Telus tears up offer to Mobilicity

Mobilicity once had two dance partners publicly vying for its attention. Now it has one.

The startup carrier said Monday that Telus Corp. has withdrawn its proposed $380 million offer to take over the Toronto-based company that has some 250,000 subscribers in five major cities in three provinces.

Now it’s option for survival is a recapitalization plan, which will be voted by debtholders on June 25.

That recapitalization may allow the carrier to continue operations, but it likely won’t provide enough funding to meet all of the challenges it faces in the immediate future –including finding hundreds of millions of dollars to bid in the next spectrum auction, scheduled for January, as well as to keep expanding its network.

However, there is speculation the recapitalization plan may allow Mobilicity an avenue to merge or be bought by Wind Mobile or another company.

Telus’ decision came after the federal government said last week it won’t allow an incumbent carrier like Telus to get its hands on the spectrum bought by either new or would-be new carriers that bought frequencies in 2008.

Industry minister Christian Paradis said the government would block purchases on two grounds: Either because the frequencies couldn’t be transferred to an incumbent because of a five-year ban (which for Mobilicity, Wind, Shaw Communications, Videotron and Eastlink ends next year), or if the transfer results in “undue concentration” of spectrum.

The rules on what undue concentration means haven’t been made clear, but Telus apparently feels there is no way it can get Mobilicity and its spectrum.

On the other hand, there have been studies that show in some markets Telus has stockpiled less spectrum than Bell and Rogers, making it possible the company will argue that it can’t be in a position of having too much.

Still, Telus and Bell have an agreement to share spectrum, making the counter-argument possible that Telus can’t have it both ways.

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