Wireless carrier Mobilicity could be sold or recapitalized
A merger with Wind Mobile could create a viable competitor, expert says
Mobilicity says it will ask its debt holders on May 21 to approve a two-part restructuring plan that involves a recapitalization of the company and a possible sale.
On Friday, the small, cash-strapped player in Canada’s $19-billion wireless industry, said the Ontario Superior Court of Justice (Commercial List) has given the go-ahead for the securities holders’ meetings.
Mobilicity creditors will be asked to allow pursuit of refinancing and a sale simultaneously in a structure the company said will expedite the process.
Under the recapitalization plan, share capital of Mobilicity, whose official name is Data & Audio-Visual Enterprises Holdings Inc., would be reorganized.
Certain existing second lien notes would be repaid and Mobilicity would receive additional liquidity to “enable it to continue as a going concern, continuing to service its existing subscribers and dealers in its coverage areas.”
The sales plan provides a structure for an “as yet to be determined purchaser” to acquire the outstanding shares of the company. Proceeds would be applied to repay first and second lien debt of Mobilicity, with the remainder being used to retire outstanding unsecured debt securities. If both plans are approved, but a sale does not go through, the recapitalization plan would be engaged, said Mobilicity, which is based in Vaughan, Ont. The privately held company, formed after a 2008 government auction of radio wave spectrum used by wireless carriers, did not immediately respond to a request for comment. Toronto-based distressed asset investor Catalyst Capital Group Inc., which holds more than $50 million or about 25 per cent of Mobilicity’s senior debt, has sued the carrier to block $75 million in second lien funding, arguing in court filings that it has not been paid back for its initial loan. Mobilicity offers no-contract cellphone service in Toronto, Ottawa, Calgary, Edmonton and Vancouver. It is among several new entrants in Canada’s wireless service market attempting to win market share from the big three incumbent carriers, which are Bell, Rogers and Telus. The largest of the new players, Wind Mobile, has put itself up for sale and new entrant Public Mobile is also seeking a buyer according to reports.
Wind Mobile in particular has succeeded in attracting subscribers but the entrants have also struggled to maintain the funding needed to support infrastructure and operations.
Catalyst owner Newton Glassman is seen to be pushing for a merger of Wind and Mobilicity, a move that John Lawford, executive director of consumer group the Public Interest Advocacy Centre, said could create a viable competitor.
The new entrants have forced the incumbents to respond with their own discount brands and have played a big part in Ottawa’s campaign to maintain a wireless market with at least four significant competitors.
However, consumer advocates argue that the lack of more aggressive support, such as a set aside of spectrum for smaller entities in an upcoming auction, puts the objective of more wireless competition at risk.