GATINEAU – In what could be described as a case of “turnabout is fair play”, Globalive has formally questioned the Canadian bona fides of Telus and has asked the CRTC to hold a public hearing on the matter.
Globalive (which, of course, does business under the Wind brand) says that Telus’s recent aborted attempt to convert to a single share structure blew the lid off of the Vancouver-based telco’s non-compliance with the country’s telecom ownership rules and that it may well be in breach of the Telecom Act. So, a full public hearing must be held to determine whether or not Telus is Canadian enough.
“Only by doing so, and establishing whether Telus is in compliance and – whether it is or is not – what is acceptable to the Commission in this regard, will the Commission create an informed ‘substantive precedent and a level of much needed certainty to all industry players. [A] public decision would afford industry players and the general public with a better understanding of the Commission’s interpretation of the [Ownership Rules]’,” reads the Globalive submission, quoting Telecom Regulatory Policy 2009-428.
“As Telus wrote when it successfully persuaded the Commission to undertake a full public review of Wind’s compliance with the Ownership Rules in 2009, “[f]airness dictates that all market participants have the benefit of knowing what corporate, capital and debt structures, as well as ancillary arrangements and agreements, are permissible under section 16.”
Readers may recall that when Wind came to market in Canada in 2009, Telus and Public Mobile backed lengthy regulatory and legal proceedings challenging Globalive’s Canadian ownership and control (winning a round at the CRTC and another at the Federal Court, but losing at Federal Cabinet, on appeal and, in the end, at the Supreme Court). Public and Telus complained that while Globalive’s executive and board members were predominantly Canadian, its financing was nearly all foreign capital, meaning its structure violated the laws which say telecom companies in Canada must be Canadian owned.
Eventually, the saga of “Is Globalive Canadian?” ended with a ruling from the Supreme Court of Canada saying it would not hear a final appeal of a lower court decision affirming Globalive’s Canadian-ness.
So perhaps one can understand why Globalive now wants to go over just who owns Telus with a fine-toothed comb.
According to the Globalive submission sent to the Commission Wednesday, Telus’ own shareholder reporting shows that nearly half of the owners of the company’s voting shares are not located in Canada. “Ownership Rules require that a ‘qualified corporation’ that acts as a holding company for a Canadian carrier – such as Telus Corporation – must have at least 66 2/3% of its outstanding voting shares beneficially owned and controlled by Canadians. And thus, of course, compliance with the Act requires that no more than 33 1/3% of the voting shares of Telus Corporation may be held by non-Canadians,” it reads, quoting regs.
Telus’ shareholder reports “show that approximately 48% of the beneficial holders of the voting shares of Telus Corporation are located outside of Canada,” continues the Globalive letter.
“Moreover, this apparent breach of the Act seems to have continued over an extended period of time, which in Wind’s submission is not only evidence of Telus’s non-compliance with this ‘bright-line’ element of the Ownership Rules, it is also suggestive of a cavalier disregard by Telus of the importance of the Ownership Rules and of having processes in place to ensure ongoing compliance.
“As we make clear in this application, this information should clearly trigger a full public review by the Commission of Telus’s compliance with the Act,” the submission continues. “That Telus seems to be taking no action to ensure compliance, and also that the Commission does not appear to be taking any action in this regard, is confusing.”
Besides, notes the application, the Telus share restructuring proposal (a one-for-one share conversion from voting to common shares) would limit the company’s effective access to foreign capital, something Telus has often indicated it needs.
“Telus has consistently lobbied to reduce or remove the Ownership Rules that apply to it, and so it is somewhat surprising, since pursuant to those rules non-voting shares may be owned by non-Canadians, that Telus is so actively seeking to eliminate its class of non-voting shares even though the Ownership Rules remain applicable to Telus. Simply and straightforwardly, the Telus share restructuring plan will significantly reduce the number of its shares that could be owned by foreign investors.15 It is puzzling to Wind why Telus would propose (and actively pursue) a plan to effectively reduce its access to foreign capital.”
Since we received the CRTC submission rather late Wednesday, Telus responded early this (Thursday) morning to our report on the Globalive submission and attacked Globalive’s methodology, saying the claims have no merit.
"Globalive’s allegations are completely unfounded and misleading,” a Telus spokesperson told Cartt.ca in an e-mailed response. “Telus has been and continues to be fully compliant with foreign ownership restrictions, and have our own control processes in place to ensure we remain compliant.”
Telus says the shareholders report used by Globalive to support the statements in its submission to the CRTC relies on the postal or zip code of an account rather than actual residency, and is not intended to be used to determine foreign ownership compliance. “So if you have an investor who is temporarily in the U.S. for work or who invests through a U.S. institution they may show up as having a U.S. address in this report,” said the spokesperson.
The shares covered in the reports are materially different than those on the Telus share register, the company added.
“Telus has comprehensive control processes in place and our transfer agent updates our shareholder registry every day and obtains declarations from investors of their residency. That is a far more accurate way to determine the residency of an investor.”
The spokesperson added that Telus filed its annual report and statutory declaration with the CRTC on May 9th certifying its compliance with the ownership and control restrictions.
