Sawiris’ auction threat triggers swirl of reaction, charges of ‘bluffing’

Wind Mobile’s suggestion that it will not participate in Industry Canada’s 700 MHz auction unless a set-aside policy is implemented is a “bluff” and “blackmail by media,” critics said Friday. Naguib Sawiris, the Egyptian founder of Wind financial backer and lender Orascom Telecom Holding SAE, told the CBC in an interview this week that Wind cannot afford to compete head-to-head against Canada’s well-capitalized incumbent telcos in a bidding war for spectrum. “Our position is clear: if they don’t set aside this we won’t bid for it,” Sawiris said in the interview, which aired Thursday on the CBC business show The Lang and O’Leary Exchange. Repeating an argument that is often put forward by some of Canada’s small wireless providers, Sawiris said incumbents BCE Inc., Rogers Communications Inc. and Telus Communications Co. would outbid new entrants like Wind for the frequencies in a strategy to keep smaller players out of the Canadian market. In a separate interview with The Globe and Mail’s editorial board Thursday, Sawiris said he would walk away from his investment in the Canadian market if he could get 90 per cent of his money back. “I would, actually, if they would give me my money back, minus 10 per cent, I would take it any day,” he said. Carmi Levy, an independent technology analyst, told The Wire Report Friday that he believes Sawiris is bluffing and that it would not make sense for Wind to withdraw from the auction or the Canadian market. “The long and the short of it is, he’s blowing smoke,” Levy said in an interview with The Wire Report. “Essentially what he is doing is positioning Wind Mobile for the upcoming spectrum auction and this is just part of the usual jockeying that goes on in advance of these high stakes contests.” Levy said Sawiris’ threat is a public relations manoeuvre designed to shape the government’s decision on the upcoming auction’s rules. “He’s sending a message to both the Canadian government and the CRTC that the rules need to change, that the rules for the upcoming 700 MHz spectrum auction need to be modified such that they aren’t more in favour of incumbent players.” Michael Hennessy, senior vice-president of government and regulatory affairs at Telus Communications Co., agreed, telling the Globe that Sawiris’ threats were “blackmail by media.” Hennessy called the statement “fundamentally wrong ... on the premise that it has to be either/or; that you either have a set-aside or three carriers will end up with everything.” In an interview with The Wire Report Friday, Wind CEO Anthony Lacavera said Sawiris has proven to be a man of his word and that he meant what he said. He pointed to similar disputes Sawiris faced with regulators in countries like Algeria, Bangladesh, Italy and Greece. In those cases, he said, Sawiris either got what he was looking for out of regulators and government or withdrew his investments even if it meant taking a loss. “Naguib’s track record speaks for itself. He doesn’t bluff. He’ll walk away,” Lacavera said. Amit Kaminer, a research analyst with the Seaboard Group, agreed in an interview that Sawiris is known to be a man of his word and said he “puts his money where his mouth is.” If Sawiris withdrew funding from Wind for the upcoming auction, Lacavera said the carrier would continue to search for other sources of financing. But it would be equally unlikely that Wind could secure alternative financing if set-asides were not a part of the policy framework, he said. “Without a set-aside, I do not have investor support to participate in the auction. We cannot possibly participate in an auction where we have no chance of winning,” he said. Lacavera said that other small players and new entrants are in a similar position. “The bottom line is, the Canadian government must proceed with the set-asides or no new entrant is going to show up to this auction,” he said. “We’re not going to have any competition in the auction, and ultimately we’re not going to have any competition in the wireless marketplace in Canada, which will lead to higher pricing and fewer features and choices for consumers.” But Alek Krstajic, CEO of new entrant Public Mobile, suggested his company would compete in the auction either way. “Public Mobile is looking forward to acquiring additional spectrum and is happy to bid in the upcoming auction without WIND,” Krstajic said in email statement passed on by the company Friday. “Having fewer interested parties, will only benefit Public Mobile. While WIND spent $442 million in the last auction, Public Mobile prudently spent only $52 million, which has given Public Mobile a significant cost savings advantage that it is now passing on to its customers.” Also Friday, Industry Minister Christian Paradis’ office confirmed that the government will not grant Wind’s request to for a second round of consultations on set-asides prior to the release of the auction rules. Wind sent a formal request for an additional consultation to Industry Canada, Pascale Boulay, Paradis’ press secretary, noted in an email Friday. But the department will not hold any further consultations before releasing its policy framework for the auction. “During the 700/2500 MHz consultations, IC received extensive comments on the various issues, including on the one raised ,” Boulay wrote. “IC continues to monitor developments in Canada and abroad related to the 700/2500 MHz auctions … We are reviewing all info received in these consultations and provided in meetings with stakeholders and will proceed accordingly. “There is no need for further consultations on policy framework and related competition issues. After the Minister announces the decision on policy, IC will consult on licensing framework and rules.” Lacavera said the government is missing an important opportunity to give new entrants a chance to set the record straight. “We think the government does not necessarily have all the information they need because they’re getting a lot of misinformation from our larger competitors,” Lacavera said. nkyonka@thewirereport.ca

Sawiris’ auction threat triggers swirl of reaction, charges of ‘bluffing’

News | 11/18/2011 10:33 pm EST

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