GATINEAU – While a CRTC hearing into the levels of foreign ownership in new wireless entrant Globalive is set to begin on the 23rd of this month, Rogers Communications this week sent a letter to the Regulator asking for the same treatment of two other newcomers, Public Mobile and Dave Wireless.
“Since the 2008 AWS auction, many questions have arisen regarding the ownership and control of several of the successful bidders,” reads the Rogers letter to CRTC chairman Konrad von Finckenstein. “Many of the auction’s participants included foreign partners in order to raise the necessary capital. These concerns were directed primarily at Globalive due to the presence of Orascom, one of the world’s largest wireless carriers based in Egypt, who provided the vast majority of Globalive’s debt and equity.”
Cartt.ca has been following that story for the better part of a year.
But, serious questions about the levels of foreign ownership of Public Mobile and Dave, as posed by Rogers, is new.
Both Dave and Public Mobile have been aided by foreign capital, as most in the industry have been. However, claims Rogers, with the various funds which have invested, or invested and left, with new ones coming on, it’s not easy to measure the Canadian ownership and control of the companies.
When it comes to Dave (whose chairman is Canadian entrepreneur John Bitove), Rogers said: “While on the surface it appears to meet the Canadian ownership and control rules as the two American partners (Vulcan and Quadrangle) only owned 33.33% of the votes, there is not enough information to make a final determination,” reads the Rogers letter. “For example, it is unknown who owns Data & Audio Visual Enterprises Investments Inc. It is revealed that the company has three directors who are all Canadian residents but no information is provided with respect to the shareholders who could replace the directors at their discretion. There is also no mention of any shareholder agreement, debt instruments or other agreement that may provide authority over the carrier.
“These issues were further complicated by changes to the ownership structure after the auction began. Shortly into the auction, Vulcan Capital withdrew from the DAVE consortium. It is unclear however who made up the lost capital. Was it split between DAVE and Quadrangle? If so, who received how much? Were new investors brought into the fold and if so who are they and what is their nationality?”
As for Public (whose CEO, Alek Krstajic is a former Bell and Rogers exec) RCI called its ownership appearance “even more confusing.
“It filed two beneficial ownership structures before the beginning of the auction. Initially the primary Canadian shareholder was the investment fund Novacap Technologies III L.P. who was to control 66.67% of the voting shares. A group of foreign investment funds including Columbia AWS Canada Inc., AWS Canada M/C Inc., CTC Catalyst L.P., Battery Ventures VIII Canadian Spectrum Holdings Inc. and CRP XIII Blocker Inc. held the remainder of the voting shares and all of the non-voting shares. However on May 15, 2008, just 12 days for the start of the auction, 6934579 Canada Inc filed a new beneficial ownership structure with Novacap replaced by three new entities Rho Canada Ventures LP, 6976387 Canada Inc. and BMO Capital Corporation. The five foreign firms remained. Apparently the controlling Canadian shareholder was replaceable while the non-controlling foreign shareholders were not.
“The foreign investors also appear to have been in control over the consortium’s pursuit of the spectrum. The authorized representative of 6934579 Canada Inc during the auction, Salvatore Tirabassi, was a partner of M/C Venture Partners of Boston Massachusetts. Who controlled the bidding is unknown,” adds the Rogers letter.
RCI wants another public hearing to get to the bottom of the ownership of both companies to make sure they meet the requirement that telcos in Canada be majority Canadian controlled, under Telecom Regulatory Policy CRTC 2009-428.
“Some public participation would appear necessary in order to make a proper examination of the key materials, such as shareholder agreements and debt instruments, which are normally closely held,” it added.
We’ve asked for comment from Public Mobile and Dave and will update the story when we hear back.
– Greg O’Brien
