Technology & Science

Globalive wireless aims to look Canadian

A new wireless provider has altered its ownership agreement in an effort to show it meets Canadian regulations and should be allowed to launch a new cellphone network in Canada.
"We're trying to prove our Canadian control," said Anthony Lacavera (left), Globalive Communications Corp. chair. On the right is Globalive Wireless Management Corp. CEO Ken Campbell. ((Emily Chung/CBC))
A new wireless provider has altered its ownership agreement in an effort to show it meets Canadian regulations and should be allowed to launch a new cellphone network in Canada.

Globalive announced the changes at the start of a two-day hearing before Canada's telecommunications regulator Wednesday in an effort to discourage restrictions that could hamper or scuttle its launch.

Globalive paid $442 million in 2008 for wireless spectrum across Canada and had originally hoped to start offering its services in late 2009. The government reserved 40 per cent of the 105 megahertz of airwaves up for sale in 2008 for new entrants to encourage competition in the wireless industry.

The changes to Globalive Wireless's shareholder deal announced by Lacavera at Wednesday's hearing are that:

  • He himself, the largest Canadian shareholder, will chair the boards of the three companies that make up Globalive's wireless business, instead of co-chairing with Michael O'Connor, a third shareholder and a Canadian who previously worked for Orascom. O'Connor will instead be vice-chair.
  • He has waived his ability to separate the new wireless business from Toronto-based Globalive's existing wireline telephone businesses, which operate under brands such as Yak and OneConnect.
  • Orascom has given up its right to ever buy out Lacavera's stake in case of dispute and Lacavera has agreed not to sell his stake within the next three years.

The Canadian Radio-television and Telecommunications Commission is trying to determine whether the company is controlled by Canadians to the extent required by law despite its partnership with Egyptian telecommunications giant Orascom Telecom Holding SAE, which owns 65 per cent of Globalive Wireless's equity and a large portion of its debt.

The CRTC launched the review of the company's "complex" corporate structure and financial arrangements after a request from Telus and Shaw Communications in April.

Foreign ownership of telecommunications firms is limited to 20 per cent of the voting shares of an operating company and one-third for a holding company.

Globalive maintains that it meets Canadian requirements, as management of the company is largely with the Canadian partners.

'I clearly have the majority of votes'

"I clearly have the majority of votes," Lacavera told CBC News during a break in proceedings, noting that Industry Canada has approved the company's structure after it made changes recommended by the department.

Anthony Lacavera, chair and CEO of Globalive Communications Corp., told the CRTC on Wednesday he has made further changes based on the CRTC's prior feedback.

"We're trying to prove our Canadian control," Lacavera said.

He suggested that larger telecommunications companies had "turned this review process into an adversarial one, with the single-minded purpose of trying to prevent us from being able to compete with them."

The company's representatives said it is seeking other Canadian investors, but has had trouble so far due to the global financial meltdown, and the regulatory uncertainty created by Industry Canada's and the CRTC's reviews have not helped. They asked the CRTC not to impose restrictions on such financing such as deadlines that could affect its ability to negotiate with potential investors.

"We will be held hostage," suggested Globalive's chief financial officer Brice Sheschuk.

Orascom could force partner to sell

Naguib Sawiris (right), founder and chairman of Orascom, appeared by videolink from Egypt. He said it wouldn't be a dealkiller if a clause guaranteeing the company 51 per cent ownership of Globalive Wireless were removed. ((Emily Chung/CBC))
CRTC panellists expressed concerns about aspects of the deal with Orascom that could give it undue influence over Globalive Wireless's operation.

"Based on what I've heard, Orascom is involved in all aspects of the operating business," said Leonard Katz, vice-chair of telecommunications for the CRTC. "It's currently acting as banker, financier and in some respects as an indirect operator of the operating company as well."

He questioned whether Globalive Wireless is financially independent of Orascom.

CRTC chair Konrad von Finckenstein himself raised concerns about Orascom's ability to force Lacavera to sell his stake, despite the fact that Lacavera has majority control.

"I'm just stunned," von Finckenstein said. "If you and Orascom don't work together, he can always say, 'Look, I'm out of here, I'm selling the whole thing and by the way, I'm selling you too?'"

Lacavera responded that he has first right of refusal in such a case.

Von Finckenstein was also concerned about the fact that the agreement guarantees Orascom a 51 per cent stake in the company even if other, Canadian investors come on board. Orascom founder and chair Nabuib Sawiris, who participated by video link, said the clause was put in largely for accounting reasons and it wouldn't be a deal killer if it were removed.

Telus concerned over veto power

Michael Ryan (left), who represented Telus, alleged that "Globalive is, for all intents and purposes, an Orascom company." Ted Woodhead, Telus's vice president of telecom policy regulatory affairs, is on the right. ((Emily Chung/CBC))
Following Globalive's presentation, the CRTC heard from Telus, which has a wireless business that Globalive could in the future compete with and which was one of the companies requesting the CRTC review.

"Globalive is, for all intents and purposes, an Orascom company," argued the company's legal representative, Michael Ryan. "I'd respectfully suggest that the CRTC has never endorsed an arrangement which gives a foreign entity such wide ranging influence over the operations of a telecommunications common carrier."

Telus raised concerns about the fact that Orascom has the power to veto any expenditures worth more than $5 million, borrowing in excess of $20 million, and the issuance of new shares, including stock options.

Ryan also questioned the fact that Globealive adopted Wind, an Orascom brand, for its new service, and has an agreement to buy technical services from Orascom that could give it a great deal of influence over things like design of the network and purchasing of equipment.

Rogers Communications Inc. and Bell Canada also testified at the hearing Wednesday.

The hearing continues Thursday, but most of that day's session will take place behind closed doors. The CRTC is expected to issue a decision within 30 days of the end of the hearing.