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Should Telus be Allowed to Break the Rules?

28 May 2013

The sale of the smaller mobile communications company, Mobilicity, to the mega-giant, Telus, is one that’s been widely talked about in Canada for several weeks. While the sale was supposed to go through just over a week or so ago, things have stalled. The problem? There’s a rule set out by Industry Canada that don’t allow Mobilicity to be sold or transferred until next year. But of course, Telus believes the government should side-step that rule for now, to allow the acquisition to go on.

Mobilicity, as well as other small players in the big mobile world such as Wind Mobile, purchased something called spectrum –  the radio waves which cellphone networks use. Upon purchase, that spectrum was not to be sold or transferred to any other of the mega carriers in the industry, so to encourage competition in the Canadian marketplace.

“The government is looking at this restriction as a way of ensuring that competition exists,” says Iain Grant, executive director of SeaBoard Group.

Telus though, believes that the rules should be set aside for now, in order to help out Mobilicity and all their shareholders. Mobilicity has also seemed on board with relaxing the rules on this one; and they’ve even reached out to Industry Minister Christian Paradis to say that all 150 of their employees would still have jobs at Telus, and that service could continue for their 250,000 customers.

The Minister has responded by saying that he’s going to take his time reviewing the case, and that he’s going to review every aspect of the acquisition very carefully. The only problem with that is that the spectrum in question has a June 11 deadline for bidders to hand in their applications to buy the networking space. And many think that with the government taking a careful analysis, that deadline may pass.

“When a government says it’s going to take its time, that would be the opposite of urgency,” says Grant.

Of course those who have sunk money into Mobilicity, and who will be left holding the bag should the sale not end up going through, are in support of the company’s sale to Telus. They’ll go to the court today to seek approval.

But many don’t think the deal should be allowed to go through, and that the competition rules that are in place are there for a reason.

“Why should we break principles that are well established just so that we can bail out debtholders?” asks analyst Eamon Hoey of Hoey Associates Management Consultants Inc.

He, along with Grant, say that should the deal between Telus and Mobilicity fall through, there would be plenty of other players that would be interested in purchasing the smaller mobile company – and at the appropriate time, too. Grant said just a few of those potential buyers would be Accelero Capital Holdings, a company that was co-founded by a huge mobile player in Egypt, Naguib Sawiris.

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