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Mobilicity still needs a buyer and fate of small carrier still to be decided

LuAnn LaSalle, The Canadian Press

The corporate logo of Wind Mobile is shown. THE CANADIAN PRESS/HO
The corporate logo of Wind Mobile is shown. THE CANADIAN PRESS/HO

Financially-struggling wireless carrier Mobilicity said Wednesday it remains on the sale block, and has no plans to transfer its cellphone customers to rival Wind Mobile.

"The report that we are transferring our subscriber base to Wind is not true," said Mobilicity's chief restructuring officer Bill Aziz in a statement.

The National Post reported that unidentified industry sources say Mobilicity was going to shut down its money-losing operations by the end of September and that Toronto-based Wind Mobile would assume its 200,000 customers for little-to-no financial compensation.

The small wireless carrier has been seeking a buyer, or go into debt restructuring, since last spring after Ottawa blocked Telus from purchasing it in a $380-million deal. Earlier this week, U.S. telecom Verizon, which had been rumoured to be interested in Mobilicity, said it was not moving into Canada.

Wind Mobile chairman and CEO Anthony Lacavera wouldn't comment on the report, but said he's still interested in buying Mobilicity. He has been trying to acquire Mobilicity for months.

"New entrants clearly need to find a way to work together and we maintain our interest in a dialogue with Mobilicity about how we can most effectively combine," Lacavera said.

Both Mobilicity and Wind Mobile bought spectrum — radio waves needed to make cellphone networks operate — in 2008 in an auction designed to bring new players to a market dominated by Rogers (TSX:RCI.B), Telus (TSX:T) and Bell (TSX:BCE).

Wind Mobile launched in December 2009 and Mobilicity about six months later.

If merged, Wind and Mobilicity would have more than 800,000 cellphone customers scattered in major cities while the big three carriers will have a combined 25 million.

Lacavera has said that he wants to build Wind Mobile into Canada's fourth national carrier. Mobilicity and Wind Mobile's network coverage overlaps in major cities such as Vancouver, Edmonton, Calgary, Toronto and Ottawa.

Telecom analyst Eamon Hoey said Mobilicity's customers are looking for discount prices and it makes sense for them to be combined with Wind Mobile.

"Doing a deal with Wind, of some kind, is probably their best choice," said Hoey, of Hoey Associates Management Consultants Inc. in Toronto.

Analyst Richard Smith also said the two small carriers could merge and try to grow as much as they can.

"What you want to do is get to critical mass and be above a certain size so you aren't losing money anymore," said Smith, director at the Centre for Digital Media in Vancouver. "If you're bigger, you're worth more at the end, even if you don't survive in the long term."

Toronto-based Catalyst Capital Group, which holds a major portion of Mobilicity's debt, couldn't be reached for comment.

Lacavera also has ownership challenges with Wind Mobile. He owns a 35 per cent stake in the company and is trying to buy remaining stake from Dutch-headquartered VimpelCom.

Telus, however, remains interested in scooping up Mobilicity when its spectrum licence expires in 2014.

"We remain interested like we were last May, if possible, if the government permits it," said Josh Blair, chief corporate officer at Telus.

"We remain interested in acquiring their business, meaning their spectrum, their customers and their employees."

Blair noted that Telus has less spectrum than competitors Rogers and Bell and needs more radio waves to meet growing demand from its smartphone and tablet customers.

The deadline for placing a deposit for January's spectrum auction is Sept. 17. After that, players entered in the auction can't negotiate deals with each other.

The Conservative government has said it wants four carriers in every region of the country and hasn't indicated it will change the rules or postpone the auction now that Verizon has decided not to enter Canada's wireless market.