Public Mobile is one of the smallest new cellular licence holders, can only operate in two provinces and hasn’t started business yet.
But CEO Alek Krstajic is already musing about the company a national wireless operator. He says he can do it if the Federal Court opens the way for companies like his to get the same foreign financing that Ottawa has given rival Globalive Wireless Management Corp.’s Wind Mobile.
“We could expand faster, potentially buy some other players and consolidate the market” with U.S. financing, he said in an interview Friday.
Those are bold words coming from a company that spent a mere $52 million on spectrum in the 2008 wireless auction. That compares with the $442 million spent by Globalive for licences covering seven provinces and two territories, $243 million spent by DAVE Wireless for spectrum covering parts of Ontario and a number of large Western Canadian cities, and $189 million by Shaw Communications for coverage of four Western provinces and parts of Ontario.
Not only that, Public Mobile didn’t buy the advanced AWS spectrum that pushed the price of those new entrants’ licences up. Instead it chose the little-wanted PCS ‘G’ band spectrum, which few bidders thought handset manufactures would bother with.
They were wrong. After initially vowing to launch service in the third quarter of 2009, Public Mobile now says it will open doors in the first half of this year.
Krstajic believes his company holds two aces: half of its spectrum covers southern Quebec, where only one other new entrant has coverage, and Public Mobile’s relatively low debt.
“We would be very interested in being a national player,” Krstajic said, “and we’re the only one that can be a national player [of the new entrants] given that we have Quebec and nobody else does other than [Quebecor Inc.’s] Videotron.
“With access to more capital, we would definitely look at taking the Public Mobile brand national.”
Possible acquisitions, he said are the other new entrants who either haven’t launched yet – although many, like Globalive and Shaw have more money – or ones that run into trouble after they go into business. So far only Globalive’s Wind Mobile is open. DAVE Wireless says it will launch this year.
Ideal acquisitions for Krstajic would be two low-profile companies that also bought PCS ‘G’ band 2008 auction: Novus Wireless, headed by Vancouver real estate magnate Terrence Hui, which spent $17.9 million on spectrum covering B.C. and Alberta; and Blue Wireless Canada, controlled at the time of the auction by Michael Gelfand of Palm Beach, Fla.
Neither returned calls by press time. Neither has made any public comment on their plans in the 18 months since the auction.
Public Mobile is demanding the Federal Court overturn a cabinet decision allowing Globalive to operate despite being almost entirely in debt to Egyptian-based Orascom Telecom S.A.E, which also has 68 per cent of its equity. Canadians control the board, with Globalive chairman Anthony Lacavera the company’s largest voting shareholder.
Last fall the Canadian Radio-television and Telecommunications Commission said Orascom’s position meant it controlled Globalive in violation of the Telecommunications Act, but in December the cabinet took a different interpretation of the facts. It added the ruling is not a precedent for other companies.
In launching the court challenge Krstajic said what cabinet did is unfair.
Krstajic said he doesn’t want to close Globalive, but said the same foreign ownership and control opportunity that Globalive has should be open to all telecommunications companies.
Initially, Public Mobile was almost completely funded by a U.S. telecom venture funds, including M/C Venture Partners of Boston and Columbia Capital of Alexandria, Va. After the 2008 auction, Krstajic said, the government told the company that would have to change, which led to the $50 million investment by the private investment arm of OMERS, the Ontario Municipal Employees’ Retirement System, followed by the addition other Canadian shareholders.
“The Harper government is playing fairly fast with the rules,” Krstajic complained, including “unilaterally” changing the foreign ownership law.
“I don’t understand what Public [Mobile] expects to achieve,” retorted Lacavera on Friday. The Telecommunication Act’s control test is subjective, he said, and the cabinet disagreed with the CRTC.
As for the government ordering more Canadian investment in Public Mobile but being satisfied with Globalive’s shareholders, Lacavera argued the two companies are different. Pubic Mobile is a pure startup, he said. Globalive includes a Canadian business, he said: Lacavera’s 10-year-old long-distance and Internet firm, Yak Communications, which has customers and revenue.
