Canadian incumbent Telus has struck a deal to buy indebted challenger operator Mobilicity for C$380m (US$374m).
At the end of April Mobilicity initiated a restructuring and said it would pursue a sale of the business to repay its outstanding first and…
Canadian incumbent Telus has struck a deal to buy indebted challenger operator Mobilicity for C$380m (US$374m).
At the end of April Mobilicity initiated a restructuring and said it would pursue a sale of the business to repay its outstanding first and second lien debt, and its outstanding unsecured debt securities.
“A concern for our customers and employees led us to approach Telus,” said Mobilicity president Stewart Lyons. “I am confident Telus will look after our employees and our customers, mitigating any disruption to their service, while offering the best outcome for all stakeholders.”
Telus stands to gain Mobilicity’s 250,000 customers, its 10MHz of AWS spectrum in a number of Canada’s major cities, and would also have one less competitor in the market.
Mobilicity will use all the proceeds from the sale to pay off debt.
The transaction requires support of debtholders, and first lien note holders or certain unsecured note holders may be entitled to additional proceeds from the sale if they express their support of the deal in writing during the next five days they.
The deal is subject to approval from the Competition Bureau and Industry Canada, the government’s business ministry.
In a statement industry minister Christian Paradis said: “The agreement between Telus and Mobilicity is subject to regulatory approvals. The government will take the time required to review the proposal carefully. Our government has taken significant action to promote competition in the wireless sector.”
William Aziz, Mobilicity’s chief restructuring, commented: “Mobilicity has been losing a significant amount of money every month.”
“The financial strength of Telus will allow the business to be continued in a way that will benefit customers and employees. An acquisition by Telus is the best alternative for Mobilicity.”
No details of the financial structure of the deal were disclosed.
In a note RBC Capital Markets analyst Drew McReynolds commented: “While a potential Telus-Mobilicity combination had been discussed in the media for some time, we are surprised by the timing of this announcement given the pending spectrum transfer review by Industry Canada.”
It has been speculated that Industry Canada may say that spectrum belonging to new entrants such as Mobilicity cannot end up in the hands of incumbents, such as Telus. The government is set to rule on what can be done with the spectrum this month.
