TORONTO – Mobilicity filed for bankruptcy protection late Monday, but said that it’s business as usual for its wireless customers – and that it has a buyer at the ready.
The company issued a statement after the markets closed confirming that it applied for and received protection under the Companies' Creditors Arrangement Act (Canada) ("CCAA"). The move will allow it “the necessary time and financing to advance and complete a going-concern transaction, which is before Industry Canada for its review and approval”, the statement reads. “Mobilicity believes that the proposed transaction is in the best interests of its stakeholders and hopes to advance the transaction in the near term.”
In the meantime, the company said that there are no changes to its network, that it will continue to honour prepayment plans for its customers, and that its dealer network is open for business.
According to Dvai Ghose, Managing Director/Head of Research for Canaccord Genuity, the move is not surprising given Telus’ failed $380 million bid in early June that was blocked by Industry Canada; the lack of a rumoured bid from the likes of Verizon or fellow new entrant Wind Mobile; and, Mobilicity’s failure to raise external capital.
“The real question is whether Telus, or any of the other wireless incumbents, will be allowed to acquire Mobilicity when its 5 year AWS spectrum set-aside expires in February 2014”, reads Ghose’s note to clients. “…Mobilicity’s financing plan seems predicated on a pending bid. We assume that this is from Telus.”
While speculating that a private equity firm or consortium could acquire both Mobilicity and Wind, Ghose questioned whether “private equity really wants to finance 700 MHz spectrum purchases, network expansion and LTE upgrades given Wind and Mobilicity’s challenges to date. In fact, Mobilicity is not even on the initial bidders list for the 700 MHz auction, although Wind is. In our view, Mobilicity and Wind’s spectrum will probably end up in the hands of the incumbents over time.”
Ernst & Young Inc. has been appointed as Monitor by the Court to assist Mobilicty and its stakeholders. The Court also approved Mobilicity's debtor-in-possession financing from some of its existing noteholders, in a maximum amount of $30 million.
