The federal government has rejected a bid by wireless provider Telus Corp. to acquire smaller rival Mobilicity, saying it won’t allow the carrier’s operating licences to be transferred over.
Federal Industry Minister Christian Paradis said Tuesday that Mobilicity and other new wireless carriers remain prohibited from selling off airwave licences granted to them by Ottawa in 2008 until a five-year moratorium is lifted next year.
“We will not waive this condition of licence and will not approve this, or any other, transfer of set-aside spectrum to an incumbent ahead of the five-year limit,” he said. Telus has offered $380-million for the carrier.
Paradis says the federal government will take whatever actions are necessary to increase competition in the wireless industry. That means it will stand by rules that prevent any of the new players to transfer their spectrum.
The Consumer’s Association of Canada and other advocacy groups celebrated the decision saying the blocked would benefit wireless competition.
Still, analysts say the smaller carrier, which boasts an estimated subscriber base of 250,000 compared to more than seven million at Telus, is struggling remain in business hindered by a heavy debt load and investors who are seeking to cut losses.
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“It now seems inevitable that Mobilicity will go bankrupt and Public Mobile may follow,” Canaccord Genuity analyst Dvai Ghose said in a note. “More importantly, if new entrants are not allowed to be sold to the only obvious buyers – the incumbents – we wonder why investors would want to fund the independent new entrants.”
Similar conditions exist for two other startup carriers, Wind Mobile and Public Mobile, who have met with similar growth and profitability challenges and whose backers are seeking to exit a $20-billion wireless market that’s controlled by three large incumbents in Telus, Rogers Communications Inc. and BCE Inc.
Rogers has been reportedly linked to a buyout offer for Wind, the largest of the three independent carriers with 650,000 clients.
The wireless industry has been calling on Ottawa to clarify the rules ahead of the next auction of wireless spectrum. Paradis says the auction will be delayed to Jan. 14 to allow more time for new entrants to prepare.
With files from the Canadian Press
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