Public Mobile, the Toronto-based startup that surprised many telecom veterans by buying what was thought to be “orphan” PCS frequencies in the 2008 spectrum auction, has been sold to Telus Corp.
Industry Canada gave its blessing Wednesday, although the deal still needs to be confirmed by the Competition Bureau.
No price for the purchase was announced. Public Mobile has 280,000 subscribers.
Although it spent a modest $52 million on spectrum covering Toronto, Montreal and Ottawa, it didn’t have the finances to continue to combat multiple competitors, depending on the city (five in Toronto, four in Montreal). It also needed tens of millions more if it wanted to expand its network, buy spectrum in the upcoming700 MHz band and overlay its network to carry the high-speed LTE service so many cellular subscribers are now demanding.
“Public Mobile was an extraordinary story of a company that took a modest foothold in an entrenched marketplace and showed what focus, clarity and shrewd practice can accomplish,” said telecom analyst Iain Grant of the Seaboard Group. “The company’s focus on vectors and verticals was unparalleled. Telus is very lucky to have the public mobile pedigree to marry its own DNA.”
It’s the first of the new carriers that came into the market after buying spectrum in the 2008 auction to fall to competition. Mobilicity has filed for bankruptcy protection. Wind Mobile’s main financial backer is looking for partners or to sell its stake entirely. Shaw Communications didn’t even bother getting into business after buying spectrum, deciding it was too expensive to build a new cellular network.
The deal “highlights that the new entrants, by and large, have failed,” wrote Dvai Ghose, director of research for Canaccord Genuity. He didn’t say so but it also could be a sign that Ottawa’s bid to inject more competition in the cellular business has also failed.
It started with setting aside spectrum in the 2008 auction strictly for new entrants or existing carriers with small market share. After four years of competition, BCE Inc.’s Bell Mobility, Rogers Communications and Telus have just over 90 per cent of cellular subscribers.
The government’s hopes for the new entrants continuing to compete rest on three companies: Eastlink, the maritime cable company that only launched its service in January; feisty Quebec carrier Videotron, also a well financed cableco; and Wind Mobile.
Public Mobile chose to buy PCS spectrum in the G-block rather than AWS spectrum that others like Wind Mobile, Mobilicity, Videotron and Eastlink bought, which held conditions forbidding their sale to incumbent carriers until 2014. The PCS spectrum, being in a less desirable frequency range, didn’t have that limit so the carrier could have been bought at any time.
That seemed to change over the summer when the federal government refused to allow Telus to buy Mobilicity. At the time Industry Minister Christian Paradis said it was because the five-year ban on selling Mobilicity’s licences to an incumbent hadn’t expired. But he also said that from that point on the government would review any take-over, which included Public Mobile.
Public Mobile had been backed by private Canadian investors and venture telecom capital from the U.S. However, over the summer they sold to the investment arm of the Thomson family and the Cartesian Capital Group.
In a statement explaining his decision Industry Minister James Moore said Public Mobile’s G-block spectrum is of lesser value than the AWS spectrum bought by other startups because it can’t carry high speed data services. As a result, he said, competition isn’t affected by Telus getting hold of it.
Public Mobile officials were not available for comment.
In a statement CEO Alek Krstajic said that “following our review of strategic options for our organization, Telus stood out as the company most committed to strong customer service and innovation. We are confident this is the right decision for our customers, our company, our employees and our investors.”
Telus [TSX: T] said Public Mobile customers will be offered the chance to switch to its faster network. “We look forward to the successful completion of this transaction, and migrating Public Mobile’s customers onto Telus’ world-class 4G LTE network while putting their spectrum to good use for millions of customers across Canada,” Eros Spadotto, Telus’ executive vice-president of technology strategy and operations said in a statement.
Krstajic, a telecom veteran, had his elbows up for a fight even before Public Mobile launched. At the 2009 Canadian Telecom Summit, he didn’t back down when Dave Dobbin, the then head of Mobilicity (called DAVE Wireless at the time), suggested there were no handsets to run on the G-block spectrum Krstajic was sitting on.
Krstajic proved him and everyone else wrong. Eventually his company had as many subscribers as Mobilicity although it operated in fewer cities.