Wind Mobile

The Canadian Radio-television Telecommunications Commission (CRTC) is back in this news this week after running a dog and pony hearing at the behest of Bell, Telus, and Rogers (three of Canada’s largest incumbent telecommunications companies) pondering whether would-be wireless competitor Globalive was Canadian enough to do business in the country.

The Telecom Act specifies that all wireless phone companies must be controlled by Canadian citizens.  Toronto-based Globalive Wireless Management Corporation insists it has met the requirements of Canadian law, despite having a major percentage of its financing coming from Egyptian-based Orascom, a wireless mobile provider itself.  Globalive points to approval of its holding company business structure by Industry Canada.

Under the arrangement, Globalive would launch competitive wireless service under the brand Wind Mobile starting later this year.  Then the CRTC got involved.

Canada’s three current wireless phone companies — Bell, Telus, and Rogers, complained to the Commission that Globalive is violating the spirit of the Telecom Act and have essentially joined forces to keep Globalive out of Canada.

The CRTC was quick to respond to the incumbents’ concerns and scheduled hearings which started last Wednesday.  As expected, Globalive got hard questioning from the CRTC and the providers.  Canadian citizens looking for competitive choice weren’t on the agenda.

The Commission previously forced Globalive to publicly release more than 1,000 pages of company documents relating to its business structure, pages that were kept confidential by Industry Canada, but made available to Globalive’s existing competitors for their review.  The result was a gold mine of insight on their potential competitor’s business plan, and they used the information gleaned to argue against the company’s right to provide service.  itWorldCanada covered the response:

“I don’t know how the commission could possibly approve that deal now with that kind of capital structure,” Michael Hennessy, Telus’ senior vice-president of regulatory and government affairs said in an interview. “It would be unprecedented.”

Rogers could have gone along with the Industry Canada ruling, said Ken Engelhart, the company’s vice-president of regulatory affairs, “but when we read the documents we were just amazed. There has never been an approval like this before. The rules have always been [a telecom company] could have a major foreign shareholder, a major foreign debt holder, a major foreign strategic partner. But you could never have the same person being all three. Orascom has 65 per cent of the equity, 100 per cent of the debt and they provide the brand and all the strategic and technical skills.”

“If this is OK there’s no point having any more hearings. They should all get rubber-stamped because if this is Canadian owned and controlled, what isn’t?”

Bell concern trolled their way through written comments, ringing their hands over an ownership structure modified to address their earlier concerns is now even worse.

Anthony Lacavera, chief executive officer for Globalive Wireless Management said Globalive has every right to operate a wireless provider in Canada as he is a Canadian citizen and has control.
TMCNet’s Canadian Angle blog explains:

The biggest problem seems to come down to math.  Globalive states that Lacavera is in control, and he is a Canadian citizen.  The incumbents are complaining about the amount of ownership and possible influence that the Egyptian financial backer, Orascom Telecom, has on the Globalive company.  The way that Lacavera has explained it, the Globalive team is following all the rules while still allowing for some out of this country funding.  Here is the breakdown:

• Anthony Lacavera owns 35 % of Globalive, and Orascom owns 65%.
• Orascom funded over $500 Million so Globalive could pay for the wireless spectrum that they bought, and the bridge financing required for the infratructure
• Both of these parties have agreed to replace the loans with third-party investments – as soon as it is commercially viable.

Telus and Bell suggest that Globalive and Orascom are pulling a fast one – trying to get around the legalities by setting up separate companies but still providing Orascom with a majority stake in the company, and  also with the added benefit of controlling the operations.

It shouldn’t be a big shock that Globalive was financed through another country, and as long as Globalive and Orascom commit to what they say they are going to do, there shouldn’t be any problems.

Well – still one hefty problem – the CRTC is under the influence of the incumbents.  The decisions coming from this regulatory body will provide fuel for many posts to come.

Am I the only one that sees the irony in the CRTC grilling Globalive about being influenced by outside sources?  Isn’t this the pot calling the kettle black?

The reason for all of the debate is simple enough.  Canada’s three wireless phone companies could lose one quarter of their customers to competitors like Globalive and DAVE Wireless, according to Toronto-based Convergence Consulting Group, Ltd., which released a study on the matter last week.  Without Globalive being one of those competitors, incumbent providers will likely retain more customers and more revenue.