UBS poised to take charge of Look Communications; Craig shifts legal battle to Ontario

Unique Broadband Systems Inc. (UBS) appears to be winning the battle against Craig Wireless International Inc. for control of wireless cable operator Look Communications Inc., having received conditional approval from the CRTC last week to increase its stake in Look from 29.99% to 51.06%. But the battle against Craig Wireless International, which also wants control of Look, continues on the legal front to prevent UBS from gaining control of the wireless cableco. The legal action that it initiated in Manitoba has been discontinued, but Craig Wireless president Boyd Craig says that the case will be re-filed in Ontario. "What it means is that we’ve agreed that the proper jurisdiction is Ontario (not that it doesn’t have merit)," Craig tells Canadian Communications Reports. He emphasizes that the CRTC approval is conditional. "It was conditional upon them proving that they are Canadian controlled. …The position that we’re taking is we’d like to see that application because so far it’s been done on a fast track scenario and we have not had access to the application…But our position is that the fast track scenario was really put in place to expedite applications that were non-contentious." He adds, "I guess what the CRTC has told us at least initially is that they’ve done their homework. But the CRTC doesn’t look at broader issues. They look at (things) strictly from their point of view. The fact that there is lawsuits out there is really none of their business, or so they say." Craig intends to challenge UBS’ acquisition of some Look shares in the courts. Now that it has the condition approval of the CRTC, UBS Wireless Services Inc., a wholly owned subsidiary of UBS, hopes to gain majority control of Look through the exercise of a fully paid option that will be presented to UBS shareholders at the company’s annual meeting on November 20. The change will include the creation of a class of non-voting shares to ensure compliance with CRTC Canadian ownership rules. Look president, CEO and chair Michael Cytrynbaum praised the development, saying, "This means Look will have a committed shareholder who shares our vision of the marketplace and can contribute to our strategy to capitalize on the opportunities ahead." UBS chair and CEO Gerald McGoey stated that it was the ideal time to be taking over Look as Industry Canada recently announced the auction of 2.3 MHz and 3.4 MHz spectrum beginning in mid-November. Both Look, which operates in Ontario and Quebec, and Craig Wireless, which operates in Manitoba and British Columbia, are restricted in the number of TV channels they can offer due to the limited spectrum they have been licensed to use. Craig Wireless’ legal action against Look was initially filed before the Court of Queen’s Bench in Manitoba. It was discontinued on October 17. Craig Wireless asked the Manitoba court to disallow a private placement by Look in January to UBS until it was approved by the company’s disinterested shareholders, and to direct Look to get approval from the TSX Venture Exchange for the private placement. The private placement gave UBS 29.99% of Look’s outstanding shares, while it still had an option to acquire 21.16% of Look’s outstanding shares from Look shareholder Telesystem that would increase its total to 51% (CCR, Aug. 22/03). It is the latter transaction that just received conditional CRTC approval. Before the action was discontinued in Manitoba, Look had made a motion for an order to set aside Craig Wireless’ statement of claim and a stay of proceedings. Look argued that the province of Ontario, not Manitoba, was the proper jurisdiction for hearing the claim. Cytrynbaum notes in his September 4 affidavit filed with the Manitoba court that, "Although Look is a federally incorporated corporation, its business is located primarily in Ontario and Quebec. Look does not carry on any active business in Manitoba and has no assets in Manitoba." The affidavit further states, "Look specifically denies such allegations (made by Craig that Look directors acted in a way that is oppressive, unfairly prejudicial, or unfairly disregarded the interests of Craig) but it is to be noted that each of the specific acts referred to in subparagraphs 22 (a), (b), and (c) of the statement of claim took place outside of Manitoba, in Ontario. …No member of the (Look) board of directors resides in Manitoba. Currently, five of Look’s seven directors reside in Ontario, and two reside in Quebec." Cytrynbaum also notes that the other Look shareholders, UBS and Telesystem, cited by Craig Wireless do not operate in Manitoba. UBS is incorporated under the laws of Ontario, and Telesystem is incorporated under the laws of Quebec and has its head office in Montreal. "I know of no factor connecting the issues in this claim to Manitoba," Cytrynbaum concluded. Furthermore, a search of Craig Wireless with the Manitoba Companies Office revealed that it was in default since it failed to file its last annual return with the body. Craig Wireless, which was initially registered on May 26, 1985 under the name Sky Cable Inc., last filed a return with the Manitoba Companies Office in 2002. Craig held 5.36% of the shares in Look when it acquired those held by Teleglobe to increase its stake to 29.9% this year. It can further boost its stake to 32.47% if it receives CRTC approval to acquire the remaining 2.57% of Look shares held by Teleglobe. Craig Wireless had declared its desire to gain voting control of Look in a bid for a more national footprint for its wireless cable operations. Appearing before the CRTC last week for the renewal of Craig Wireless’ Manitoba MDS licence, company president Boyd Craig told commissioners that bankruptcy would be the end result if the CRTC didn’t grant it some concessions. Craig wants wireless cablecos to be exempt from licensing, and it is asking the CRTC to give it more time to pay the money it owes to the Canadian Television Fund (CTF). Asked if Craig Wireless was committed to wireless cable TV and the Internet, Craig responded that the company was in for the long haul. Craig pointed to Craig Wireless’ recent increased investment in Look as a sign that it believed in and was committed to the wireless technology. "I think what we have now that we didn’t have seven years ago is experience - both from an operational standpoint, a marketing standpoint and a very important technical standpoint," Boyd told commissioners.

UBS poised to take charge of Look Communications; Craig shifts legal battle to Ontario

Broadcast | October 31, 2003

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