CRTC ‘control in fact’ review of DAVE Wireless to look at debt, licensing

The CRTC’s ownership review of Data & Audio-Visual Enterprises Wireless Inc. (DAVE Wireless) will focus on “control in fact” questions such as the control of licensing, branding, debt, and patents, telecom experts say. In a public letter to DAVE Wireless, the CRTC said the company’s ownership structure “appears to comply with the legal control requirements of the Act.” But “with regard to control in fact,” the commission “notes that a significant debt facility has been provided though an export credit arrangement with foreign bank for the purchase of telecommunications equipment. DAVE Wireless’ corporate governance provisions largely follow the guidelines laid out in the BCE and Globalive decisions.” Control in fact refers to the kind of power a foreign entity can exert over a company outside traditional ownership structures. It goes beyond basic legal requirements to look at issues such as the amount of debt lent by the holding company, or the number of non-voting, but participating shares. One industry source described control in fact as “questions of fact” rather than legal tests. The commission’s decision last year to deny Globalive Wireless Management Corp. access to the Canadian wireless market was a decision based on control in fact. The commission found that Globalive did not meet foreign ownership requirements, and ruled that the carrier’s holding company, Egypt-based Orascom Telecom Holding S.A.E., could use licensing agreements to bypass Globalive’s board of directors. Orascom held a significant amount of Globalive’s debt, leading to the CRTC’s determination that the company was not Canadian-controlled. The Conservative government subsequently overturned the CRTC ruling. In a statement to The Wire Report by email, Anthony Lacavera, Globalive chairman, noted that "Globalive and WIND Mobile went through a rigorous process, but we were confident the entire time that we were compliant.” Lacavera added that Wind’s “offering is competitive and we are delighted that we are now in market.” Licensing issues could also arise for DAVE, as they had for Globalive. “The commission was concerned that the brand licensing agreement and the technology agreement were ways for a non-Canadian to control the company,” Mark Goldberg, a telecommunications analyst with Mark H. Goldberg & Associates, said regarding the commission’s decision on Globalive. The commission has determined that a “Type 2” review of DAVE’s ownership and control is necessary to assess the “sufficiently complex nature” of its corporate structure, the letter says. “The important thing about Type 2 ownership reviews is that there is at least a measure of complexity that takes it beyond a straightforward examination,” Goldberg said. The CRTC says DAVE Wireless appears to meet basic legal ownership requirements under the Telecommunications Act, which state that foreign investment must be limited to 20 per cent of voting shares in a carrier and 33 per cent of voting shares in the holding company. Eighty per cent of the company’s board of directors must be Canadian citizens. Ownership structure information DAVE Wireless has provided to the CRTC says that non-Canadians own 22.4 per cent of the voting shares in the holding company, well below the limit. The board of directors for the holding company, DAVE Holdings, will consist six Canadian members and three non-Canadians. Although the Telecommunications Act says 80 per cent of the board must be Canadian, the rule applies to the carrier’s board, not the holding company’s. The DAVE Wireless carrier has just one Canadian director and no non-Canadians. “You look at the structure and it’s very complicated,” Roberta Fox, president of telecommunications analysis firm Fox Group Consulting, told The Wire Report. “What I see is that corporations have to have that complicated structure to try to get access to the money to grow and run their businesses,” Fox said. “We don’t have enough capital in Canada, and telecommunications is a capital intensive business.” DAVE Wireless says it plans to launch its wireless services this spring in Toronto under the Mobilicity brand and pending CRTC approval. The company has invested $243 million for spectrum to operate in Toronto, Vancouver, Calgary, Edmonton and Ottawa. But the Conservative government’s decision to reverse the CRTC’s ruling on Globalive is not expected to influence on the commission’s review of DAVE. “The cabinet decision was very careful,” said Brownlee Thomas, a wireless industry analyst with Forrester Research. “They were very clear in saying it was a specific case.” Thomas said that, on the surface, the review of DAVE looks like it will be more straightforward than that of Globalive. But it is possible, she said, that some information not made public could complicate the case. jmigneault@thewirereport.ca

CRTC ‘control in fact’ review of DAVE Wireless to look at debt, licensing

News | March 12, 2010

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us

CRTC ‘control in fact’ review of DAVE Wireless to look at debt, licensing

News | March 12, 2010

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

FCM calls for greater cell and internet coverage in north

Liberal backbench effort to update spectrum framework wins Conservative, Bloc support

CRTC scolds Bell for new $40 ‘device handling’ fee

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us