Telus says Mobilicity deal shouldn’t exclude it from key auction

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Telus Corp. wants to ensure that its proposed $380-million purchase of struggling carrier Mobilicity won't hamper its ability to bid in a pivotal auction of wireless licences later this year.

The acquisition has raised the ire of consumer advocates because it would require the federal government to make an exception to a rule barring big carriers like Telus from acquiring new-entrant licences until next year. But given Mobilicity's pressing financial problems, both companies are pushing for fast-tracked approvals that would allow for an expedited transfer of assets to Telus.

As that controversy simmers, Canada's second-largest wireless carrier is seeking "written advice" from Industry Canada to make certain the deal "will not have a material adverse impact" on either Telus or Mobilicity's ability to participate in the 700 Megahertz auction, according to new court documents filed as part of Mobilicity's restructuring case.

The 700 MHz auction, which is scheduled to begin Nov. 19, is a defining event for Canada's wireless industry. That particular band of spectrum, or publicly owned radio waves, is in high demand because it is well-suited to facilitate mobile data traffic used by top-end smartphone customers. Analysts have said the long-awaited auction could make or break sustainable competition in the sector, and Telus's western-Canadian home base has become a key battleground because consumers in those markets tend to generate higher revenues.

Included in Mobilicity's new legal filings was a document that forms part of the carrier's application for court approval of the Telus deal, which is scheduled to be heard on Tuesday. It suggests that written assurances from the government is one of a handful of conditions that must be satisfied or waived before the deal can close.

Additionally, the deal hinges on "the delivery of a non-refundable deposit of $10-million by Telus if the effective date has not occurred by June 10, 2013," and approvals from Industry Canada and the Competition Bureau. A final court order would also be required.

In the filing, Mobilicity states the "outside date" to complete the Telus deal is Aug. 9, but suggests it could be pushed to Aug. 30. Further extensions also remain in the realm of possibility.

Telus has also agreed to lend Mobilicity badly-needed funds if the transaction hits a temporary road bump.

"In cases where the acquisition is not completed by June 10, 2013, and Telus continues to pursue the transaction after that date, Telus has agreed that it will provide an interest bearing loan in a specified amount, which may be used to subsidize the Mobilicity Group's ongoing cash requirements," the documents say.

If the deal eventually closes, the amount of the loan would be applied against the purchase price. But if the transaction falls through, "there shall be no repayment obligation to Telus in respect of the loan or any interest payable thereon," adds the document.

The documents, meanwhile, also confirm that one of Mobilicity's biggest bond holders voted against the Telus deal during a meeting in Toronto last week. Catalyst Capital Group Inc., which owns roughly 30 per cent of Mobilicity's senior secured notes, had previously launched a separate legal action to nix a financing deal announced earlier this year. But new documents suggest that Catalyst and Mobilicity "agreed to adjourn" the application.