Telus calls off Mobilicity purchase

Telus called off its plan to buy small wireless provider Mobilicity on Monday after Ottawa signalled last week that it would not allow the deal.

Mobilicity, which has about 250,000 customers, said it will instead go ahead with a recapitalization plan, which will be voted on by debtholders on June 25.

• Can anyone take on Canada's 3 telecom giants?
• How Canadians use smartphones

"The company will continue to provide updates as warranted," Mobilicity said in a brief statement.

Telus had offered to pay $380 million for Mobilicity, but its deal required the federal government to make an exception to certain rules and allow the larger company to transfer ownership of wireless spectrum owned by Mobilicity.

However, Industry Minister Christian Paradis quashed that idea last week when he said the current rules would stand.

The government has tried to increase competition in the wireless sector which is dominated by Bell, Rogers and Telus.

During a 2008 sale of wireless spectrum, Ottawa set aside a portion for new entrants including Mobilicity and placed restrictions on it to prevent it from being easily acquired by the larger companies.

Telus had argued that it should be allowed to acquire the company and the wireless spectrum because Mobilicity would not be able to survive without financial help.