TORONTO – While the owners of Wind have announced control and executive changes they want to make, without Industry Canada approval of those shifts, someone still has to be at the wheel – and for now, it is a re-energized Tony Lacavera.
Lacavera, the normally ebullient driving force behind Wind in Canada, was seen by many over the last number of months to be the odd man out and in some of his public appearances, he seemed, well, glum. Plus, Wind’s primary financial backer, Egyptian wireless company Orascom (a part of the massive VimpelCom empire), has announced a number of moves which will bring Canada’s number four national wireless company under foreign control – as is now allowed under the new foreign investment regs announced last year by Industry Canada – and bump Lacavera out.
Due to various factors, which we touched upon here and here, while Wind has become the fourth-largest national wireless player, it has less than half the number of subscribers Lacavera hoped the company would have by now. It’s parent company took a $339 million impairment charge last quarter from its Canadian operations, helping drive Orascom to a $470 million quarterly loss.
But until Industry Canada approves the ownership change application by Wind, Lacavera is still the guy in charge – and until they tell him not to come to work every day, Lacavera says he plans to keep pushing ahead. In fact, he says he is energized by the rules surrounding the 700 MHz wireless spectrum auction which is now set to begin November 19th this year. Last week he chatted with Cartt.ca editor and publisher GOB about the auction rules and what’s up with him and Wind.
Greg O'Brien: How have you been?
Tony Lacavera: Everything’s great. I’m rolling along, getting this Globalive Capital thing going (his new venture capital fund), of course I’m still in the chair at Wind. We haven’t gotten any kind of approvals to get the ownership change through, so nothing’s really changed actually. As I’ve told everyone I’ve talked to about it, I’m probably the least bullish of anyone that it’ll get through without significant changes that could materially impact the deal we did. I just don’t think it’s going to be clean and everyone’s kind of saying ‘well, they just changed the foreign ownership rule, so it should be clean.’
GOB: You’re the first test of it, I think.
TL: Yeah, exactly. And the first test never goes smoothly.
GOB: You found out (about regulatory battles) when you were the first competitor to come to the market.
TL: I learned the lesson that it’s a question of when – it’s just time and working through the process. So in the meantime, I’m just pushing ahead with Wind and trying to get this new entrant consolidation to happen. I’m very pleased to see the (700 MHz) announcement. I’m really happy about it. I know there was a lot of skepticism about it, but I think it was a very comprehensive, broad policy statement and directional shift towards the long term, leading toward spectrum balance. That’s the key, spectrum balance. We’ve been saying for the last couple of years that at some point (the federal government) has to recognize that three guys have 90% of the spectrum. Sixteen guys, small guys, have 10% altogether. We’re just not going to have a fourth national carrier where it’s so fragmented among the small players.
GOB: That’s part of the point I made in some of my analysis: It’s just the way that the market has been allowed to develop – and the way the government’s been so slow on opening it up to foreign investment, we’re now stuck where we’re at right now. It seems really hard for me and others to envision how companies like yourselves and Mobilicity can continue to try to make a dent and be a long-term viable fourth national competitor.
TL: You’re absolutely right. There’s no way, without sufficient spectrum. Everything cascades from there… If you don’t have the real estate, you’re screwed right from the get go.
So we got into it knowing we had insufficient spectrum for the long-term, but the policy statement in ’08 was clear that they were going to continue to run auctions and the spectrum will keep being opened up. And as you quite rightly put it, they’ve just been slow at doing it. And so everyone’s saying, ‘well it’s too little, too late.’ I mean you could argue it’s too late, but what they did (with the 700 MHz auction rules) is not too little in my view. It’s a directional shift and a clear acknowledgement that they understand the spectrum and the long-term need to fix it.
GOB: What are the big positives from your point of view where it will help Wind?
TL: I think they’re abundantly clear that they’re not going to permit incumbents to vacuum up the new guys as they did with Clearnet and Fido. So, I think it’s a clear, broad, directional shift where they couldn’t have said enough where there’s going to be four carriers come hell or high water. I think that’s the anchor of the statement. The coverage of that was about 700 and absent auctions and minimum bids and all this stuff. I called all the big analysts and said ‘you’re missing widely the point of this whole thing in my view.’
GOB: Which is?
TL: That there’s going to be four carriers and there’s going to be enough spectrum for the fourth carrier. Whether it’s 700 2,500 or 500, that’s not the point. All of those can be put together in a solution. But if you allow the big guys today to buy Shaw’s spectrum, next they’re going to buy Mobilicity’s spectrum. Next, VimpelCom has no option but to sell to an incumbent and it’s over. So it’s a broad policy direction and I really like the way they approached it. I know there was criticism that it was vague, nothing is definitive, but I like that.
GOB: Government does vague very well.
