Floundering Mobilicity prey to big fish

Company joins wireless players facing sale to Bell, Rogers, Telus

HAMILTON, Ont. Small wireless company Mobilicity is joining new players Wind Mobile and Public Mobile in facing the possibility of being put up for sale.

Mobilicity said Friday it’s business as usual for its cellphone customers and employees, but that it is starting a restructuring process to deal with its debt.

Five years after Ottawa auctioned off the radio waves over which cellphone networks operate to allow several new companies to launch in Canada, the future of Mobilicity, Wind Mobile and Public Mobile is in doubt.

“The market hasn’t turned out the way everybody had hoped,” said Greg O’Brien, editor and publisher of web-based Cartt.ca., which covers Canada’s telecom industry.

“We’re going to end up with Rogers, Bell and Telus,” O’Brien said from Hamilton, Ont.

Mobilicity, which began operation in May 2010, offers no-contract cellphone service in Toronto, Ottawa, Calgary, Edmonton and Vancouver.

Meanwhile, Dutch owner VimpelCom has put Wind Mobile up for sale, opening up the possibility that a bigger company could swoop in and pick it up. And it has been reported that Public Mobile has hired an investment banker to find a buyer.

“It just doesn’t look, to me, as though these three small companies are going to be able to survive,” O’Brien said.

Wind Mobile may have an “outside shot” of staying in business if founder Anthony Lacavera can raise the money to buy it back, he added.

Mobilicity’s debtholders will be asked to approve both a plan to sell the company and a recapitalization plan at a meeting on May 21. Proceeds from a sale will be used to repay its debt.

“The purchase price received would be applied to repay all of the outstanding first- and second-lien debt of Mobilicity, with the remainder being used to repay outstanding unsecured debt securities issued by Mobilicity,” the company said in a statement.

If a buyer cannot be found, Mobilicity said it will go ahead with the recapitalization plan.

Under the recapitalization plan, the share capital of Data & AudioVisual Enterprise Holdings Inc. — Mobilicity’s legal name — would be reorganized, certain debt would be repaid and Mobilicity would get funds to continue operating.

The process has been approved by the Ontario Superior Court of Justice.

Mobilicity said it had no further comment the matter.

There have been reports that Telus has been in talks with Mobilicity to buy the small carrier.

O’Brien said he’s not sure why a foreign telecom company would bother with “such a tiny company” like Mobilicity and with Canada.

He estimates that Mobilicity has between 250,000 and 300,000 cellphone customers.

Regional telecoms such as SaskTel, MTS-Allstream could show an interest in Mobilicity if they wanted to branch out and be national players, he added. He also doesn’t expect Catalyst Capital Group Inc., a bondholder, to be interested in buying Mobilicity.

The federal government has eliminated restrictions on foreign ownership rules for small wireless providers and announced it’s reviewing its policy on licence transfer requests.