UPDATE 1-Mobilicity confirms takeover talks, adjourns debtholder vote

Wed Jul 10, 2013 9:18am EDT

By Euan Rocha

TORONTO, July 10 (Reuters) - Canadian wireless startup Mobilicity confirmed on Wednesday that it is in discussions with multiple parties in connection with a potential acquisition.

The struggling company, legally known as Data & Audio-Visual Enterprises Holdings Inc, is in talks with U.S. telecommunications behemoth Verizon Communications Inc, among others, a source told Reuters last month.

Mobilicity also said it has again adjourned its debtholder vote on a previously announced recapitalization plan, which had been scheduled for later Wednesday, in light of the discussions.

The company said it is "working diligently to reach an acquisition agreement" but it may reconvene the recapitalization plan vote should the talks regarding a takeover, not pan out.

Separate sources have told Reuters that Verizon has already made a bid for rival Canadian telecom startup Wind Mobile, as it looks for growth outside the United States.

Analysts say that for a relatively small sum, the potential deals would allow Verizon to enter Canada's high-margin wireless business, placing it in a good position ahead of a government auction of spectrum - wireless bandwidth used for data transfer.

Verizon's moves come a year after the Canadian government eased foreign ownership restrictions for telecom operators whose revenue is less than 10 percent of the national market total. An acquirer can go on to operate in Canada and increase revenue beyond that 10 percent mark, as long as it does so organically.

The Canadian government is eager to boost competition in the domestic telecoms sector, currently dominated by BCE's Bell, Rogers Communications and Telus Corp.

Last month, the Canadian government rejected the transfer of Mobilicity's wireless spectrum licenses to Telus, effectively blocking Telus' C$380 million ($361 million) takeover of the debt-laden startup.

Mobilicity and its peers Wind and Public Mobile, which bought spectrum during the 2008 auction, have so far helped to lower average wireless phone bills for Canadian consumers. But they have also struggled to be profitable, and this has forced them to explore alternatives.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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