OTTAWA – Wireless incumbents Rogers Communications and Telus have asked Industry Canada to hold a public proceeding into wireless newcomer Globalive’s Canuck bona fides.
Globalive, a Canadian VOIP operator and long-distance re-seller, backed by Egypt-based wireless supplier Orascom, bid over $440 million for wireless spectrum during the summer’s advanced wireless spectrum auction. But both Telus and Rogers say the new wireless company’s ownership structure violates the Canadian legislation which says telecom companies must be majority-owned by Canadians.
Last month, Telus requested Industry Canada hold an open public proceeding to review the eligibility of new holders of wireless spectrum to own that spectrum, and to place a “redacted version” of all filings on the public record. That is, place much of what was confidential on the public record.
Rogers has supported the Telus request and last week sent an additional missive to Industry Canada voicing its concerns over Globalive’s makeup after listening to Orascom’s September 4th conference call with telecom analysts.
“The call revealed that Orascom will be taking a 65% equity ownership stake in the wireless carrier coupled with ‘less than 50% voting control’. It also indicated that the remaining funding will come from (a) Globalive Canada; (b) shareholder loans; (c) other Canadian equity (public or private); (d) vendor financing; and (e) non-recourse debt. It is also apparent that Globalive will rely on equipment supply contracts with its principal foreign investor, Orascom, to gain access to lower prices available through Orascom’s wireless operations in other parts of the world,” reads the letter from Dawn Hunt, RCI’s vice-president, regulatory-telecom, to Kevin Lindsay, acting assistant deputy minister.
“On its face, these arrangements raise significant concerns about the ability of Globalive to satisfy the control in fact test. These concerns are heightened when one considers the relative size and financial strength of the two companies.
Orascom has over 77 million wireless customers in a number of countries, including Pakistan, Iraq, Bangladesh and Egypt, and took in over US$4.7 billion in revenue in 2007 while Globalive, a private company, says it has about a million 10-10-123 LD and VOIP customers (its consumer brand is Yak).
“Industry Canada has pursued an AWS auction policy that was designed to introduce new Canadian carriers into the wireless market in this country. This policy has conferred significant benefits and opportunities on new entrants, and significant obligations on incumbent carriers. It was not a policy designed to assist foreign
controlled wireless carriers to enter the Canadian market,” continues Hunt’s letter.
“Industry Canada has been meticulous in following a transparent and open public process in all previous stages of its process of formulating an AWS policy and related amended conditions of license. In this context, conducting a closed door, non-transparent process, for determining the crucial issue of whether the statutory eligibility rules have been met by provisional licensees is out of step.
“The application of the eligibility regulations to provisional licensees is a quasi-judicial function that affects the rights of new entrants and incumbents alike. It is not a policy decision by the Minister. As such, those parties with an interest should be allowed the opportunity to participate in the process. As pointed out by Telus, this will not unnecessarily delay the review process and may avoid the need for subsequent proceedings before the CRTC or the courts.”
Globalive and Orascom executives told the September 4th conference call that they hoped to have an answer out of Industry Canada on its ownership structure within 60 days.
“(W)e went by the book,” Orascom chairman and CEO Naguib Sawiris told the September 4th conference call. “We have hired dozens of lawyers who have given us a good revision of the consortium we have proposed. We have tried to adhere 100% to the restrictions on foreign ownership to the effect that we do not have control in the company.
“It has to do with the officers in charge, the board representations, the ownership structure. So we are quite confident that as far as the legislation and the regulations, we have adhered to them.
“Now should there come any comments from industry Canada which would require us to be flexible or change any of that, we are. We are keen to do this opportunity. We’re not very much concerned about control. We are concerned about success.”
The ball is now in Industry Canada’s court.
– Greg O’Brien
