For such a small company, in terms of subscribers, Mobilicity has certainly remained in the news lately. They have been under the court’s protection from its creditors since September 2013 and while it has had several potential buyers – most notably, TELUS – the courts have refused to give its okay. The Canadian government refuses to give the ‘green light’ to a large incumbent as a purchaser, in their never ending battle to create more competition.
The Financial post has learned that WIND Mobile has been secretly trying to merge or buy Mobilicity in recent weeks, right up until the January 30 deadline for the AWS-3 spectrum auction. A source familiar with discussion, who asked not to be named said, “[The companies] have been spending the better part of the past few months trying to figure out how to get it done.” Of course, in negotiations such as these, the obstacle is always the price – TELUS was willing to pay $350 million in May of 2014, and Mobilicity is still hoping for that kind of money. However, a source familiar with the negotiations who asked not to be named stated that “Wind is never going to be in a position to pay Mobilicity the price it expects it could get from an incumbent [TELUS].”
TELUS made three attempts to purchase the fledgling company, but opposition from Ottawa killed the deal, saying that it would impede competition in the wireless industry. Mobilicity was left without a solid buyer and still owing about $200 million in debt. Negotiations are prohibited now until the AWS-3 auction spectrum provisional winners are announced on March 6. Both startups, WIND Mobile and Mobilicity have had merger talks on and off since 2009. In the meantime, WIND Mobile has grown to over 800,000 subscribers while Mobilicity and its 150,000 subscribers remains in a substantially weaker position and valued only at about $130 million. Its most valuable spectrum licenses were obtained during a time, such as with the upcoming auction, when Ottawa adjusted the rules to favor the startups and keep the incumbents at bay.
Lawyers are battling it out with the courts – the lawyers that represent the creditors want a deal to go through and have looked into several ways a restructuring process could go through. Of course, nothing can happen without the court’s approval. Robert Chadwick, the lawyer representing Mobilicity’s ad hoc committee of noteholders, who own about 67% of the first lien notes and 95% of the unsecured senior notes said, “We believe that a motion under section 11.3 of the CCAA would be successful and that a transaction with an incumbent could be achieved.” So they are looking at the incumbents as well as the startups in an effort to make something happen…all under the watchful eye of the courts.