TL: But in this case, I think it’s smart. They’re saying, ‘listen, we’re going to review everything. We want four carriers, so if Shaw and Rogers want to do an auction deal, then you need to bring the auction deal to us and we’re going to consider it.’ It’s not no and it’s not yes, it’s ‘we’re going to consider it in the context of a broad policy objective of four carriers.
To me, that’s the anchor of the whole thing. And whether we want to talk about whether the roaming is good or bad, hard handoff vs. soft handoff. Obviously we prefer the tower sharing arbitration to be two weeks and not three months or whatever. Those are all around the edges to the fundamental issue that is if you permit Shaw and Rogers to transact in the way they contemplate it… then Mobilicity logically tucks into an incumbent – and even if I can find other investors, or VimpelCom to buy Mobilicity spectrum, the incumbents are going to overpay for it and we’re never going to be able to buy it.
GOB: So here’s the question that I have though. Are you definitely going to be in on the auction or do you need to be combined with Mobilicity first before that happens?
TL: I said literally since day one that there’s room for one more carrier. Wind and Mobilicity – yes, they need to combine. Yes, Public Mobile needs to figure out how to combine with us and (government must) stop Shaw from selling its spectrum to Rogers. They need to stop Vidéotron from selling its spectrum to an incumbent in Toronto. So the stuff that was set aside needs to remain set aside. And if you do that, then suddenly, the 500 megahertz and the 700 looks attractive. So all those things lead to me saying, ‘yeah look I’m keen on the 700, again in the broad context of a policy that says we’re going to insure there are four carriers. And we’re going to ensure there’s enough spectrum for four carriers.’
From my perspective, it was a real win. I think I might be the only guy who thinks that because all the banks, the Mobi guys, Public guys, everyone’s saying, ‘well nothing is clear, this really hurts our ability to finance,’ because there’s no clear way to exit to an incumbent if we ever had to. Well then why did you get into the business if you wanted to exit to an incumbent? The point is to create a competitor. So I hope the VimpelCom guys want to stay. I always hope that and the deal that I did with them is really structured for me to stay involved and they stay and we move again.
GOB: Well that’s going to be the other question when people see this story from the comments you were just making to me today. They’re going to think ‘isn’t this guy on the way out? How is he speaking for Wind? What’s going on there?’
TL: Well I’m still the chairman and CEO of Wind. Nothing has been approved. We’re waiting regulatory approvals. But we have an application in for me to transfer my controlling interest to VimpelCom. So my voting shares go to them and they have total control thereafter. That’s been applied for but it has not been approved. So as part of that transaction, the original Globalive assets and the Globalive name and everything come back to me, as was disclosed initially. I’m still going to be very active in the industry and I still have a huge stake in Wind, so I’m very keen to see the consolidation happen. I’m not in control of Wind anymore, I just have a big economic stake. I’m not getting any money out of Wind. I’m fully still in and I’m handing the keys to VimpelCom.
GOB: Do you have any insight on whether they definitely want to stay in Canada? Their quarterly report showed a pretty big impairment charge due to Canadian operations.
TL: I've been abundantly clear on that one and I’ll say it again today. I’m at the table. If they plan to sell, I will be bidding, I want to own it. I want to build a competitor, long-term. I do not want to see it sold to an incumbent and I’m going to do everything I can to make sure it doesn’t get sold to an incumbent. So I’m handing them control, which means they can vote to sell to an incumbent and all I can say is that I’m going to do everything I can to make sure that doesn’t happen.
GOB: Is there investment money out there to back such a purchase?
TL: Yeah. I’ve raised the money to acquire it, if and when they actually do want to sell. Look, I think the other good thing from my perspective in that regard is that the government came out quite down on incumbents acquiring new entrants. So whether it’s me or Mobilicity or it’s Public that ends up doing the consolidation, the good news from my perspective is that there is going to be a new entrant that survives (The federal government, in its 700 MHz auction rules, said it would make sure there are four spectrum-winning bidders per region).
GOB: So I don’t know if you saw (Mobilicity chairman) John Bitove’s interview with me, but it’s his opinion that they’re going to be the consolidators and they’ve been looking to acquire Wind from you and the other owners.
TL: As I say, good for them and I hope that he is successful – and now the government has set up a policy that ensures that whether it’s me or it’s him or it’s (Public Mobile CEO) Alek (Krstajic) or it’s Vidéotron or it’s Shaw – and frankly, regardless of what he or I might say, the best-positioned companies are Shaw and Videotron. I can’t comfortably speak from the Wind chair, so I’m speaking outside the Wind chair now, as an investor in Wind, that Shaw or Videotron should lead this thing, or Shaw and Videotron. And I should build it out from there, because they have the franchise in their respective markets, right, so they’re in a position to do it. Vidéotron’s in the business and doing very well in Quebec, they have spectrum in Toronto, and they have the balance sheet… I think if a new entrant is surviving and thriving, that transaction has a better chance of getting through a Regulator.
