Analyst says the proposed $350 million Mobilicity/TELUS deal is ‘dead on arrival’

Mobilicity, legally known as Data & Audio-Visual Enterprises Holdings Inc., announced a few days ago that after a lengthy bidding process they believe that TELUS is best suited to acquire its spectrum and 165,000 subscribers. The purchase price is set at $350 million and William Aziz, Mobilicity’s Chief Restructuring Officer, stated “I am confident the Transaction will serve the best interests of Mobilicity’s customers and employees.”

TELUS went down this path twice before and both times were shut by the Industry Minister, mainly due to the transfer of set-aside spectrum licenses. Industry Minister James Moore previously declared “We will not waive this condition of licence and will not approve this, or any other, transfer of set-aside spectrum to an incumbent ahead of the five-year limit.”

Analyst Jeff Fan of Scotia Capital sent a note to his clients with his thoughts on the possibility of this transaction moving forward. The bottom line is incredibly blunt: “Third Time’s a Charm? More Likely to See Strike Three,” and “We believe that this deal is ‘dead on arrival’ for the regulators.”

Fan stated that there could be a couple strategies a play. “Plan A is to have the bankruptcy court overrule IC’s rejection.” Apparently if this Plan A doesn’t move forward then Plan B comes into place where Mobilicity will be forced to pursue the next bid (or wait for another lower offer to emerge),” which could very well be WIND Mobile. Fan said that “we believe IC is determined to devalue Wind and Mobilicity to the point that it becomes attractive for consolidation.”

Time will tell the fate of Mobilicity.