Decision increases pressure on the Harper government to come up with a strategy for financially-troubled startup wireless carriers

Debtholders okay Telus offer to buy Mobilicity

Debtholders of financially troubled wireless carrier Mobilicity have approved the proposed sale to Telus Corp., putting more pressure on the federal government to either support an incumbent telco swallowing the independent or come up with a better plan.

Debtholders met Thursday in Toronto and approved Telus’ $380-million offer, subject to a working capital agreement.

A hearing for court approval of the deal is set for May 28. However, Industry Canada and the Competition Bureau still have to approve.

Meanwhile, Mobilicity faces a June 11 deadline on deciding whether it will participate in November’s auction of 700 MHz spectrum. If the government allows the Telus deal, that deadline isn’t important. But if Ottawa is undecided, it has to alter that deadline and possibly the auction date as well.
 
The Telus offer has not caught the government unaware: Although the offer was publicly announced May 16, Ottawa was quietly told months ago that it was talking to Mobilicity.
 
Any decision it makes on Mobilicity will have an impact on the futures of fellow wireless startups Wind Mobile and Public Mobile.
 
Wind’s primary financial backer, VimpelCom, is in the middle of getting approval to buy out its lead Canadian shareholder and chairman, Anthony Lacavera. VimpelCom, based in Amsterdam, can take over because last year the government changed the telecom ownership regulations, allowing licensed Canadian carriers with less than 10 per cent of the market to be wholly owned by foreign companies. VimpelCom hasn’t said what it will do with Wind if it gains control.
 
Public Mobile, the smallest of the three standalone startup carriers, is reportedly also looking for a new buyer.
 
Mobilicity, which has 250,000 subscribers, had been preparing a restructuring plan before the Telus deal was announced. A vote among debt holders was scheduled for this month but has been put off pending a government decision on the sale.
 
Stewart Lyons, the carrier’s president and chief operating officer wasn’t available for comment. However, in a statement he said Thursday’s vote by debtholders “is a significant step towards the approval of the (Telus) plan through which the business, combined with the financial strength of Telus, can be continued in a way that will benefit our customers and employees.”
 
Telus has some 7.7 million wireless across the country through its own brand and Koodo brands.
 
(More to come)
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