Wireless startup Public Mobile has been acquired by Toronto-based investment firm Thomvest Seed Capital Inc. and New York based private equity firm Cartesian Capital, the companies said today.
Thomvest, an investment vehicle of Peter Thomson, will be the controlling shareholder. In a statement the companies announced they invested the first tranche of a commitment to fully fund Public Mobile to a “cash flow positive position.” They not reveal how much the deal cost.
The acquisition of Mobilicity by the duo closely follows a decision by the Harper government to deny the $350 million purchase by wireless incumbent Telus Corp. of troubled startup carrier Mobilicity. In nixing that deal, Industry Minister Christian Paradis said the decision was based on preserving consumer choice and market competition.
“Despite the current uncertainty in the Canadian wireless industry, Public Mobile’s strong performance and rapid growth continue to attract financial backing from blue chip investors. This financing is an enormous vote of confidence in Public Mobile’s business and a significant milestone in our company’s history,” Alek Krstajic, Public
Mobile’s founder and CEO, said in a statement. “The support of Thomvest and Cartesian enables Public Mobile to continue the rapid expansion of our subscriber base from a strong and well-funded position.”
(Krstajic in 2010 announcing Public Mobile’s launch. ITWC photo)
“Thomnvest’s strategy is to partner with entrepreneurs to build companies that transform their industries, Stefan Clulow, managing director at Thomnvest, said in a statement. “Circumstances in the Canadian wireless industry have created a window for Canada’s fourth wireless player to emerge. We are pleased to partner with Cartesian and the Public Mobile team to pursue this opportunity.”
“In the coming months, the Canadian wireless industry will see consolidation and an important spectrum auction,” said Paul Pizzani, partner at Cartesian. “Public Mobile is well positioned two grow in scale by oursuing these consolidation opportunities and by nodding for national spectrum in the 700 Mhz auctions.”
Public Mobile is the smallest of the new wireless providers that bought spectrum in a 2008 auction along with Wind Mobile, Mobilicity and Quebecor Inc.’s Videotron cable division.
Originally called BMV Holdings, Public Mobile was funded almost entirely by U.S. telecom venture funds, including M/C Venture Partners of Boston and Columbia Capital of Alexandra, Va., as well as Canadian funds Rho Ventures, Kensington Capital Partners and Ignition Partners. But after it bought spectrum Ottawa said the company needed more Canadian funding, which led to a $50 million investment by the Ontario Municipal Employees Retirement System (OMERS) plus
Unlike the others, who bought spectrum in the more desirable — and therefore more expensive — AWS band, Public Mobile took a gamble and bought less wanted frequencies in the 1.9 GHz PCS band for a mere $52 million. That covered key cities of Toronto, Montreal and Ottawa.
At the time there was some doubt handset makers would include chips in their devices to access those frequencies, but the startup proved the naysayers wrong.
When it launched May 26, 2010, Public Mobile pitched itself as a service for “working class” Canadians who wanted voice and text handsets. But the popularity of smart phones took off faster than most carriers expected and it had to add data plans. Still, because it runs a CDMA network, Public Mobile hasn’t been able to offer smart phones in demand from makers like Samsung Electronics, BlackBerry and Apple.
Last year it launched a service called Siren Music, offering millions of songs at a flat rate.
Thomvest is a venture capital firm that focuses on early and growth stage investments in financial technology, software-as-a-service, security software and telecommunications.
Cartesian is a global private equity firm that manages $2 billion in capital.