Accelero hires Ottawa firm to lobby on spectrum regulations

Naguib Sawiris' investment firm Accelero Capital, which is making an offer to purchase Wind Mobile, hired an Ottawa consulting firm to lobby the federal government on spectrum regulations, according to the federal lobbyist registry. Sawiris, formerly a major investor in Wind Mobile before it was taken over by Amsterdam-based VimpelCom Ltd., owns investment firm Accelero, which is making a bid for Wind in a partnership with outgoing Wind chief executive Anthony Lacavera. The Lobby Monitor first reported the new registration, effective March 28, which showed Accelero hired Playbook Communications consultant Emmanuel Morin to lobby members of Parliament, the Industry Department and the Prime Minister's Office on spectrum regulations. According to the registration, Morin is registered to communicate with the government about the “Policy Framework with regard to the terms and conditions of auction for Spectrum Licences for Advanced Wireless Services and other Spectrum.” Accelero Capital, based in Paris, is the only foreign bidder so far for the Canadian new entrant carrier, along with offers from BCE Inc., Rogers Communications Inc. and Fairfax Financial Holdings Ltd., The Wire Report reported last week. The Industry Department last month released final auction rules for a 700 MHz spectrum auction starting Nov. 19. The department is also consulting on new rules for the transfer of spectrum licences, which is creating uncertainty about whether VimpelCom could sell Wind Mobile to an incumbent, sources familiar with the process told The Wire Report last week. The Conservative government says it wants to allocate enough spectrum to new entrant and regional wireless players to ensure a fourth wireless carrier in every market to compete with national incumbents Bell, Rogers, and Telus Corp. One telecom industry source, speaking on a background basis, said Industry Canada's final rules for the 700 MHz auction are firm and will not change, though most potential buyers of Wind will be talking with the government about any policy implications of a purchase. “Undoubtedly they're arguing that the incumbents should not be permitted to acquire Wind,” the person said of the Accelero registration. “It makes sense to attack this from a GR perspective.” Analysts are speculating that Lacavera and Accelero may also make an offer for MTS Inc.'s Allstream Inc. division, which provides IP business services, for its fibre network and backhaul support. The division may be up for sale as the MTS conducts a strategic review. Len Katz, the former vice-chair of telecom at the CRTC, said in a phone interview last week that it's unclear whether Wind on its own is a viable business in Canada, and speculated that major foreign players will get involved in the bids for Wind Mobile if they can acquire other Canadian assets like Allstream Inc. and DAVE Wireless Inc.'s Mobilicity provider. “I think you're going to get other international players sniffing around,” Katz said. Scotia Capital analyst Jeff Fan, in a research note last month, said Sawiris may be interested in buying Wind, Mobilicity, and Allstream Inc. “In total, to acquire Wind, consolidate Mobilicity and Allstream, we estimate Mr. Sawiris would have to invest around $1 billion before the 700 MHz spectrum auction,” Fan wrote. Canaccord Genuity telecom analyst Dvai Ghose said in a phone interview Wednesday that Lacavera and Sawiris are looking at total costs of up to two billion dollars if they plan to go through with a purchase of Wind and Allstream. He said he estimates that a purchase of Allstream would cost about $300 million plus a $100 million pension liability, and that there would be additional restructuring costs of about $150 million to close down offices, cut the workforce, and make other changes. Lacavera and Sawiris would also have to spend about $500 million to $600 million in the 700 MHz auction and $200 million to $300 million for 2500 MHz spectrum in an auction the following year, Ghose said. That does not include the cost of building out fourth-generation wireless networks, which would cost hundreds of millions of dollars, he said. That would mean $1 billion to $1.5 billion in costs on top of whatever they pay for Wind Mobile, which is estimated to sell for $500 million to $1 billion, Ghose said. “It's just the tip of the iceberg,” Ghose said about the acquisition costs of Wind and Allstream. “The problem with wireless is that it's damn expensive until it starts making money, and then it makes a lot of money ... I'm not surprised by any of this speculation, I just wonder whether Lacavera and Sawiris want to commit to approaching $2 billion in capital.” Ghose said in a research note last month that VimpelCom and its subsidiary Orascom Telecom Holdings S.A.E., which VimpelCom purchased in 2011, have so far spent $1.7 billion on Wind Mobile's operations in Canada, including $442 million for AWS spectrum licences during a 2008 auction. In interviews in 2011 with CBC News and The Globe and Mail, Sawiris, the founder of Orascom Telecom, said Wind would not participate in the 700 MHz auction if spectrum was not set aside for new market entrants, and that 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,” Sawiris told The Globe. Katz speculated that Wind's possible sale could draw attention from major, international players like Li Ka-shing, an international investor based in Hong Kong and the chairman of Hutchison Whampoa Ltd.; his son Richard Li, chairman of Hong Kong communications and technology company PCCW Ltd.; or Mexican businessman Carlos Slim, owner of Grupo Carso and América Móvil SAB. MTS could also be a possible bidder, Katz said, if the company decided to expand its Allstream division rather than sell it off. “Rather than shedding Allstream, it would help MTS become more of a national player,” Katz said. Selena Hinds, a spokeswoman for MTS, said the strategic review of Allstream is ongoing and that “we are focused on getting to the right outcome for the Company and our shareholders. We won't be providing any updates until the strategic review process has been concluded.” Playbook Communications did not respond to a request for comment Wednesday afternoon. —With reporting by Simon Doyle at sdoyle@thewirereport.ca and copy editing by Nicholas Kyonka at nkyonka@thewirereport.ca

Accelero hires Ottawa firm to lobby on spectrum regulations

News | April 3, 2013

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