Industry Canada may let current rules apply on the sale of Mobilicity

MONTREAL – Industry Canada may let its current rules apply when it comes to the sale of Mobilicity to avoid having the small, struggling carrier swallowed up by Telus, some telecom analysts predicted on Monday.

Ottawa could also extend the five-year period that prevents the early transfer of Mobilicity’s licence for spectrum, radio waves over which cellphone networks operate, to a big wireless carrier, analysts said.

“The government is looking at this restriction as a way of ensuring that competition exists,” said Iain Grant, executive director of SeaBoard Group.

Mobilicity, as well as Wind Mobile, bought spectrum that was set aside for new players to bid on in order to bring more competition to the cellphone market.

As a result, their licences can’t be sold and transferred to any of the big carriers until next year, however Telus (TSX:T) has urged the deal be approved because Mobility is in dire financial straits.

Mobilicity has said the acquisition by Telus would provide continuing service for its 250,000 customers and jobs for its 150 employees.

Industry Minister Christian Paradis has said he will take whatever time is necessary to review the acquisition carefully.

Grant said he doesn’t expect a quick decision and the June 11 deadline for bidders to hand in their applications for the 700-megahertz spectrum auction may come and go.

“When a government says it’s going to take its time that would be the very opposite of urgency,” he said.

Debtholders of Mobilicity have approved the plan to sell the company to Telus Corp. (TSX:T). The company is to seek court approval Tuesday.

Analyst Eamon Hoey said Industry Canada should uphold its own rules on the transfer of spectrum licences for new players such as Mobilicity.

“Why should we break principles that were well established just so that we can bail out debtholders,” asked Hoey, of Hoey Associates Management Consultants Inc.

Hoey said Ottawa also could do a “gigantic review” of the situation and let the clock run out that way.

Both Grant and Hoey said other buyers could emerge for Mobilicity if Telus’s bid fails.

“If you’ve got a going concern with a quarter of a million customers, sure it’s not going to be easy, but you will be able to find somebody,” Grant said.

He noted that Accelero Capital Holdings, co-founded by Egyptian telecom player Naguib Sawiris who originally backed Wind Mobile, is buying Allstream, the business division of Manitoba Telecom Services (TSX:MBT).

Sawiris came up with the money to buy Allstream and his “other pocket might have more money it” to make a bid for Mobilicity, Grant said.

Wind Mobile, with its just over 600,000 subscribers, has been put up for sale by Dutch owner VimpelCom. Sawiris’ Accelero and founder Anthony Lacavera are reportedly bidders.

However, Scotiabank analyst Jeff Fan said if the government denies the deal, Mobilicity will likely either fail or receive a lower offer from a strategic investor.

“In either scenario, we think Mobilicity could take legal action against the government, prolonging uncertainty and reducing the likelihood of a strategic investor emerging,” Fan wrote in a recent research note.

“We believe the best deal for Mobilicity (and Wind) stakeholders is a sale to one of the incumbents.”