Canada's Telus Makes Second Attempt to Buy Mobilicity
Published on: 18th Apr 2014
By: Ian Mansfield
Struggling Canadian mobile network operator Mobilicity has accepted a takeover bid from larger rival Telus as the result of months of operating under court approved protection from its creditors.
Mobilicity was one of the new entrants that was expected to shake-up the telecoms market, but struggled to compete against the big three networks. Its valuable radio spectrum was allocated with a five-year sales block, which expired in February.
This is the second time that Telus has offered to buy Mobilicity, but the previous transaction was effectively blocked when the government refused to permit the spectrum license transfer.
The Canadian government has previously indicated that it would again block the sale of Mobilicity to a larger rival, but the company said that it felt the recent spectrum auction and changes in the telecoms market meant that the deal will get approval this time.
Under the terms of the latest deal, the majority of Mobilicity's 165,000 customers will be migrated to the Telus network.
Telus is paying $350 million for the company, with the money used to settle Mobilicity's debts.
In addition to its radio spectrum and customer base, Mobilicity is also sitting on around $500 million of tax losses, which could make the deal sweeter for the buyer if they can find a way of utilizing them.
Approximately 95% of the holders of Mobilicity's 15% senior unsecured debentures due 2018 also support the transaction and have agreed to vote in favour of the deal.
"The Transaction is a good outcome from Mobilicity's restructuring efforts and extensive Sales Process," said William Aziz, Mobilicity's Chief Restructuring Officer. "I am confident the Transaction will serve the best interests of Mobilicity's customers and employees."
It is now down to the government to decide if it will permit the transaction and bring the long running saga to a final conclusion.