UPDATE 3-Canada blocks Telus deal for more wireless spectrum

Tue Jun 4, 2013 6:21pm EDT
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By Randall Palmer and Euan Rocha

OTTAWA/TORONTO, June 4 (Reuters) - Canada rejected the transfer of Mobilicity's wireless spectrum licenses to Telus Corp on Tuesday, effectively blocking its takeover of the struggling startup as the government seeks to hold back industry leaders from swallowing smaller rivals.

The ruling is a warning to companies like BCE Inc's Bell and rival Rogers Communications that any future deals will likely face obstacles.

However, Industry Minister Christian Paradis indicated that the government may still approve the big three wireless phone companies buying up airwave spectrum from smaller players after a ban on such deals expires in early 2014, as long as it did not result in "undue spectrum concentration."

During an auction that began in 2008, the government put a five-year ban on the transfer of spectrum - bandwidth used for phone calls and data transmission - set aside for new entrants.

Even though the ban expires only in early 2014, Telus last month struck a C$380 million ($367 million) deal to buy debt-laden Mobilicity because the start-up company faced possible bankruptcy unless it was acquired. Telus asked the government to waive the ban and allow it to take over Mobilicity's spectrum licenses.

Paradis said he believes Mobilicity had lots of options, and bankruptcy was not foregone conclusion. And his ruling to reject Telus' application effectively quashes the takeover deal.

"Our government has been clear that spectrum set aside for new entrants was not intended to be transferred to incumbents," Paradis said. "We will not waive this condition of license and will not approve this, or any other, transfer of set-aside spectrum to an incumbent ahead of the five-year limit."   Continued...