Globalive does not meet Canadian ownership and control requirements and cannot therefore set up shop as Canada's fourth national cellphone company, the CRTC says.
The regulator on Thursday found that the Toronto-based company, which is backed by Egypt's Orascom and had plans to launch service in Toronto and Calgary this year under the Wind brand, does not meet ownership and control rules.
"The commission found it particularly important that Orascom owns 65.1 per cent of the equity, has entered into a strategic technical arrangement with Globalive, controls and holds the 'Wind' brand under which Globalive will operate, and holds the overwhelming majority of the outstanding debt," the regulator said.
"The commission therefore determines that Globalive has not met the requirements of the ownership and control regime and is therefore not currently eligible to operate as a Canadian telecommunications common carrier."
The CRTC prescribed a list of changes the company could theoretically make in order to bring itself into compliance, which would include amendments to the composition of its board of directors, liquidity rights and the threshold for veto rights.
However, the fact that Orascom controls almost all of the company's debt is a factor that cannot be easily resolved.
"When these levers are considered in concert with Orascom's provision of the vast majority of Globalive's debt financing, the commission finds that it cannot conclude that Globalive is not controlled in fact by a non-Canadian, to wit Orascom," the CRTC said. "In other words, the commission finds that Orascom has the ongoing ability to determine Globalive's strategic decision-making activities."
Globalive chief executive Anthony Lacavera said the CRTC has made a "bad decision" and that Canadians need to speak up on what they want to see in the wireless marketplace.
"What this means for Canadians is less choice in wireless, higher prices, less features and services," Lacavera told CBC News. "We were ready to launch with a new competitive offering that's going to cause all the incumbent players to bring better offerings themselves to Canadians."
'We are a Canadian company'
Lacavera rejected the findings of the CRTC, saying Globalive complies with Canadian ownership rules.
"The CRTC has, in our estimation, made errors in their assessment of our control and ownership. We are a Canadian company, we have always been a Canadian company. We're ready to begin a new wireless offering to Canadians and Canadians have spoken loud and clear that they want this choice in wireless."
He said they are still assessing their options.
The CRTC decision stymies the company's plans to launch service across the country, except in Quebec, by next year after spending $442 million in an auction of government airwaves last year. Globalive passed an ownership test by Industry Canada at the conclusion of the auction.
The government had reserved airwaves for potential new wireless carriers during the auction in an effort to boost competition in the Canadian marketplace.
Telecommunications analyst Carmi Levy said he was shocked by the decision, given the federal government’s apparent openness to foreign investment.
Several other companies are also hoping to enter the sector and Levy said they should be double-checking their ownership structures.
"It means that the CRTC is looking very closely into precisely who’s pulling the strings," he said, "who’s making the decisions, and if they don’t meet those very stringent Canadian ownership criteria, they, too, will be denied entry."
Levy predicted Globalive won’t give up because it has invested too much already.
"They will look at re-jigging their organizational structure, possibly seeking additional Canadian-based investment and re-approaching the CRTC at some future point in time," he said.