OTTAWA – Orascom Telecom announced Wednesday it has withdrawn its application for Investment Canada Act approval of its acquisition of control of Wind Mobile Canada.
Back in January, Orascom announced it would take full control of the nascent Canadian wireless company in a deal which would have seen company CEO Tony Lacavera transfer all of his shares to the foreign owner and resign as CEO. The agreement followed changes to the foreign investment rules by the federal government that frees up telecom companies with less than 10% market share to have no restrictions on foreign ownership. VimpelCom subsidiary Orascom owns 65.1% of the carrier and was an original financial backer of Wind Mobile.
Industry Canada did not rule on the application and so Orascom Telecom said today the decision to withdraw follows a review process and discussions with the government of Canada and that “it continues to be interested in consolidating its interest in Wind Mobile Canada and in working with the government of Canada to achieve this goal.”
So what does all this mean for Wind, its subscribers and its CEO? “It’s another speed bump in a long road,” Lacavera told Cartt.ca in an interview. But, “it doesn’t change the business operations in any way and it doesn’t change the business opportunity in any way… With this withdrawal, that deal is dead, so we’re going to have to sit down and figure out something else. We want to find a solution that works for everyone.”
Lacavera is in an unusual position, running and growing Wind, a company from which he agreed to step down, while also openly searching for funding to purchase control of the company from its foreign parent. That meant the CEO – and Lacavera says he wants to remain CEO of Wind – could not be a part of VimpelCom’s search for a new owner.
While Lacavera wouldn’t comment, it’s a bit of an open secret in the industry that he was teaming up again with former Orascom owner Naguib Sawiris’s Accelero Capital to try and pry Wind away from VimpelCom (and the two may well still succeed at that). Accelero just agreed to purchase Allstream from MTS, so that Sawiris seems committed to the Canadian market and Wind, once you remove the debt from its spectrum purchases and handset subsidies, is reportedly nearing break-even from an operating standpoint.
Lacavera added that with all that has happened in the last year, where foreign ownership has been loosened, the federal government has committed itself to having a fourth carrier everywhere, Industry Canada has said it will not allow undue spectrum concentration and Telus was blocked from buying Mobilicity, “the whole picture has improved for Wind, frankly,” he explained.
So much so, Lacavera believes, that other foreign telcos may think there is an entry opportunity here, now. While he insists he has no insight into VimpelCom and its potential wooing of other foreign telecom brands because he has been one of the potential Wind bidders, “the reality is that the U.S. majors are the ones with the brand recognition in Canada, they have a lot of cross-border synergies with customers who have operations on both sides of the border, and they’ve been here before.”
And to those who doubt the veracity of the reports that the likes of Verizon or Vodafone, Orange or Deutsche Telecom could be looking to invest? “I think what everyone is missing is an auction has always been a logical entry point into a market. Orascom entered in ’08 with the AWS auction,” said Lacavera, referencing the 700 MHz auction now scheduled for January 2014. There are assets for sale, at least one (Mobilicity) quite distressed, more spectrum will always be needed, and an auction is coming (with another, the 2.5 GHz, right after). “There’s a play here,” he added. “With these policy decisions… the framework for new third party investment, including a strategic investment from a U.S. major or another major operator from around the world, is very, very possible.”
However, there is an awful short time frame left for any company to make a move as initial deposits – the expensive commitments to participate in the auction – are due September 17th, 2013 and, acknowledged Lacavera, despite all the noise about the potential for entry into Canada by foreign telecom brands, “it doesn’t mean they’re going to do anything. It could be they’re just looking.”
