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Canada government adamant in opposing Telus bid for Mobilicity

OTTAWA (Reuters) - Canada's federal government signaled on Monday that it was still opposed to any of the country's established wireless companies acquiring Mobilicity, even though the startup, now under creditor protection, could cease operations without such a deal.

Telus Corp has been widely expected to make a third bid to buy Mobilicity after the five-year ban on the transfer of its spectrum expires on Wednesday.

As part of the ground rules for a 2008 auction of wireless frequencies, the government prohibited such transfers, aiming to foster more competition in an industry dominated by three operators and to lower prices for consumers.

A percentage of spectrum up for grabs in 2008 was set aside for newcomers such as Mobilicity, which was granted court protection from creditors in September.

Telus declined to comment on whether it was planning another bid.

But when asked whether Ottawa planned to extend the spectrum transfer moratorium, the answer was emphatically the same as it was in June, when the government first said it wanted to avoid more frequencies falling to established operators.

"The minister has made his position clear already on spectrum transfers," said Jake Enwright, a spokesman for Industry Minister James Moore. "We've been clear that we will not approve any spectrum transfer that results in undue concentration."

Along with Telus, BCE Inc and Rogers Communications own around 85 percent of all Canadian airwaves used for wireless. An auction of 700 megahertz that is currently underway is likely to strengthen their market dominance.

A Telus purchase of Mobilicity airwaves would certainly bring more concentration.

Some analysts had suggested Ottawa might relent on another Telus bid, given that Mobilicity may simply cease to operate without a sale. Mobilicity's subscriber base has eroded sharply since it went under creditor protection.

A ruling either way would have broader implications for the industry. Rogers has separately reached deals giving the company the option to acquire spectrum from Quebecor Inc and Shaw Communications Inc. It could also affect bidding strategies in the 700 Mhz auction.

Quebecor and Wind Mobile - which both entered the wireless industry courtesy of the 2008 auction - are also considered potential buyers of Mobilicity by media and analysts, but would likely not have the appetite or ability to outbid Telus.

Telus initially offered to pay C$380 million ($344 million)for Mobilicity last May, arguing the government should waive the transfer ban given Mobilicity's financial troubles. The government rejected a second offer in October.

Telus is separately seeking a judicial review of Ottawa's broader spectrum transfer policy.

The ongoing 700 MHz auction limits Telus, BCE and Rogers to each acquiring no more than one of four so-called "prime" blocks, leaving room for a fourth operator in each region. ($1 = 1.1048 Canadian dollars)

(Reporting by Randall Palmer in Ottawa and Alastair Sharp in Toronto; Editing by Chris Reese)

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