Newspaper article The Canadian Press

Wireless Startup Mobilicity, Its Backer File $1.2B Suit against Industry Canada

Newspaper article The Canadian Press

Wireless Startup Mobilicity, Its Backer File $1.2B Suit against Industry Canada

Article excerpt

Mobilicity files suit against Industry Canada

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TORONTO - One of the financial backers of wireless startup Mobilicity has filed a lawsuit against the federal government, seeking $1.2 billion in damages for breaking several assurances that Industry Canada officials allegedly made to prospective investors.

New York-based investment firm Quadrangle Group claims, among other things, that Mobilicity's backers were assured that it would be able to transfer wireless spectrum to one of the big Canadian wireless networks after five years.

However, the government's has refused to allow Mobilicity to transfer the spectrum to Telus Corp. (TSX:T), which has offered to buy the smaller company that has been operating under court protection since late last September.

In the statement of claim filed with the Ontario Superior court on Thursday, Quadrangle alleges that in late 2006, Industry Canada pursued a meeting in late 2006 with John Bitove, a Canadian businessman known for his development of Sirius XM Canada, and encouraged him to help invest in a new wireless company.

"The Industry Canada representative ... assured Mr. Bitove that if he has his partners invested in a new company, purchased spectrum and built out a new network, it would prevent unfair competition from the incumbents and create market conditions in which new entrants could establish themselves and compete effectively," the company said in the filing.

Part of the understanding, the claim says, was that Industry Canada assured Bitove that his investment would not be lost because the spectrum licences could be sold to one of the country's biggest wireless carriers after five years.

Bitove has put about $44 million into the business through his company Data & Audio-Visual Enterprises Investments Inc., which has filed the claim alongside Quadrangle. As part of the investment, Quadrangle gave $217 million of equity and another $95 million through a debt financing, the court documents say. …

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