Telus’s Thirst for Spectrum Continues

It appears Telus is the only choice for Mobilicity.

| More on:
The Motley Fool
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Over the past year Telus (TSX: T)(NYSE: TU) has been busy buying up smaller telecom players such as Novus and Public Mobile. These small players came to be through the 2008 spectrum auction along with Wind Mobile and Mobilicity. Now six years later, two of these companies have been purchased by Telus and the other two are broke and looking for buyers.

Mobilicity has been a target for Telus twice in the past 12 months, but both times it was blocked by the Federal government on grounds of reduced competition — a party line the government has been trying to sell to the public through its “More Choice” campaign, with the hopes of better service and lower prices for wireless customers.

Mobilicity has been kept alive since September due to creditor protection and has been attempting to find a buyer to keep the company afloat. Mobilicity contacted 25 different organizations back in December to find a potential buyer. Of those 25 organizations only five submitted a bid to purchase. Of those, only a $350 million bid by Telus was deemed acceptable by Mobilicity and the court-appointed monitor.

Both companies are attempting to reassure the government that this deal will meet the criteria’s of the Federal Competition Bureau and the Minister of Industry. If the deal is accepted it is claimed that the “vast majority” of Mobilicity’s 165,000 subscribers would be migrated to Telus’s network, and staffing levels would remain the same.

Another factor working in Telus’s favor is the end of the five-year moratorium on re-selling spectrum sold in the 2008 auction to incumbent players. This means that any further rejection of the deal from the Federal government could leave Mobilicity with the choice to pursue legal action or exit the market.

Either option may have the same result for customers, as can be seen with Telus’s “endgame” with Public Mobile. Once Telus acquired the company’s spectrum licenses in Ontario and Quebec, its 260,000 subscribers were transferred to the Telus 4G network. Many of the subscribers will have to upgrade their phones to use the network, as Public Mobile’s network was considered outdated (though now growing in potential).

Foolish bottom line

No matter what decision the government makes, one thing is clear. If nothing is done, Mobilicity will continue to operate at a loss and will be out of cash by July, leaving its 165,000 subscribers in Toronto, Ottawa, Calgary, Edmonton, and Vancouver without service.

For Telus this is another opportunity to increase the area and the bandwidth capabilities of its network. This growth is more important now than ever since Telus surpassed Bell (TSX:B CE)(NYSE: BCE) as the nation’s number two wireless provider.

The acquisitions of Public Mobile and Novus Wireless raised the percentage of the population it can service from 80% to 97% and the addition of Mobilicity would further cement its foothold in urban Canada. For investors, the addition of spectrum gives Telus greater stability in the Eastern Canadian market and allows it to compete even better against regional incumbents Bell and Rogers.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Cameron Conway does not own any shares in the companies mentioned.

More on Investing

Hands holding trophy cup on sky background
Investing

3 Growth Stocks That Could Be Huge Winners in the Next Decade and Beyond

Here are three top TSX growth stocks that may be worth a look, given the significant valuation declines these stocks…

Read more »

edit Back view of hugging couple standing with real estate agent in front of house for sale
Dividend Stocks

Why Real Estate Stocks Are a No-Brainer Addition to Your Portfolio

Real estate stocks, especially REITs, offer some distinct advantages over other types of stocks, making them must-have additions to most…

Read more »

Man data analyze
Stocks for Beginners

Beginners: 2 Market-Beating Stocks Just Getting Started

Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) and Constellation Software (TSX:CSU) are proven market beaters that could continue their ways.

Read more »

oil and natural gas
Energy Stocks

Small OPEC+ Oil-Output Hike: Buy More Energy Stocks?

Energy stocks could soar higher, because oil markets will remain tight due to the small production increase by OPEC+.

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Top TSX Dividend Stocks to Buy for Monthly Passive Income

Top TSX stocks with monthly dividends now trade at cheap prices for investors seeking passive income.

Read more »

edit Person using calculator next to charts and graphs
Investing

Where to Invest $500 in the TSX Right Now

Long-term investors can look to buy stocks, including Suncor Energy and Shopify, as they are poised to outpace the broader…

Read more »

Canadian Dollars
Dividend Stocks

Create Free Passive Income and Turn it Into Thousands With 1 TSX Stock

If you can't afford to invest, you can certainly create passive income another way and use that to invest in…

Read more »

falling red arrow and lifting
Investing

2 Oversold TSX Stocks That Should Bounce Back

Stocks that are oversold without an external catalyst like a market crash or a weak sector might be risky buys,…

Read more »