GATINEAU – The fact that Globalive Wireless has altered its governance structure to mitigate CRTC concerns is just distracting everyone from the fact that its purse strings are tightly held outside of Canada.
And that means it can’t be a Canadian telecom operator, the three Canadian wireless incumbents told the Commission this morning.
During the final day into a hearing that began last week over the proposed structure of Globalive Wireless (which intends to come to market before year-end under the Wind brand name), representatives from Bell Canada, Telus and Rogers each played different verses of the same tune: Globalive is not Canadian-controlled and therefore can’t come to market here.
As Cartt.ca reported earlier today, Globalive went into the last day of the hearing with a number of alterations to its corporate governance and share structure designed to show the Commission that while 65% of its equity and 99% of its debt financing are from Egypt-based Orascom Telecom, it remains in Canadian control. The decisions happen here.
Globalive president Ken Campbell chalked up the complaining from the big three to the fact that “clearly, the incumbents don’t welcome competition. They will continue to make their contrived and disingenuous arguments,” he said. “We realize that this is part of the regulatory game they are determined to play. However, it is not the incumbent carriers that need to be satisfied of our compliance.”
And after having satisfied Industry Canada and altered their structure even beyond that, Campbell and the rest of the Globalive team is now confident all conditions have been met.
Not so, said Bell, Telus and Rogers on Thursday morning.
“These changes do not, indeed they cannot, alter the conclusion that Globalive still does not satisfy the mandatory Canadian ownership and control requirements under section 16 of the Telecommunications Act,” said Bell’s SVP regulatory and governmental affairs Mirko Bibic. “Globalive may not want to hear that, but in our view, that’s the only decision available.”
The company “remains ineligible to operate as a Canadian carrier,” he added.
Bibic also predicted should this ownership structure be approved, all manner of ownership changes would happen where “the Vodaphones and Verizons would next be knocking on your door,” he said, because the incumbents “would seek them out” as investors.
“It would render our foreign ownership laws meaningless.”
The next incumbent up was Telus and VP telecom policy and regulatory affairs Ted Woodhead called the request to consider Globalive a Canadian entity, given where most of its money is coming from “unprecedented” and the structural changes proposed “do not resolve the issue of Globalive being controlled, in fact, by non-Canadians,” he said.
Would the Commission accept a similar financial arrangement if proposed by Canwest or CTV or Rogers? “I think not,” said Woodhead.
Woodhead acknowledged, however, the pressure the Commission is under with this proceeding. The prospect of a new, lower-cost, wireless company has been a siren’s song for many Canadians and Globalive paid more than $440 million for spectrum. Its ownership has also already passed muster with Industry Canada, which operates under the very same Telecom Act the CRTC does.
“I don’t envy you as you enter your deliberations,” he said.
Rogers Communications SVP legal and general counsel David Miller noted again how Globalive Wireless’ Canadian contribution to the business was no cash at all, but was the existing wireline business (Globalive is the Yak brand on the wired side).
“The fact that the equity injected by AAL (the holding company) was in the form of Mr. Lacavera’s wireline business, rather than in the form of fresh capital, means that Orascom contributed virtually all of the capital for the wireless business,” said Miller.
And “the 18% interest rate on the loans also means that Orascom will be entitled to virtually all of the economic rent from the Globalive business for the foreseeable future.”
Globalive’s CFO Brice Scheschuk, in the company’s closing, tried again to assuage Commission concerns, emphasizing the further changes in the arrangements. “Globalive now has the unilateral ability to extend the loan for up to an additional 36 months at the same terms and at the same or better interest rates. This grants to Globalive Wireless an extension to August 5, 2014, of loans with no covenants and no ability for the lender to require additional terms or conditions,” he said.
“The very notion of Orascom calling its own loans when it has the level of economic interest that it does is absurd unless Orascom’s goal is to put the venture into bankruptcy and have Bell Canada offer 50-cents on the dollar for its spectrum. In this particular case, any notion of debt as a control lever is eliminated by the fact that the equity holder who would suffer the largest loss would be the very entity calling the loan.”
However, CRTC chairman Konrad von Finckenstein asked a very interesting question towards the very end of the proceeding when he pondered that Orascom might only be willing to offer such beneficial arrangements and light terms and conditions on the loan is because “you don’t need them because you have control already?”
The CRTC will have a decision on or before October 23rd.
