Mobilicity debtholders approve sale to Telus

The creditors owed money by the financially struggling wireless company Mobilicity approved a deal Thursday that would see the mobile upstart sold to Telus for $380 million.

The approval is the first ofseveral hurdles the company must clear before the sale can go ahead. Theacquisition planmust also be approved by Industry Canada, the Competition Bureauand the Ontario Superior Court, which is overseeingMobilicity's restructuring and issued the orders allowingit to seek potential buyers as a way to avoid bankruptcy.

• Telus to buy Mobilicity for $380M

"This is a significant step towards final approval of the plan through which the business, combined with the financial strength of Telus, can be continued in a way that will benefit our customers and employees," said Mobilicitypresident and CEO Stewart Lyons in a press release.

Plan revised

Telus and Mobilicityhave said thatthe entire purchase price will be used topay downMobilicity's secured and unsecured debt.

Mobilicity said that several minor revisions had been madeto the acquisition plan before Thursday's vote, mainly related to how debtholders are to be repaid under certain conditions (for a full breakdown of changes, see the underlined sections in therevised acquisition plan).

Mobilicity launched in 2009 as an alternative to the threelargeincumbent telecom players that dominate the market in Canada following a government auction of new wireless spectrum and had grown to more than 250,000 customers. It paid $243 million for the spectrum, which is band of electromagnetic space that allows wireless devices to transmit signals.

Telus, which has more than 7.7 million wireless customers across Canada,has said that if the sale is approved, there will be no disruption in service for Mobilicity customers and no immediate price hikes.

But some fear that Mobilicity could lose its right to use the spectrum it bought in 2009, because under the rules that Industry Canada set for the auction, small operators cannot be sold to established carriers for five years.

Four-carrier plan falling apart

Telecom watchers have met the news of Mobilicity's potential sale with dismay, fearing even greater consolidation of the wireless market in the hands of the three big players that currently control more than 90 per cent of it: Bell, Rogers and Telus.

• Spectrum auction could lower costs

Public Mobile and Wind Mobile, the other small players that entered the Canadian market in the 2009 auction,are also reported to be looking around for buyers.

Another spectrum auction, this time for the 700 MHz band, is set to take place in November, but critics have said the government has not done enough to ensure smaller carriers will have a fair shot at getting some of that spectrum.

The federal industry minister, Christian Paradis, has said he would like to see at least four competing carriers available in every region of the country.