OTTAWA – Industry minister Tony Clement created a tilted ice sheet when he overturned the CRTC decision on Globalive’s ownership, Public Mobile CEO Alek Krstajic told the House of Commons Standing Committee on Industry, Science and Technology earlier this week.
Krstajic used a hockey analogy to explain the impact of the minister’s decision.
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“Had we known that we could have had a different structure with almost all our money coming from foreigners, we would have been able to bring on more capital and buy more spectrum,” Krstajic explained.
Simon Lockie, chief legal officer and secretary for Globalive Communications Corp., said that under the current rules a company can bring in as much foreign capital as it likes as long as the structure of the company meets the legal requirements for foreign investment. He noted that Public Mobile and Mobilicity have yet to get the green light to operate from the CRTC.
“If the CRTC in its wisdom determines that they are controlled in fact by non-Canadians, Cabinet can – as they did with us – reverse that decision if they think that the CRTC got it wrong, or (those companies) can petition Cabinet to do that. Everyone has the right to structure themselves and to bring in as much capital as they possibly can in a way that respects the rules,” Lockie told the committee.
While the two companies used the joint appearance to take pot shots at each, Globalive and Public Mobile shared common ground on a number of points. They agree that the current foreign ownership restrictions have outlived their usefulness.
In his opening remarks, Lockie said the government should look to the two most recent studies of foreign investment restrictions for advice: the Telecommunications Policy Review Panel and the Competition Policy Review Panel, noting that “we can do no better than to endorse these careful recommendations.”
Added Lockie: “In our view, the key issue to increasing competition in telecom is facilitating access to foreign capital on reasonable terms.”
Krstajic agreed, noting that it’s not only access to capital that’s important but the terms and conditions placed on it. “If we’re only allowed to get capital out of one pool, namely Canada, it’s going to be very difficult. If we’re allowed to get capital from multiple pools, then it’s not only more available but the price of that capital goes down.”
As has been brought up in previous committee meetings, some MPs expressed concern that opening up the telecom sector to greater foreign investment won’t change much in the long run. They fear that Canada will end up with only a few large players, as currently exists.
Globalive and Public Mobile acknowledged this fact, but noted the destination is less important than the journey.
Bruce Kirby, VP of strategy and business development at Public Mobile, said it’s not the number of competitors that matters most, it’s what they bring. “What’s important at that point and over a long period of time is having an environment that allows other new investors to come in, to create other new entrants over time, and to ultimately keep that dynamism in the market,” he said.
“There will be continuing competition so long as you remove this barrier to the entry and to capital. That’s how I would sum that up,” Lockie added.
It should perhaps come as little surprise that Globalive isn’t a fan of the CRTC’s proposal for a foreign investment regime (which Cartt.ca reported on here), particularly with respect to maintaining the control in fact test. Increasing the amount of permissible foreign voting equity to levels that still do not confer voting control will not make investment in Canadian telecom companies substantially more attractive, he said.
If Globalive’s experience has demonstrated anything, it’s that subjective test and the regulatory uncertainty that it creates is a disincentive to foreign investment, Lockie added.
