Public Mobile to contest Globalive foreign ownership

Howard Solomon

15 years ago

A Toronto wireless upstart will ask the Federal Court to overturn Ottawa’s decision allowing newcomer Wind Mobile to start business despite its heavy foreign ownership.

In a press release issued late Friday, Public Mobile said it believes the federal cabinet has “thrown out the foreign ownership laws of Canada” with last month’s ruling that Wind Mobile’s parent Globalive Wireless Management Corp. qualifies as as Canadian controlled company.

In the press release Public Mobile’s head suggested what it wants is the same break Wind Mobile got from the cabinet.

“We believe cabinet’s decision is unfair to other wireless carriers, especially new entrants like Public Mobile that have played by the rules and secured substantial Canadian investment,” CEO Alek Krstajic said in the release. “Furthermore, while we respect the Government’s authority we believe what it has done amounts to a change in law, and only Parliament can change Canadian law.”

“And we want to be very clear that we are not opposed to Globalive’s presence in the marketplace so long as the same rules are applied to everyone. But the government’s decision does not create a level playing field. It has made two sets of rules – one for Globalive and its Egyptian owners and one for everyone else. We are simply asking that all wireless providers be treated equally and given the same access to capital.”

However, in its application Public Mobile is only asking the the court to quash the cabinet’s Dec. 10 order. It isn’t clear what effect that would have on the operation of Wind Mobile, because in effect it would then be operating in voilation of the Canadian ownership and control provisions of the Telecommunications Act.

Public Mobile says cabinet’s conclusion that Globalive isn’t Canadian controlled was reached “in a perverse and capricious manner.” In addition, it says the cabinet erred in law by concluding that the ownership and control provisions of the Telecommunications Act should be interpreted in a way to encourage foreign investment and to enhance competition.

The move comes weeks after the Canadian Radio-television and Telecommunications Commission (CRTC) said it is conducting a closed-door review of Public Mobile’s ownership to see if it meets the demands of the Telecommunications Act. While Industry Canada has given Public Mobile its spectrum licence, the CRTC gives out wireless carrier licences.

Last fall, after a public hearing, the CRTC refused to give a carrier licence to Wind Mobile’s parent company, Globalive Wireless Management Corp. of Toronto because of the heavy influence of the company’s minority partner, Orascom Telecom SAE of Egypt.

Globalive’s majority shareholder and chairman is Canadian telecom entrepreneur Anthony Lacavera. However, Orascom holds nearly all of the company’s $508 million debt and 68 per cent of its equity.

But last month cabinet gave Wind Mobile a pass on the foreign ownership and control laws, saying it is satisfied the company is Canadian controlled.

In making its ruling, the cabinet emphasized that it was making an exception for Globalive based on the facts of its structure. In other words, the cabinet was trying to say it wouldn’t let other companies have the same degree of foreign control. Public Mobile will argue Ottawa can’t do that.

It might have been expected that other carriers would join Public Mobile in its action, for they would benefit if court says all Canadian companies have to benefit from a cabinet order. However, in its notice of application to the court Public Mobile also named as respondents the country’s incumbent wireless carriers, Bell Canada Enterprises Inc, Rogers Communications Corp., Telus Corp., as well as Calgary’s Shaw Communications, because they filed interventions in the CRTC-Globalive hearing. Globalive is also a named party. The case may draw other new wireless spectrum holders who have not yet started business but are looking for financing, including Toronto’s DAVE Wireless and Montreal’s Quebecor Inc. and Halifax’s Bragg Group.

Public Mobile, which, like Globalive is one of the new wireless companies that won spectrum last year, has not started business yet. It will operate in southern Ontario and Quebec.

Its shareholders are made up of Canadian and American venture and private equity companies, some of whom have deep experience in startup wireless companies. Public Mobile hasn’t publicly revealed what the shareholder and equity stakes are of each partner. It is known that the Ontario Municipal Employees Retirement System (OMERS) has invested $50 million in the startup.

Public Mobile spent $52 million in the auction, which, pales beside the $442 million spent by Globalive and the $554 million spent by Quebecor. However, those two companies bought AWS spectrum, ideal for data-heavy Internet and video demands of subscribers. Public Mobile bought less desirable PCS spectrum, which will work with its low-end business model of targeting people who have been avoiding buying cell phones because of the price. These people don’t want to cruise the Internet with a handset, the company says, but will largely make voice calls.

More importantly, Public Mobile’s $50 million bought it spectrum covering the populous Toronto and Montreal areas, leading at least one industry consultant to say it got the deal of the century at the spectrum auction compared to what others spent.