The reports come a day after Wind chairman and CEO Anthony Lacavera told IT World Canada that his company will be a consolidator – either through a purchase or a merger – in the coming year with at least one of the other new wireless companies.
They would also be in a better position to bid for spectrum in upcoming spectrum auctions.
While the two startups have different strategies – Wind has always said it wants to be a national carrier, while Mobilicity wants to concentrate in cities – they have a number of things in common.
Both offer service in Toronto, Vancouver, Calgary, Edmonton and Ottawa, so coming together would mean the ability to increase subscribers in each city.
Both use spectrum in the AWS band, so their frequencies could easily be combined, which is vital when subscribers are using bandwidth-hogging data.
On the other hand, their networks use different equipment. Wind’s providers are Alcatel-Lucent and Nokia Siemens Networks, while Mobilcity’s was built and is operated by LM Ericsson. That poses more operational problems than technical. It is also inefficient. At some point management will have to decide which equipment provider will be the company’s future.
Some industry analysts urged the new entrants to work together and build a shared network to avoid such duplication.
Any coming together of rivals also obviously raises the question of valuation. Wind, with an estimated 400,000 subscribers, spent $442 million buying spectrum in the 2008 auction, and has spent hundreds of millions more on its network.
Mobilicity, with about 250,000 subscribers, spent $243 million on spectrum. Because Ericsson is managing its network Mobilicity may be paying less than Wind in network costs.
Both startups have shareholders who would want to see some value for the money they’ve put in
Wind’s parent company Globalive Holdings, is partly owned by Amsterdam-based VimpelCom Ltd, which has provided virtually all of the financing for the Canadian company. For a take-over Wind would have to rely on VimpelCom again.
Mobilicity is a partnership between Toronto entrepreneur John Bitove through his holding company Obelysk, and Quadrangle Capital Partners, a U.S.-based equity company.
After fruitlessly hunting for Canadian financing, he met Egyptian telecom entrepreneur Naguib Sawiris, whose Orascom Telecom Holdings and Weather Investments owned or invested in a number of wireless companies in Europe, Asia, Africa and the Middle East. One is Wind Italy.
By comparison Mobilicity – originally called Data and Audio-Visual Enterprises Wireless – had a relatively straightforward launch in May, 2010.
However, since their launches neither company have hit their subscriber targets. The first hint that all wasn’t well came in June when Lacavera replaced Ken Campbell as Wind CEO. Then last month Bitove replaced Mobilicity CEO Dave Dobbin with COO Stewart Lyons.