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Mobilicity still seeking financing for possible spectrum bid

Pietro Cordova, CEO of Wind Mobile, is pictured at the Queen’s Quay store in Toronto in 2013.

Deborah Baic/The Globe and Mail

Mobilicity says it has not yet secured the financial backing it needs to take part in an upcoming auction of wireless airwaves.

The deadline for applications to participate in the public auction of spectrum in the AWS-3 (advanced wireless services) frequency band is Jan. 30 and if the startup mobile carrier were to bid in all of the regions where it currently operates, it would need to come up with about $62-million for a refundable deposit by that time.

Mobilicity, which has been under creditor protection since September, 2013, said in court materials filed Thursday it has sought funding from existing creditors as well as third-party sources but so far has been unable to secure financing to participate in the auction.

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The company says it is continuing to consider funding options and could still potentially take part in the auction, which begins March 3.

The auction has been structured to favour operating new entrants, such as Mobilicity and Wind Mobile, which operate in Ontario, British Columbia and Alberta, as well as Videotron Ltd. in Quebec and Eastlink Wireless in the Maritimes.

Sixty per cent of the AWS-3 airwaves are set aside for new entrants. If Mobilicity does not participate and Wind does, Wind could acquire the licences in Ontario, B.C. and Alberta for the opening bid price of $62.5-million.

Jan. 30 is also the deadline for another auction, to be held in April, for airwaves in the 2,500-megahertz frequency band. However, Mobilicity said in its filing Thursday it does not plan to bid in that auction, which does not have a set-aside for new entrants.

Industry Canada discourages wireless players from publicly discussing auction strategy and Wind Mobile has not formally said it will take part in the auctions.

However, the company's CEO Pietro Cordova said in December that Wind – which is owned by a consortium of Canadian and U.S. backers that struck a deal to acquire it in September – is evaluating various paths it could take to secure more spectrum, the valuable airwaves used to carry cellular signals.

"We have many options [for spectrum] but they all fall into a few categories: You participate in an auction; you buy existing spectrum from people that are either under-utilizing it or not using it at all; or you partner up with people who have spectrum but maybe need Wind to pursue a different strategy," Mr. Cordova said in a Dec. 16 interview.

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Mobilicity is asking the Ontario Superior Court of Justice for another stay of legal proceedings against it, requesting an extension from Jan. 30 to May 8.

The company also said Thursday that while it has continued discussions with various parties over possible sale, merger or financing transactions, it has not been able to conclude an agreement.

William Aziz, the company's chief restructuring officer, said in an affidavit he is optimistic that by May 8, after the two spectrum auctions have concluded, "the wireless spectrum landscape will have materially changed and [Mobilicity's] transaction options may be materially different than they are today."

While the auctions are ongoing, he noted, potential transaction partners will be focused on the bidding process and in some cases the auction rules will bar the parties from holding discussions around possible deals.

Mobilicity has tried to sell to Telus Corp. on multiple occasions, but Industry Canada blocked the transactions and has said it will not approve deals that lead to an undue concentration of cellular spectrum in the hands of Canada's incumbent national carriers.

The company acquired spectrum licences in the AWS-1 band in a 2008 auction for $243-million and those licences remain Mobilicity's main asset, although they have proven difficult to sell due to Ottawa's policy.

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The company said it is operating on a "cash flow break-even basis" and its customer base remains stable. It had 158,637 active users as of Dec. 31.

A spokesman for Mobilicity declined to comment further Thursday.

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About the Author
Telecom Reporter

Christine Dobby covers the Canadian telecom industry for The Globe and Mail. Before joining the Globe in May 2014 she reported for the Financial Post for three years, most recently writing about telecom and media. She has also reported for the Toronto Star and New Brunswick Telegraph-Journal. More

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