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TELUS Takes Mobilicity Under its Wing

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TELUS Corporation (TU - Free Report) has agreed to take over wireless carrier Mobilicity for $380 million, converting the latter into a wholly owned subsidiary of the former. However, the deal will be finalized following the regulatory approvals of the Competition Bureau, Industry Canada, and Mobilicity’s debt holders.

Management at TELUS and Mobilicity have already approached the federal board for the consent and are working diligently toward securing the sanction for a timely acquisition without much hassle. Mobilicity initiated the proceedings of the deal in the Ontario Superior Court of Justice and expects to obtain the permission under the Canadian Business Corporations Act.

Mobilicity – which has been distraught by weak finances over the last couple of months – placed the offer of acquisition to TELUS, considering the welfare of its customers and employees. If the deal gets approved, TELUS will retain Mobilicity’s existing staff of 150 personnel as well as render services to its 250,000 customers. On the other hand, Mobilicity will utilize the proceeds from the transaction to pay off all secured and unsecured debt.

With this deal, TELUS – which recently unveiled the Research In Motion Limited BlackBerry Q10 smartphone – aims to bring in more subscribers and broaden its operating horizon. The company performed impressively in the first quarter of 2013, with adjusted earnings per ADS of 55 cents (55 Canadian cents per share) surpassing the Zacks Consensus Estimate of 53 cents.

We believe that the company is on the path of strengthening its foothold over the Canadian telecom sector through growing wireless customers circle, deeper penetration of smartphones, improving churn, increasing average revenue per unit, accelerating wireless data services, growing wireline fiber optic networks and profitable acquisitions.  

TELUS Corporation – which operates within the Canadian telecom industry along with Rogers Communications Inc. (RCI - Free Report) and BCE Inc. (BCE - Free Report) – currently carries a Zacks Rank #3 (Hold).

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