By Alastair Sharp
TORONTO, Sept 30 Wireless telecom company
Mobilicity, one of the smallest players in the Canadian market,
said it won creditor protection from an Ontario court on Monday
as it seeks regulatory approval for a transaction that would
allow it to keep operating.
Mobilicity said the tentative transaction is currently being
reviewed by the federal government, but declined to identify the
possible buyer. It said in July it was talking to several
A source told Reuters in June that Verizon Communications
Inc was in talks with Mobilicity, although Verizon has
since said it is not interested in the Canadian telecoms market.
Major operator Telus Corp had a bid for the company
blocked earlier that month by the federal government, which is
eager to see four wireless competitors in each region, but one
analyst suggested after the announcement that Telus could make a
fresh offer. Telus declined to comment.
Mobilicity said its customers would not notice any change in
wireless service while it is in protection and that its dealer
network remains open for business.
"This step was taken today to give us the time to create
stability in the company, to stop the clock as it were, and
allow the company to restructure its affairs as this review
takes place," Stewart Lyons, Mobilicity's chief operating
officer, told Reuters in a phone interview.
Mobilicity was one of several new entrants to Canada's
wireless industry that bought spectrum in a 2008 auction. They
have since helped to lower average wireless bills but struggled
to dent the dominance of three major carriers: BCE Inc's
Bell, Rogers Communications Inc and Telus.
Mobilicity did not apply to take part in another auction of
valuable airwaves due to start in January. Its biggest
debtholder, private equity firm Catalyst Capital Group Inc, and
its founder and executive chairman, John Bitove, have applied
The Ontario Superior Court of Justice, which granted the
protection under the Companies' Creditors Arrangement Act, also
approved debtor-in-possession financing from some of
Mobilicity's noteholders to a maximum amount of C$30 million
Lyons and chief restructuring officer Bill Aziz said
Catalyst was not among the debtors providing the additional
funding, which should keep Mobilicity operating to spring of
The order provides an initial stay on all claims against
Mobilicity - legally known as Data & Audio-Visual Enterprises
Holdings Inc - for 30 days and requires suppliers to continue
dealing with the company, Aziz said.
Earlier this year, the federal government effectively
blocked a C$380 million deal for Telus to buy Mobilicity by
saying Telus could not take over Mobilicity's wireless spectrum
Telus has since taken the government to court to challenge
its restrictions on the sale of spectrum licenses, arguing that
when Mobilicity bought the airwaves it was on the understanding
it could sell them to the established operators after five
Canaccord Genuity analyst Dvai Ghose said he believes Telus
is the prospective buyer again, and that a second rejection
could open Ottawa up to legal action from Mobilicity debtors.
He said it was unlikely that private equity would be willing
to finance the purchase of spectrum, expansion of networks and
technology upgrades necessary for Mobilicity or other small
entrants to better compete with established players.
One of the other new entrants from the 2008 auction, Wind
Mobile, has also been the subject of takeover speculation but
will be bidding in the next auction. Another of the upstarts,
Public Mobile, was recently acquired by private equity firms but
will not seek more airwaves in the auction due to start in