As per two unidentified sources, Canadian telecommunication giant Rogers Communications Inc. RCI, has reached a deal for the purchase of wireless carrier, Mobilicity. Reportedly, Rogers Communications has agreed to shell out C$400 million ($324.57 million) for the acquisition. However, neither of the companies has confirmed the news so far.
Notably, Mobilicity has been under creditor protection since 2013. Moreover, as per reports, on June 24, the company plans to present its agreement with Rogers Communications for approval before the Ontario Superior Court judge, who is also supervising its creditor protection procedure.
Interestingly, only last week, The Globe and Mail had reported that Rogers Communications and TELUS Corporation TU are vying to purchase Mobilicity for about C$300 million ($245 million). Mobilicity was expected to take a call this week, while the Canadian government was also likely to give its permission in favor of any one of the buyers.
Mobilicity is one of the new entrants in the Canadian wireless space. The company has cut wireless tariffs considerably but has failed to grab significant market traction. Mobilicity was also barred from vending its cellular airwaves licenses to TELUS on numerous instances in the past. This was the fourth bid from TELUS for Mobilicity, following back-to-back government opposition related to the transfer of the latter’s spectrum license.
Interestingly, the proposed agreement also includes the deal related to the transfer of Mobilicity’s wireless spectrum in the Ottawa region and eastern Ontario to WIND Mobile. However, the pricing detail of the transaction is yet to be disclosed. Notably, this deal to sell the airwaves is considered essential to attain federal government’s approval for the proposed Mobilicity takeover.
We note that spectrum is the only major component left with Mobilicity now as the carrier has been suffering from substantial subscriber churn, of late. The operator’s subscriber base has reduced to 157,000 in April 2015 from 165,000 in May 2014.
Meanwhile, Rogers Communications is striving to strengthen its 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.
Thus, Mobilicity’s takeover is in line with Rogers’ consolidation plans. We believe, successful acquisition of the company will lend vital additional spectrum to Rogers Communications, which will significantly boost its market share as well as top-line growth, going forward.
Rogers Communications currently has a Zacks Rank #3 (Hold). Better-ranked stocks in this sector include Level 3 Communications, Inc. LVLT and Shenandoah Telecommunications Co. SHEN. Both the companies carry a Zacks Rank #2 (Buy).
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