Orascom to continue ‘working with government’ on Wind deal

Orascom Telecom Holding S.A.E., owned by Amsterdam-based VimpelCom Ltd., said it is withdrawing a request to Industry Canada to acquire control of Wind Mobile, though it still wants to work with the government to consolidate its interest in Wind. Wind Mobile, owned by Globalive Wireless Management Corp., announced a plan in January to transfer its control to VimpelCom, and last October Orascom filed an application with Industry Canada to make that transfer under the Investment Canada Act. The deal to transfer ownership had a June 30 closing date and Orascom's application was delayed without a decision from the department. Orascom said in its statement Wednesday that “after a review process and discussions with the Government of Canada, it has decided to withdraw its application for Investment Canada Act approval of its acquisition of control of WIND Mobile Canada.” The company added: “Orascom Telecom continues to be interested in consolidating its interest in WIND Mobile Canada and in working with the Government of Canada to achieve this goal.” The statement did not say why Orascom was withdrawing the application or why it was delayed. Wind Mobile emphasized the security of its network this week as The Globe and Mail, citing anonymous sources, reported that the application had been delayed in part due to national security concerns related to Russian investors in VimpelCom, particularly Russian billionaire Mikhail Fridman. Reuters reported in April that Altimo Holdings & Investments Ltd., a company owned by Fridman, had made an offer to purchase 100 per cent of Orascom, the majority equity investor in Wind Mobile, for $3.7 billion US, though Bloomberg reported this month that Fridman withdrew the bid. Industry Minister Christian Paradis would not comment on Orascom's statement Wednesday, saying he cannot discuss issues actively under the Investment Canada Act. “I cannot talk about that. This is ICA stuff,” Paradis told reporters on Parliament Hill, and reiterated his policy objective of ensuring a fourth wireless player in each region of Canada to compete against national wireless incumbents Rogers Communications Inc., BCE Inc., and Telus Corp. “I’m confident that we can have a fourth player. I’ve been very, very clear about that,” Paradis said. The minister said this month that he will not permit the incumbents to purchase new entrants' spectrum licences, which were set aside for small players in a 2008 wireless auction, until a five-year moratorium expires. This month, Paradis also blocked Telus' deal to acquire Dave Wireless Inc., operating as Mobilicity, due to the new entrant's “set aside” spectrum licences. VimpelCom was looking to sell off Wind after its plan to take ownership of the new entrant, and had hired UBS AG to help with a sale and review offers. This week, Fran Shammo, chief financial officer at Verizon Communications Inc., told the Wall Street Journal that the company is “looking at the opportunity” of entering the Canadian wireless market. “We’re looking at the opportunity,” said Shammo. “This is just us dipping our toe in the water.” Canaccord Genuity analyst Dvai Ghose said in a note to clients Wednesday that Orascom may still want to assume control of Wind before selling it to a third party, such as Verizon or Accelero Capital Holdings, former Orascom CEO Naguib Sawiris’ private equity firm. Tony Lacavera, chief executive of Wind Mobile, had partnered with Accelero on an offer to purchase Wind. Ghose referred to VimpelCom CEO Jo Lunder’s comments this month at a broker conference in London, where the executive said he wants a “clean exit” from Canada. Lacavera, CEO of Wind Mobile, said in a phone interview Wednesday that he has not had conversations with Orascom about the company's withdrawal of the application and he is not sure what Orascom means by aiming to consolidate its interest in Wind. He said he intends to meet with Orascom to discuss the company's objectives. “I am back at the table, and we're going to have to work out a solution that works for everybody,” Lacavera said. He will remain as CEO of Wind, and he said that does not necessarily mean Accelero's offer for Wind will be favoured. “What does happen now is that they can still run a process through UBS to sell their stake, and I would be a bidder for their stake, and my stake would just remain. That's a possibility,” Lacavera said. One telecom industry source said on a background basis that Orascom may be pulling its application from Industry Canada so that it can directly sell its shares in Wind without transferring ownership to itself and then to a buyer. “If all they want to do is resell it, why go through the process twice?” the person said. Lacavera said the regulatory framework introduced by the Conservative government—including restrictions on “undue” spectrum concentration under one owner; aiming for four carriers in each region; better tower sharing and roaming rules; blocking Telus' deal for Mobilicity; and liberalizing the foreign ownership rules—have created a good “macro policy picture” for potential foreign investors. “You arrive at a place where I think it's a very interesting investment opportunity now,” he said. “My objective is to see a strong fourth carrier in every market, and I think Wind has clearly emerged in Ontario, B.C. and Alberta.” In a statement released by Wind on Wednesday, Lacavera said he will “continue working with VimpelCom toward achieving our mutual objectives,” adding that Wind has more than 600,000 customers. “It is an exciting time in Canada's evolving wireless landscape!" the statement said. Lacavera said earlier this month that Wind would be interested in purchasing Mobilicity, now that it cannot be purchased by an incumbent. New entrant Public Mobile Inc. also said this month that it has been acquired by two private equity firms, Toronto-based Thomvest Seed Capital Inc. and New York-based Cartesian Capital Group LLC, for an undisclosed amount. Another industry source, speaking on a background basis, said they do not expect any further merger or acquisition announcements before Industry Canada releases its new spectrum transfer policy by the end of this month. “Nobody's going to do anything until they see these new licence transfer rules,” the person said. “They want to see what exit routes they have.” —With reporting by Simon Doyle at sdoyle@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Orascom to continue ‘working with government’ on Wind deal

News | 06/19/2013 8:47 pm EDT

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