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Telus Will Acquire Mobilicity for $373 Million

Telus Corp. (T), Canada’s third-largest wireless operator, has agreed to buy struggling mobile-phone provider Mobilicity for C$380 million ($373 million) to gain ground on larger rival Rogers Communications Inc. (RCI/B)

All of the money committed to buy Mobilicity, formally known as Data & Audio-Visual Enterprises Holdings Inc., will be used to pay off Mobilicity’s debt, Vancouver-based Telus said in a statement today. The acquisition also needs the approval of Canadian regulators and Mobilicity’s debt holders.

Buying Mobilicity would eventually give Telus more of the valuable wireless spectrum that all Canadian carriers are seeking, letting it accommodate data-hungry smartphone users. Rogers agreed to buy unused spectrum from Shaw Communications Inc. (SJR/B) for about C$300 million earlier this year. Current rules, however, prohibit the transfer of ownership of spectrum purchased in a 2008 government auction before 2014.

Telus shares rose 1 percent to C$37.33 at the close in Toronto trading. The stock has climbed 15 percent this year.

If the deal is approved, Telus said it will retain all of Toronto-based Mobilicity’s 150 employees. The company expects an “expeditious legal and regulatory review in view of the current circumstances Mobilicity is facing.”

Big Three

Canada’s new crop of wireless operators -- Mobilicity, Wind Mobile and Public Mobile -- have struggled to undercut the dominance of Rogers, Telus and BCE Inc. (BCE), which together control about 90 percent of the Canadian mobile-phone market. Mobilicity paid about C$243 million for spectrum in the 2008 auction, which was designed to trigger fresh competition for the big three.

Wind Mobile -- the largest of the three new entrants, which paid about C$442 million for airwaves in 2008 -- has been put up for sale by its backers, a person familiar with that process has said.

“Our government has taken significant action to promote competition in the wireless sector,” Industry Minister Christian Paradis said in an e-mailed statement. “The government will take the time required to review the proposal carefully.”

Catalyst Capital Group, a Toronto-based investment firm and Mobilicity’s largest bondholder, said today in a statement that it welcomed the deal. Catalyst said that it had neither bid for Mobilicity nor had any plans to acquire it.

“Catalyst still believes that the Canadian wireless market can support an independent, strong, national fourth carrier that will offer consumers real choice, while meeting the government‘s priority to provide greater wireless coverage at better rates for consumers,” the firm said.

To contact the reporters on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net; Andrew Mayeda in Ottawa at amayeda@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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