TORONTO – Despite the wild, scary ride the global economy has been taking us all on this year, wireless newcomer Globalive is well-financed and going full speed ahead, said its CEO, Anthony Lacavera, an investors conference in Toronto last week.
Recognizing that “the market would not allow external financing right now,” Lacavera told the Scotia Capital Markets Telecom and Technology investors day that Globalive’s wireless venture is well-funded by co-owner Orascom – a global wireless player based in Egypt with over 77 million wireless subscribers.
Globalive can count on up to $700 million from its corporate partner, said Lacavera, with a substantial amount of network build financing to come soon from its vendor. “We’re very near to making our vendor partnership announcement, which will happen over the next one or two weeks,” he said.
“That will round out the perspective on how we will at least get the first two or three years under our belt.” Globalive will spend about $1.1 billion in capex over its first five years as a wireless provider, said Lacavera.
Globalive (which offers the Yak long distance product, VOIP and third-party ISP services to about a million Canadians and has annual revenues in the $125 million range) plans on scooping up about 1.5 million wireless subs in the first three years of operation – which will begin in the fall of 2009, said the CEO.
“We will get our fair share of new market growth and our fair share of customers coming over, particularly of the flanker brands of the incumbents… The flanker brands (Bell’s Solo, Rogers’ Fido and Telus’ Koodo) really are exposed to us coming into the market,” said Lacavera.
Indeed, those flanker brands have already responded by ditching such charges as system access fees. In fact, Koodo launched just this year as a low-cost, no-contract brand.
However, Lacavera agreed that his wireless company will be exposed to churn as customers grow more affluent and who may search for bundled discounts, leaving their original low-cost cell provider behind. “We do definitely have exposure to churn on that front. We do have a limited ability to bundle,” he added, pointing to the company’s ISP, long distance and VOIP services as potential bundle-mates, “but we don’t have any television.”
“We will start to lose the customers to the quad play,” the CEO said.
So, for now, he is attempting to forge partnerships with the cable companies who are also new to the wireless game but who each bought substantial spectrum (Shaw, Videotron and EastLink) during the summer’s auction.
“I really believe there’s an opportunity for us to partner with cable companies because I don’t believe we’re a competitive threat to them.
“They have an obvious quad play opportunity. We don’t have that opportunity.. at least in the short term. That isn’t to say we’re not going to get into TV and video in the long term.”
Still holding back the company for now, however, is the fact it doesn’t have its spectrum “in hand” as yet (Globalive Wireless is still awaiting final word from Industry Canada on its ownership structure where Orascom owns 65% of the equity but less than 50% of voting control, and incumbents have complained) and roaming deals with Rogers, the current GSM carrier, are likely “to end up in arbitration relatively soon,” predicted Lacavera.
Industry Canada told the incumbent operators that their networks must be open to the roaming of competitors as they start up – but all newcomers will use Rogers to start with, as it has the only GSM network (really, the global standard) in the country.
Rogers Communications CFO Bill Linton said as much about roaming in his own presentation at last week’s conference.
“There’s going to be a debate… that will probably end up in arbitration,” said Linton, about not only pricing, but what services are supposed to roam for example, and how far new competitors have to go before demanding roaming compliance.
“There are lots of hurdles to get over between the idea of a competitor putting up three sticks in Toronto and then getting the benefit of all of our coverage,” said Linton.
