Mobilicity debt holders could sue government: Ghose

A financial market analyst covering the telecommunications sector says the federal government could cause harm to those with a stake in Mobilicity, and possibly even face a lawsuit, if it continues to thwart attempts by Telus Corp. to purchase the startup wireless carrier. In a Friday research note, Canaccord Genuity analyst Dvai Ghose said he is not surprised that the government would continue to be opposed to Telus buying Mobilicity since it “seems ideologically committed to its new entrant dream despite the fact that it is clearly in disarray.” Ghose, however, said he found a report of threats the government made to ban Telus from the upcoming 2500 MHz spectrum auction in retaliation against its third effort to buy Mobilicity “bizarre” since it was Mobilicity, not Telus, that announced the proposed acquisition on Thursday as its “only move,” and the government has not offered an alternative. “Perhaps the Government is concerned that the bankruptcy judge and even the Competition Bureau may approve Mobilicity’s sale to TELUS, causing further embarrassment for the Government,” Ghose said. “Nonetheless, we do not see how constantly changing rules including set aside provisions and bidding eligibility helps attract capital for new entrants.” Ghose said if Mobilicity is not sold it might shut down operations, negatively affecting customers, employees and those that do business with the carrier, on top of leading to a loss of tax revenue for government. Such a scenario could lead to a lawsuit against the government by Mobilicity debt holders, Ghose speculated. “Mobilicity bond holders may well sue Industry Canada, as the 5 year set aside under which they invested has essentially been extended indefinitely — it would be ironic if this ‘pro new entrant’ Government is sued by new entrant bond holders,” he said. Late Friday afternoon, Mobilicity announced that Industry Canada had agreed to participate in court-ordered mediation relating to its proposed sale to Telus. It said Industry Canada is already reviewing the proposal, but it has not date for when to expect a response. “Mobilicity is of the view there will be no need for the court-ordered mediation if there are no outstanding issues remaining for the successful completion of the ,” the company said in a news release. The carrier also said it received an extension of its bankruptcy protection to June 30, and that a debt holders meeting it had initially sought for April 30 would postponed indefinitely to a later date. Two previous attempts Telus made to purchase Mobilicity have been stymied by Industry Canada, which cited spectrum-transfer rules that prevented Mobilicity from giving up its AWS spectrum to one of the big three incumbent carriers. The spectrum-transfer moratorium expired in February, though Industry Canada has maintained its authority to approve or veto all transfers of wireless-spectrum licences. When reached by The Wire Report on Friday, Jake Enwright, press secretary to Industry Minster James Moore, would not comment on Friday’s Globe and Mail report that quoted a “senior government source” as warning against Telus’ third bid for Mobilicity and its wireless spectrum. Enwright said the government’s spectrum transfer policy remains unchanged. The source was quoted in the Globe as saying: “If Telus doesn’t drop efforts to acquire spectrum set aside for new entrants, the Harper government is prepared to change the rules of the upcoming wireless auction that could effectively bar Telus or any incumbent from acquiring that spectrum.” Mobilicity, owned by DAVE Wireless Inc., has been in bankruptcy protection since September. The Wire Report reported on Tuesday that the bankruptcy judge in the Mobilicity case could claim the power to overrule Industry Canada in approving the sale. — With reporting by Peter Henderson at phenderson@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Mobilicity debt holders could sue government: Ghose

News | April 25, 2014

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Mobilicity debt holders could sue government: Ghose

News | April 25, 2014

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