Wireless woes
Mobilicity files for protection from creditors,
VANESSA LU Small wireless carrier Mobilicity filed for formal creditor protection on Monday, saying the move will hopefully help the company seal the deal on a buyout offer.
The company announced it received protection from the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act, which Mobilicity said will give it time to organize its affairs.
It added that Industry Canada is currently reviewing a new buyout proposal, but refused to disclose any details.
The proposal was submitted to Industry Canada “just recently,” said Mobilicity’s president and chief operating officer Stewart Lyons in an interview.
“The outside date is several weeks, but it may take shorter than that. We’re hoping it happens in a fairly short order,” he said, considering the company’s pressing circumstances. “Obviously, we’re encouraging the government to do something sooner rather than later.”
Mobilicity’s chief restructuring officer Bill Aziz by seeking creditor protection, the company now has time and room to reorganize.
“In our case, we told the court we have a proposed transaction. We can’t identify who that’s with and any of the details around it at this time, because it’s subject to regulatory approval,” Aziz said.
“An order under CCAA is considered a tool that puts in place a stay against claims that are made against the company.” BILL AZIZ MOBILICITY CHIEF RESTRUCTURING OFFICER
“An order under CCAA is considered a tool that puts in place a stay against claims that are made against the company,” Aziz said. That means people who have claims can’t enforce them and lawsuits are put on hold for while. Vaughan-based Mobilicity is a privately held company that doesn’t disclose its subscriber base. Some press reports have suggests it only has about 250,000 subscribers – who do not sign long-term contracts. Earlier this year, Telus had put forward a $380 million deal to buy Mobilicity, but Telus wanted the federal government to make an exception to rules around ownership of wireless spectrum – given new entrants had special chunks reserved for them, as part of a drive to boost competition. But Ottawa balked at the idea, and Telus withdrew its offer. In July, Mobilicity said it was in talks with “multiple partners” about a buyout. Mobilicity said the latest development won’t affect any of its wireless customers and there are no changes to the network, adding its stores will remain open. Tech analyst Carmi Levy said Mobilicity’s move is no surprise. “I think we saw this coming a mile away. It’s been fairly clear for months … Mobilicity has had the most difficulty gaining subscriber transaction,” said Levy. “It’s a perfect example why Industry Canada’s drive to increase competition in its current form is woefully inadequate.
“They are making it easy for companies like Mobilicity to enter the market, but they don’t make it easy for them to survive long enough,” Levy said, referring to how Canadians are still sticking with the big wireless players.
“(Mobilicity) is a perfect example why Industry Canada’s drive to increase competition in its current form is woefully inadequate.”
CARMI LEVY TECH ANALYST
“Canadian consumers will not leave the safe confines of a known carrier, no matter how much they complain about it, because the new carriers don’t offer enough of compelling difference in service or price,” he said.
Levy believes this is only the first shoe to drop in the wireless industry, noting other small carriers like Wind and Public Mobile also remain on shaky ground.
While the other two carriers have managed to strengthen their financing, Levy said if companies don’t grow their subscriber base, and start taking significant share from incumbents, investors won’t keep funding the carriers.