Commentary: Globalive gets rough ride from incumbents at first day of CRTC hearing

At the CRTC hearings into Globalive’s ownership structure Telus Corp, Rogers Communications Inc., and Bell Canada made a consistent and compelling case that Globalive does not comply with Canada’s foreign ownership regulations. Of course, as incumbents, it is in their interest to stall Globalive’s entry into the Canadian market. But it wasn’t just the incumbents expressing concern with Globalive’s complex management structure. At one point, CRTC chair Konrad Von Finkelstein called “stunning” the fact that Egyptian telco Orascom Telecom has ‘drag along’ rights to sell Toronto-based Globalive to a third party. “Don’t you have a sword of Damocles hanging over your head?” von Finkelstein asked of Tony Lacavera, CEO of Globalive. “We are comfortable,” replied Lacavera. “Neither of us is interested in selling prematurely. Both of us are interested in long term value.” To the general public this must seem a bizarre scenario – why are we talking about whether or not Globalive can operate after it has already spent $442 million on spectrum, all of it financed by a loan from a foreign telecom? “The CRTC doesn’t have jurisdiction to assess until Globalive applies to be a carrier,” says independent telecom analyst Mark Goldberg of Mark H. Goldberg and Associates, in conversation with Tech Media Reports. “Globalive controls the timetable – simply owning spectrum doesn’t make you a carrier.” And, though Iain Grant of the SeaBoard Group has been quoted as being skeptical that the CRTC will give Globalive the green light, Goldberg won’t speculate as to what the commission will decide. However, he is comfortable outlining three broad scenarios. “They can say ‘Yes, this set up is good,’ or they can give approval subject to fixing a few things, or they can refuse to approve the current corporation as the carrier.” In this third scenario, Globalive would have to go back to the drawing board and re-submit with a new corporate structure. This might seem like a bureaucratic attempt to stymie competition, but the evidence presented against Globalive was not insignificant. “Globalive, despite consistent efforts, has been unable to secure Canadian capital for this venture,” said Telus VP Ted Woodhead. “But other operators have not has this difficulty. One must ask oneself: How flexible have Globalive and Orascom been?” Woodhead added that the condition of the technical services agreement that ensures that Globalive uses Orascom is further proof that it isn’t an independent company. “The point is, good idea or not, the technical services agreement is not at the choice of management,” said Woodhead. “It has been dictated by Orascom....and gives Orascom very strong influence over a number of important matters.” Strangely, it seems that Orascom wants to be rewarded for the fact that it took the risk in the first place, with the full understanding that approval was not a given. According to this logic, the size of the investment determines the interpretation of the law – a distinct possibility given that the Telecommunications Act does not define Canadian control. “We made these loans...when we were not sure of approval,” said Naguib Sawiris of Orascom, appearing via video feed from Egypt. “I wonder if there is another company in the world that would do this?” Probably not, for the simple reason that the present scenario was entirely likely. And last-minute moves by Lacavera, including giving up a put option on his shares and becoming chair of two holding companies, will likely not be enough. It certainly didn’t impress the incumbents. “There is not a single significant strategic or operational decision that Globalive can make without Orascom’s permission,” said Ken Engelhart, Rogers' head of regulatory affairs. Bell’s head of regulatory affairs, Mirko Bibic, went even further, saying that Globalive’s arguments are a “smokescreen” and that, if approved, Globalive would be operating under a “different set of rules”. There will be no more news for at least another week: first there is the in camera session, then documents must be translated and redacted before a decision. But the repercussions of having Globalive rejected will be significant. Globalive has 30 wireless spectrum licences and has been on a hiring binge – its brand, WIND Mobile, announced that it will be creating up to 200 jobs in the City of Peterborough to staff its call centre. Still, it is entirely possible that Goldberg’s third scenario will become a reality. “The CRTC doesn’t have a problem enforcing the rules,” says Goldberg. “It’s their job, and they’ve gone through the ownership review process in the past.”

Commentary: Globalive gets rough ride from incumbents at first day of CRTC hearing

News | September 24, 2009

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