Canadian Government Stands Firmly in Favour of Competition, Terminates Telus-Mobilicity Deal

On May 16, Telus agreed to buy the wireless telecommunication provider for $380 million, pending approval from the debtholders, the court, the Competition Bureau and Industry Canada. Last week the Ontario Superior Court of Justice approved Telus’ acquisition of Mobilicity. Debtholders also voted in favour for the transaction.

“Today’s court decision takes us another important step closer to completing this acquisition,” said David Fuller, Telus Chief Marketing Officer, at the time, “which will allow Telus to save the jobs of Mobilicity’s 150 employees and continue service for their 250,000 customers without the disruption that company’s current financial issues could cause.”

But the Canadian government has rejected the proposed deal, citing the consolidation of telcos and wireless spectrum would result in “undue concentration.”

Quoth The Globe and Mail:

In rejecting the Telus deal, Mr. Paradis said the government was sticking to its original policy that no new spectrum licences parcelled out in the 2008 auction could be transferred to incumbents for five years. That moratorium doesn’t end until next February for Mobilicity.

However, Mr. Paradis went further, saying “all proposed spectrum transfers…that result in undue spectrum concentration, and therefore diminished competition, will not be permitted.”

However, as a result some believe that Mobilicity may go bankrupt without Telus’ financial aid.

Founded in Vaughan, Ontario in 2009, Mobilicity or often known as Data & Audio Visual Enterprises Wireless, has been financially struggling. With over $450 million in debt and losing $30 million a month, it became clear for the Mobilicity executives that the only credible way to maintain undisrupted service and job security is to make a deal. In December it began talk with Telus and by February it secured much needed capital to continue operations, while conversations about purchase continued.

Industry Minister Christian Paradisalso noted that the next spectrum will be postponed by two months. It was originally scheduled for November. Now the auction will take place January 14, giving telcos until mid-September to apply.