with is uncertainty when it comes to regulation of the industry. that is a high barrier to entry here and a reason why Verizon didn’t end up coming here.

    • thomas nguyen

      i agree, and if the government continue to manipulate rulings and regulation when they see fit, it becomes unfair, resulting in an increase disinterest from foreign investor to even come to Canada to begin with.

  • Who Needs Facts

    The cost of saving face for Mr. Moore is not only very expensive for Mobilcity investors, but also for those hoping for future foreign investment in the telecom industry.

    Between the changing rules with this case and the Allstream debacle Mr. Moore has in his short tenure done irreparable damage to Canada’s future. Why would a foreign company look to invest in Canada?

    At some point Canadians have to take him to task on his failure in this position and on a broader case, the Conservative handling of the wireless industry since 2008.

    It is abysmal.

  • Who Needs Facts

    One of the things I have never understood is why Telus gets lumped in with Rogers and Bell when it comes to spectrum.

    From Industry Canada. Spectrum usage in Canada 2010.

    Rogers 41% – 8.6 million subs
    Bell 29% – 7.0 million subs
    Telus 15% – 6.7 Million subs

    Wind and Mobilicity have 6% combined and under 1 million subs.

    How do these numbers add up?

    Telus is doing the same amount of traffic as Bell on half the spectrum and nearly 80% or Rogers on a third of the Spectrum.
    They are doing seven times that of Wind and Mobilicity on barely twice as much spectrum.

    Moore has to look at this a little more objectively than he has. You cannot just lump all the incumbents into a neat little package. Yes it resonates good with the consumer but it is not representing the facts

    • Walter

      That is spectrum used not spectrum owned. Huge difference. How ever I would really like to see how much spectrum the big 3 actually have.

    • Who Needs Facts

      Walter – those number are the holdings. I have not seen a chart of useage.

    • Walter

      I am not going to get into a link war with you. But those look like % of the market controlled the big 3 as of 2010. I went out and answered my own question and discovered a chart that shows telus has more licenses then Bell does if you looking at the 6 or 7 largest cities in Canada.

    • Comrade Yeti

      In this case you should. These numbers are from a spectrum holding report from IC. Its the exact data that solves your argument.

    • Jean B.

      But the real question is: “Who needs facts”?

    • Walter

      I see what you did there.

    • Who Needs Facts

      Anything to add or…..

    • Who Needs Facts

      Thanks for the link – lots of good info there. The only thing is, it references the pre 2008 auction spectrum, as the document was compiled in May 2007.

    • Who Needs Facts

      If you have a link that is more relevant than the one that is found by Googling

      Industry Canada, Consultation on a Policy and Technical Framework for the 700 MHz Band and Aspects Related to Commercial Mobile Spectrum. 2010

      and specifically chart 4.5 labeled “Summary of Holdings for Cellular, PCS, AWS and BRS spectrum”

      please tell me about it because as I have made fairly clear, I have no faith in what Industry Canada says, does or intends to do.

    • Walter

      Well Mobilesyrup took down my link. But as I said it showed the exact number of licenses Rogers, Bell and Telus own broken down into the 6 largest cities in Canada. if you like I can email it to you.

    • gommer strike

      Mobilesyrup “took down your link”?

      If that’s true, than that’s not good.

    • Walter

      You’ll have to forgive me Peter but articles from companies in question hold little weight with me.

  • aamd11

    If Telus scoops em up, I will be at Mobi’s door to sign up for an unlimited plan within hours. Getting grandfathered onto Telus’s network with unlimited data…yes please

  • Jakob

    Wind will never buy Mobilicity, they have their own cash problems right now. Telus is the best offer they can get right now.

  • thomas nguyen

    The government point of view:
    Do not approve any acquisition, so that MOBI can go bankrupt.
    When it goes bankrupt, the government gets their spectrum back, meaning they can re-auction it back out, getting twice as much for the same spectrum!

    This is downright wrong, and essentially stealing. But who is there to govern the governing bodies? Regardless of the reason, we are unable to do much to change their thought process and views.

    In the end, if MOBI goes bankrupt, I’m thinking alot of the people on the governing bodies are going to get a hefty raise and benefits.

  • Bret Jarvis

    They won’t let Wind to buy, because Wind is not Canadian. I think we have many news tell you that government of Canada does not like Wind if Biggest shareholder is from Egypt, and they think is national security since they have a very good relationship with Huawei (A Private owned Chinese Company)