The fate of Mobilicity continues to dangle between the court-supervised creditor protections it has been receiving since September 2013, the federal government determined not to let an incumbent purchase it, its investor, Catalyst Capital Group, Inc. and WIND Mobile that has been in talks about a merger. By now, it must feel like a pi±ata at a children’s birthday party, getting batted from all directions, yet never quite breaking apart.
Mobilicity was already to bid in the last AWS-3 spectrum auction and secured the necessary $62 million deposit that they paid the government to participate in the auction and even secured $200 million in additional capital with the courts approval. But then, Catalyst Capital Group decided not to present a bid at the last minute – everybody was surprised by the move. WIND Mobile ended up with all of the coveted wireless spectrum that the government set aside for the small carriers in British Columbia, Alberta and Ontario. Without any competition, WIND Mobile grabbed the spectrum at the bargain price of only $56.4 million – less than the $62 million that Mobilicity put up for the right to participate.
The move left Mobilicity in about the same shape it was in before the auction and everybody, at first, thought that WIND Mobile was the big winner with its sweep from the spectrum auction. However, Catalyst Capital Group may have had that planned all along. Despite their outwardly appearance supporting Mobilicity’s spectrum bid, they may have decided they were ‘throwing more good money after bad’ was not the best route to go. WIND Mobile is finding out, even after buying the spectrum at a bargain rate, it will cost a lot of money to build out their network. Their spectrum just increased by 180-percent and it still has unused spectrum from an auction five years ago – spectrum that it has to soon used under the terms of its licensing agreements. This pressure, along with Mobilicity’s network, could prove to WIND Mobile that with Catalyst’s money backing them they could form a great partnership.
Mobilicity must also be wondering what the courts will think about continuing to hold at bay, its number of creditors. Without adding any AWS-3 spectrum winnings to its portfolio, how can it prove to the courts that it has not improved its chances of being purchased by a potential suitor? Currently, Mobilicity has less than 150,000 subscribers and an estimated value of less than $130 million – almost one-third of what TELUS offered for them less than a year ago – but was blocked by the government. However, an Ontario court ruled that a group of Mobilicity’s investors could sue the government to allow them to be sold to one of the Big Three. All we can do is watch that Mobilicity pi±ata swing back and forth until it breaks.