Wind Mobile’s future is about to change.
The Canadian carrier’s minority shareholder and biggest debtholder, Amsterdam-based VimpelCom Lted. announced this morning that it has a deal to sell all of its holdings to Wind’s parent, the Globalive group of companies, headed by founder, chair and CEO Anthony Lacavera, for $135 million, plus the assumption of debt..
Globalive Capital, Lacavera’s investment group, put out a press release that he has found partners to help him lead the buyout, including Canadian hedge fund West Face Capital and California-based private equity firm Tennenbaum Capital Partners and LG Capital Investors.
“With stable, long-term ownership and secure financing, Wind Mobile is moving into an exciting new phase,” Lacavera said in a statement. “Wind Mobile is now poised to continue to bring true mobile freedom to Canadians for many years to come.”
The deal is subject to government approval.
Given that VimpleCom has been trying to unload its 32 per cent voting and 65 per cent indirect equity investment in Wind for some time after the Harper government refused to allow it to buy Lacavera out last year, the odds are good particularly if the investors are largely Canadian.
If approved by Ottawa, Wind’s ownership will be on more solid ground than it has been for two years. VimpelCom wanted to take complete control of the company and sell it after pumping over $1 billion into spectrum and building a network, only to see it fail to make a serious dent in the market share of the three biggest carriers in the country, Bell Mobility, Rogers Communications and Telus Corp.
Today Wind has about 750,000 subscribers in southern Ontario, Vancouver, Calgary and Edmonton, but the big three still have over 90 per cent of all cellular subscribers.
After the federal refusal VimpelCom stopped putting money into Wind, which stung because it couldn’t bid during February’s auction for valuable 700 MHz spectrum.
Lacavera, the biggest shareholder, couldn’t be reached for comment.
What Wind’s new owners will do with the company is the question. In a note to investors, Canaccord Genuity research head Dvai Ghose doubts they will spend money on building a faster LTE network to match those of competitors, nor will it put money in to buy spectrum in two auctions set for next year.
For Ghose, there are only two other options: Try to fashion a merger or joint venture with Quebecor Inc.’s Videotron, which just bought spectrum in the 700 MHz frequencies in B.C., Alberta and Ontario and has been making noises about expanding from Quebec into other provinces; or just sit on its new purchase and do nothing while waiting for the Harper government — or a new government — to let it sell Wind to one of the big three.
(A Globe and Mail columnist recently suggested the government, which seems to have stuck itself in a hole by insisting incumbents can’t buy the AWS spectrum of Wind or financially-troubled Mobilicity, has an out: Declare it will give new entrants five more years of protection from being taken over by one of the big three. They already had five years when they got their licences, a term which ran out this year. It was then the government created a new rule: No incumbent could buy the AWS spectrum of a startup. That satisfied consumers, but meant some potential investors in Mobilicity and Wind were scared away — if their investment in the startups went nowhere, who could they sell to? If Ottawa gave the startups another five years and promised that no matter what investors could sell to anyone, that might bring investment).
Ghose is skeptical Quebecor can be pulled into a joint venture, given that Videotron has a small and weak balance sheet. He also suggests Wind and Quebecor will have huge differences in valuing their assets.