Canadian operator Telus has been authorised by the government to take over smaller rival Public Mobile for an undisclosed amount from investors Thomvest Seed Capital and Cartesian Capital.
Telus’ acquisition of the privately-held company now only…
Canadian operator Telus has been authorised by the government to take over smaller rival Public Mobile for an undisclosed amount from investors Thomvest Seed Capital and Cartesian Capital.
Telus’ acquisition of the privately-held company now only needs approval from the Competition Bureau before it can complete.
Some of the proceeds from the transaction will be used to repay Public’s creditors, while the rest will go to Thomvest and Cartesian. The two investors only acquired the operator in June, saying they expected consolidation in the market.
Public has 280,000 customers across Ontario and Quebec, and spectrum complimentary to frequencies Telus holds in Western Canada.
Industry Canada’s approval of the takeover comes only months after it rejected another deal proposed by Telus, when it looked to acquire Mobilicity – again a small wireless operator – for C$380m (US$374m).
The difference between the transactions lies in the different types of spectrum the two smaller operators own. Mobilicity’s AWS spectrum was acquired in 2008 and cannot be transferred to an incumbent operator such as Telus, unless the government approves it.
Public’s G block spectrum is subject to different rules, as Telus’ EVP of technology strategy and operations Eros Spadotto explains: “The spectrum was acquired by Public Mobile from the open part of the 2008 auction, not from that set aside for new entrants, so is not subject to a transfer restriction.”
While the transfer would not have been automatically blocked, the government could still have stopped it. Under a new policy introduced in June, Industry Canada now reviews all transfers of spectrum and can block any transaction that would result in “undue spectrum concentration”.
The government’s approval of this transaction may seem at odds with its general stance on spectrum transfers, but James Moore, Canada’s industry minister, explained that the difference in bands was crucial: “G block spectrum is not used for the latest data plans and smartphones in Canada and is of a significantly lesser value than other types of spectrum.
“This transaction does not materially change the spectrum concentration of incumbents in this country and therefore will not diminish competition in our wireless sector.”
Moore added that the moratorium on the transfer of set-aside AWS spectrum to incumbents remained in place. This may not help Public’s rival Mobilicity, which is still seeking a buyer.
At the start of the month, Mobilicity said it had received creditor protection so that an anonymous buyer had the chance to complete a rescue deal to buy it. The proposed transaction was being reviewed by Industry Canada. Citing multiple sources, a local report said that Telus was the buyer.
In spite of the minister’s blessing, the Telus/Public Mobile transaction is still subject to antitrust approval. However, RBC Capital Markets analyst Drew McReynolds does not think this will be a problem: “We expect this transaction to be completed given Industry Canada approval and the presence of still four or more wireless players in Ontario and Quebec,” he said in a memo.
“Although this approval does not signal a shift in government policy, the transaction does remove a wireless competitor from the marketplace and eliminates any uncertainty around Thomvest’s longer-term intentions within the Canadian wireless sector.”
