Industry Canada Minister Tony Clement to review CRTC decision on Globalive
Published Friday October 30th, 2009
MONTREAL - Industry Minister Tony Clement says he will review a CRTC decision that prevents new national cellphone company Globalive from launching its service.
"Let me just say we believe in competition in the telecom industry," Clement said Friday.
"So that remains our policy, and as to the specifics of that CRTC decision, obviously we're going to be reviewing it and we'll come to some conclusions in due course."
The CRTC ruled Thursday that Globalive wasn't Canadian-owned and controlled, putting its planned launch in the coming weeks in doubt.
Globalive, which plans to operate under the WIND Mobile banner, wants to be Canada's fourth major wireless carrier and compete with Rogers, (TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T).
DAVE Wireless and Public Mobile are expected to launch their services in the coming months, while Quebec-based Videotron (TSX:QBR.B) is expected to get into the cellphone business in that province and in parts of Eastern Ontario next year.
Egyptian telecom company Orascom owns 65 per cent of Globalive and much of its debt, a structure accepted by Industry Canada when its licence was granted last March.
Globalive chairman Anthony Lacavera said Friday that he will review what Clement has said.
"I don't know how far he can go with that," Lacavera said from Toronto. "Obviously, we're still going to be very vocal about how unhappy we are."
WIND Mobile's launch is still "up in the air" but Lacavera said he's not giving up.
"Not only do I have hope, I am more committed than I have ever been to making this wireless competitor a reality," he said. "We must be permitted to go forward by the government. We've made a massive investment."
Globalive paid $442 million in 2008 for airwaves over which to operate in an Industry Canada auction and has invested millions more in its network and hiring more staff.
Lacavera said Globalive is having encouraging discussions with other potential lenders and equity investors, but the subject of CRTC approval always comes up.
It's a "regulatory overhang" that inhibits discussions, he said.
RBC Capital Markets analyst Jonathan Allen said Friday the CRTC is "effectively neutering the biggest and most disruptive" of the new wireless entrants.
Rogers, Bell and Telus are likely to see a "big rally in celebration," Allen wrote in a research note.
The telecom sector saw gains on Friday with shares in Canada's three big telecoms - Rogers, Bell and Telus - all closed ahead on the Toronto Stock Exchange after the CRTC ruling on Globalive.
The CRTC said that Globalive currently doesn't meet the Canadian ownership and control requirements to operate as a telecommunications carrier.
Orascom also holds much of Globalive's debt financing, more than $500 million, a big sticking point for the CRTC.
"The commission finds that Globalive is controlled in fact by Orascom, a non-Canadian," the CRTC said in its written decision.
"Given Orascom's equity interest in Globalive, such a high level of debt in the hands of a non-Canadian is unacceptable."
Telecom analyst Mark Goldberg said Globalive has some options and would be able to satisfy the federal broadcast regulator with changes to its board of directors, veto rights and another debt holder.
"The capital markets today are very different from the capital markets even three months ago," said Goldberg of Mark H. Goldberg and Associates.
"Globalive needs to "simply follow the recipe" the CRTC set out for it, Goldberg said.
Analyst Duncan Stewart said investors would be willing to give Globalive money, but at what price.
"The problem is what they would demand for it essentially makes Globalive a non-starter," said Stewart, director of research and analysis at DSam Consulting.
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