Mobilicity in acquistion talks

Mobilicity has confirmed it is talking to “multiple parties” about being bought.

The financially-troubled Toronto-based wireless startup, which had scheduled a debtholder vote today on a recapitalization plan, issued a news release Wednesday morning that the vote has been adjourned while the talks are going on.

“We are working diligently to reach an acquisition agreement and thank our customers, dealers, employees and partners for their continued support as we see this process through to its completion,” Mobilicity president and chief operating officer Stewart Lyons said in the statement.

According to a report in The Globe and Mail, U.S. carrier Verizon Communications is negotiating to buy startup Wind Mobile and is interested in Mobilicity as well.

The thinking is that Verizon would combine the two to make a strong carrier operating in three of country’s most populous provinces, Ontario, British Columbia and Alberta.  That’s where the two startups have their networks.

 Verizon had a foot in Canada years ago by owning 20 per cent of Telus Corp., but got out in 2004. Now, with the federal government having changed the ownership rules to allow a foreign based company to buy a Canadian carrier with less than 10 per cent of the market it is looking to come back in.

Verizon’s presence in Canada would be a challenge to the big three incumbents in the country – Telus, BCE Inc.’s Bell Canada and Rogers Communications Inc. Combined they hold just over 90 per cent of the cellular subscribers.

However, before Verizon opens the doors here it has to decide how much it wants to open its vault, Wind’s biggest investor has to decide how much it wants, Mobilicity’s investors have to decide how much they want and the federal government has to decide what conditions it will attach to the deal.

Consider:

–Wind is the biggest of the standalone new carriers that entered the Canadian market after buying frequencies in the 2008 spectrum auction. It has just over 600,000 subscribers.

Its major investor is Orascom Telecom Holdings, a division of international telecom giant VimpleCom Ltd. of Amsterdam. Voting control is in the hands of Toronto telecom entrepreneur and Wind chairman/CEO Anthony Lacavera.

Valuing Wind is likely tricky. Orascom/VimpelCom has sunk about $1 billion into the company including the $442 million in spectrum it bought in 2008, plus building a new network in the Toronto area, Vancouver, Calgary, Edmonton and Ottawa.

Wind’s network is built around equipment from Alcatel-Lucent, Nokia Siemens Networks and China-based Huawei Technologies.

According to news reports Verizon has offered $700 million to Wind’s parent, Globalive Wireless Management.

–Mobilicity has about 250,000 subscribers in the Toronto area, Vancouver, Edmonton Calgary and Ottawa. Its parent, DAVE Wireless, is led by Obelysk, a holding company held by Toronto entrepreneur John Bitove, and New York’s Quadrangle Capital Partners.

The company has already sunk $243 million into licences from the 2008 auction, plus is paying

Ericsson Canada to build and manage its network.

It also has to deal with debt holders, including those who earlier this year put in $15 million of a promised $75 million in second lien financing.

–The federal government, which has to approve any telecom change in ownership, is reportedly concerned with approving the sale of Wind to a foreign company because of the presence of Huawei gear in its network. Huawei has been accused by members of the U.S. Congress of being under the influence of the Chinese government.
 
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