Public Mobile calls for consolidation of telecom startups

TORONTO Thu Jun 6, 2013 6:17pm EDT

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TORONTO (Reuters) - Canadian telecom startup Public Mobile, which has been bought by venture capital firm Thomvest and private equity firm Cartesian Capital, said on Thursday it sees a need for consolidation among new entrants in a sector dominated by industry behemoths.

The need to combine Wind, Public Mobile and Mobilicity - the three main struggling industry startups - is pressing, said Alek Krstajic, the chief executive of Public Mobile, but he stressed that he does not necessarily see his company as an acquirer, or the one taking a lead role in the consolidation process.

"We see ourselves having a place in consolidation, it's not clear who the consolidator is yet," said Krstajic in an interview shortly after his company announced its new ownership. "The consolidator will be one who brings the money."

Wind Mobile, Public Mobile and Mobilicity acquired wireless spectrum - bandwidth used for phone calls and data transmission - during an auction in 2008. While these companies have helped lower wireless phone bills for many Canadian consumers, they have struggled to turn a profit, forcing them to seek new financing and explore alternatives.

The Canadian government, which wants to boost competition in the sector, hopes investors - other than industry giants Rogers Communications Inc (RCIb.TO), Telus Corp (T.TO) and BCE Inc's (BCE.TO) Bell - will back the new entrants.

Public Mobile's acquisition by Thomvest and Cartesian is a big fillip for the Canadian government's efforts.

The deal comes just two days after Canada refused to allow the transfer of wireless spectrum licenses to Telus from Mobilicity. The ruling effectively blocks Telus's takeover of the struggling company.

Krstajic hailed Ottawa's ruling on the Telus bid and its decision to delay an upcoming spectrum auction, arguing that the move gives the new entrants time to talk about consolidation.

"It would be lunacy for us to bid against the other new entrants," he said, adding that Public Mobile's new backers plan to fund its bids in the auction for spectrum across the country.

Krstajic says Thomvest's and Cartesian's support will allow Public to continue to expand its subscriber base, which was well above 250,000 as of the end of 2012.

Public Mobile provides prepaid wireless coverage in urban parts of Ontario and Quebec. The terms of its takeover by Thomvest and Cartesian were not disclosed.

Thomvest is a Toronto-based investment vehicle backed by Peter Thomson. He is chairman of Woodbridge, the Thomson family investment company that owns a majority stake in Thomson Reuters Corp (TRI.TO). Cartesian is based in New York.

(Reporting by Euan Rocha and Alastair Sharp; Editing by Lisa Von Ahn, Janet Guttsman and Phil Berlowitz)

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