TORONTO (Reuters) - Wireless company Mobilicity raised C$215 million ($226 million) in debt financing on Friday as it bolsters its purse to compete with established carriers ahead of Canadian spectrum auctions due next year.
The privately held company entered the lucrative Canadian market along with Globalive’s Wind Mobile and Public Mobile after the federal government set aside airwaves for new entrants to the market in its 2008 auction of spectrum, aimed at increasing competition.
Mobilicity launched its service in Toronto a year ago and on Thursday added Calgary to coverage areas that also include Ottawa, Vancouver and Edmonton. It has no immediate plans to expand beyond those five major cities.
The three new entrants have pressured bigger, more established players Rogers Communications, BCE Inc’s Bell Canada and Telus — which together control 95 percent of the wireless market — by offering lower prices that appeal to the budget-conscious.
Mobilicity’s chief executive, Dave Dobbin, said the firm is not content to just nibble away at the low-end of the market.
“Our network sounds better than theirs, works just the same on BlackBerry data and saves the consumer a pile of money,” he said in an interview, noting that half Mobilicity’s users had a data plan.
In blind tests during the Calgary launch, he said, most potential customers couldn’t tell the difference between a phone call made on Mobilicity’s network and an incumbent network, and those that did mostly preferred Mobilicity.
Dobbin said the carrier grabbed one in 10 new wireless customers in the last quarter of 2010 and signups were tracking at a similar pace this year, though he did not detail total subscriber numbers.
The big three established carriers are lobbying hard for the rules governing a valuable 700 MHz auction to be pitched in their favor by not allowing another spectrum set-aside for newcomers.
The 700 MHz spectrum — which is being freed up as television broadcasters switch from analog to digital delivery — can travel long distances and more easily penetrate walls, making it ideal for rural deployment and to improve coverage in cities.
Dobbin said he was confident that whoever won Monday’s federal election would set rules that encourage competition in Canada’s wireless sector.
He said Globalive and Public Mobile had also been shopping around for funds and felt that Mobilicity’s financing was a vote of confidence.
“After seeing everybody’s business plan, after seeing everybody’s numbers, they all chose to invest in us,” he said.
Mobilicity said the financing was led by National Bank Financial and GMP Securities, which also organized a C$75 million facility in late 2009, and involved 10 new investors.
The young company, founded by businessman John Bitove, also raised C$125 million in 2009 through ING Bank and paid C$243 million to buy spectrum in 2008.
Reporting by Alastair Sharp; editing by Rob Wilson