- Firm: Country promised to help company compete
- Portfolio company is under creditor protection
- Three companies dominate Canada wireless industry
New York-based Quadrangle filed a statement of claim in the Ontario Superior Court of Justice against Industry Canada on Sept. 5, claiming negligence, misrepresentation, breach of contract and abuse of public office, sister news service Reuters reported.
The Canadian government did not immediately respond to a request for comment.
Quadrangle and fellow Mobilicity investor Data & Audio-Visual Enterprises Investments Inc said in the lawsuit that they had put hundreds of millions of dollars in the new entrant to Canada’s wireless industry after the government body assured it of favorable terms that were subsequently breached. The plaintiffs said Industry Canada had told Mobilicity founder John Bitove that it would prevent unfair competition from established operators and create market conditions allowing new challengers to compete effectively.
Mobilicity is under creditor protection, and its subscribers have drifted away because of the uncertainty.
BCE Inc, Rogers Communications Inc and Telus Corp dominate Canada’s wireless industry with a combined share of about 90 percent. Mobilicity’s backers said Industry Canada had assured Bitove that the company could transfer any spectrum licenses it acquires to an established operator after five years. But since then, the low-price wireless operator has failed to consummate a sale of licenses to Telus due to government opposition to a further concentration of the wireless market in the hands of its biggest companies.
“While this lawsuit does not appear material for telco investors in itself, we wonder how the government expects to fulfill its four wireless player objective, given the experience of new entrants dealing with the government to date,” Canaccord Genuity analyst Dvai Ghose wrote in a note.
Alastair Sharp is a correspondent for Reuters in Toronto.