Chris Wattie/Reuters
Newton Glassman's Catalyst Capital Group Inc. is willing to finance Mobilicity's bid for additional wireless airwaves, along with other willing creditors, in an effort to spur further consolidation among smaller Canadian carriers.
Participating in the federal government's auction of wireless airwaves next year is the only way to salvage value in Mobilicity, which is currently under creditor protection, Glassman said. Catalyst, Canada's second-largest private-equity firm, is one of Mobilicity's largest creditors.
The goal is to have Mobilicity in "as strong of a position as possible for what is the most likely outcome for a merger of two or more of these entities," Glassman said in an interview at his Toronto office.
The federal government announced earlier this year it will hold another wireless auction in a bid to create greater competition for Canada's three largest carriers – Rogers Communications Inc., BCE Inc. and Telus Corp.
Sixty per cent of the airwaves, which are designed for data-heavy cellphone traffic, are set aside for new entrants and the government has been pushing for the creation of a fourth national carrier. The last spectrum auction earlier this year netted the government $5.27-billion ($4.67-billion U.S.) from the country's wireless carriers when it sold spectrum ideal for sending data through dense urban areas.
Carriers can only bid in regions they already operate in, according to the government's rules. As a result, Quebecor Inc. can bid in Eastern Ontario and Quebec while Mobilicity and Wind Mobile, the largest of Canada's upstart carriers, can bid in other provinces. Carriers have until Jan. 30, to sign up for the auction.
'Game Theory' Glassman said he's looking at the auction as pure "game theory." Acquiring spectrum would make Mobilicity more attractive as a takeover target or potential partner for Wind or Quebecor. At the same time, competition for spectrum would force Wind to pay more than the bargain opening bid of C$62-million for the regions it operates in.
"If Mobilicity does not participate in that auction, both the value of existing or pre-existing spectrum, and its position in any negotiation goes down," Glassman said.
Robert Sauer, a spokesman for Wind declined to comment. Martin Tremblay, a spokesman for Quebecor, didn't reply to phone and e-mail messages.
Mobilicity said in e-mail it continues to discuss alternatives with a number of potential partners.
"The company has not agreed to anything with Catalyst or anyone else at this time," the company said in the e-mail.
Law Suit A potential partnership or merger between Mobilicity and Wind Mobile may be complicated by a lawsuit Catalyst has filed against one of Wind's largest shareholders, West Face Capital Inc., a Toronto-based hedge fund.
Earlier this year, West Face led a group of investors to purchase the outstanding stake in Wind Mobile, the brand name of Globalive Wireless Management Corp., that was held by Amsterdam– based VimpelCom Ltd. for about $300-million).
Both Catalyst and West Face were amongst the bidders for VimpelCom's stake in Wind, according to people familiar with the sales process.
Catalyst alleges in the lawsuit that a former employee, who left for West Face in July, may have relayed confidential information related to Wind Mobile and other potential investments, according to documents filed with the Ontario Superior Court of Justice.
Catalyst alleges in its recently unsealed statement of claim some of the documents may have been sent to West Face and circulated around the firm as part of the employee's resume and writing samples.
None of the allegations have been proven in court. West Face denies any wrongdoing, and said in the court filings the employee had no involvement in West Face's bid for Wind Mobile. Greg Boland, West Face chief executive officer, declined to comment on the suit.