According to reports by The Globe and Mail, Canadian telecommunications giant Rogers Communications Inc. RCI and TELUS Corporation TU are vying to purchase wireless carrier, Mobilicity. Notably, the Canadian government will permit the transaction for one of the buyers.
However, Mobilicity is yet to take a call and is likely to reveal its decision by next week. Meanwhile, both the companies are believed to have offered C$300 million ($245 million).
Mobilicity is one of the new entrants in the Canadian wireless space. The company has cut down wireless tariffs to a great extent but failed to grab significant market traction. Also, the operator’s subscriber base reduced to 157,000 in April 2015 from 165,000 recorded in May 2014.
The reports further revealed that Mobilicity is under creditor protection since 2013. The company was also barred from vending its cellular airwaves licenses to TELUS in the past on numerous instances.
Meanwhile, this is the fourth bid from TELUS for the domestic wireless carrier, following back-to-back government opposition related to the transfer of Mobilicity’s spectrum license. Spectrum is the main thing left in Mobilicity as the carrier has been bleeding with subscriber churn.
In May 2013, TELUS had signed an agreement to acquire Mobilicity for C$320.0 million ($315 million), when the latter was facing a tough financial phase. After that, TELUS placed a second bid of C$350.0 million (C$345.0 million) in Apr 2014, only to be rejected by the federal government on both the occasions. The federal body stated that the transaction would have landed the wireless spectrum to an incumbent carrier.
Both Rogers Communications and TELUS are striving to strengthen their foothold in the Canadian telecom sector through increased smartphone penetration, wireless customer gain, average revenue per unit improvement, wireline fiber-optic network expansion, wireless data service enhancement and strategic acquisitions.
TELUS carries a Zacks Rank #2 (Buy) while Rogers Communications has a Zacks Rank #3 (Hold). Other favourably-ranked stocks in this sector include Level 3 Communications, Inc. LVLT and Shenandoah Telecommunications Co. SHEN. Both the companies carry a Zacks Rank #2.
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