OTTAWA – This morning at 9 a.m., new wireless carrier Globalive will present to the CRTC its new corporate structure, governance, shareholder rights and financing arrangements.
After a two-day hearing last week into the company’s ownership and control, which was spurred on by the incumbent operators’ complaints, Globalive (which does business on the wired side under the Yak brand) has heeded the Commission’s stated fears and believes the alterations will soothe those concerns, allowing its to launch its wireless services under the Wind brand name before Christmas.
“We are confident that these changes will satisfy the CRTC,” said Anthony Lacavera, chairman of Globalive Wireless, in an interview with Cartt.ca.
He added that the Commission’s concerns were “no big surprise and that’s why we have been able to make the changes immediately.”
What Lacavera is happiest about is the Commission has stuck to the decision deadline it set for this file of October 23rd, “despite the incumbents’ trying to push that decision out,” he said.
And as of right now, the company is in the midst of its network build, targeting Toronto, Vancouver, Calgary, Edmonton and Ottawa.
“The network is at various stages of completion and we’ll only launch in a city if we feel the network is at least as good as what the incumbents have, because we really only have one shot to show that we can be a quality provider,” he said.
While the Globalive Wireless ownership structure had previously been approved by Industry Canada, which operates under the same rules as the CRTC, the company and its shareholders had to agree to make further changes to address Commission concerns about its compliance with Canadian ownership and control rules.
As we’ve reported previously, massive Egypt-based operator Orascom Telecom (about 78 million subs world-wide) is providing much of the funding (and the Wind brand name) for Globalive and Lacavera says its owner, Naguib Sawiris, is fully on board with the structural changes.
Those alterations include, says the company:
• Corporate structure: The corporate structure has been simplified by eliminating an intermediate holding company that was originally included in the structure for financing purposes.
• Governance: Changes will be made to the boards of Globalive Wireless and its parent corporation to give greater board representation to the Canadian shareholder and to ensure additional representation by independent Canadian directors. Anthony Lacavera will become the chair of the boards of Globalive Wireless and its holding company.
• Shareholder rights: Orascom Telecom (OT) has agreed to relinquish certain rights it had held under applicable shareholder agreements. For example, OT will no longer have a right to compel the Canadian shareholder, AAL, to sell its shares in the event of an offer from a third party to purchase 50% or more of its shares.
• OT’s rights to veto certain corporate changes have also been removed or reduced. OT’s call right to compel AAL to sell its shares to OT’s designee has been removed altogether.
• Lastly, a mechanism has been established to protect both major shareholders in the event that either wishes to sell its shares after January 1, 2013.
As for the financial arrangements, OT has agreed to remove all positive and negative covenants and all indemnities from its loan agreements with Globalive Wireless. Globalive Wireless has been given the option to extend its loans from OT for up to three years from the current maturity date at the same or lower interest rates.
Lacavera says most of these switches had been contemplated by Globalive and its backers previously anyway. “We had discussed all the potential outcomes going back to even prior to the auction,” he told Cartt.ca.
The one thing he said the company is remaining firm on is “the whole idea of additional financing and how we would raise it.
“We have been out there looking for additional financing – both equity and debt – and it’s critically important for our business that we are able to raise that financing on commercial terms,” added Lacavera. “What I mean by that is we can not have a situation develop where the CRTC requires us to accept financing by a certain date or under certain terms… because the entire investment community is going to say, ‘well, you have to take our money, so here’s the terms.’ And that could seriously affect our business plan and the outcome of the business overall.”
When asked if the rules requiring Canadian telcos to be domestically owned have had the unintended consequences of limiting wireless competition (since the pool of Canadian-backed capital required to launch a new national wireless carrier is so shallow) Lacavera acknowledged the role of the CRTC and Industry Canada to protect Canadian heritage but added: “With this market being one of – if not the – least competitive wireless markets in the world, I think it really hasn’t gone the right way so far.
“Empirically, that would suggest there has been an application of rules that has limited competition,” he said. “We need to recognize it is not a very deep capital market for media and telecom in Canada. It is for mining and resources, but not for media and telecom.
“So we need to look at how we can implement a policy framework that, while protecting Canadian content and Canadian heritage, still permits foreign capital to bring our media and telecom industries up to global standards,” added Lacavera.
“On the other hand, I was successful at bringing Orascom into the market with, of course, eyes wide open on these rules because the great thing about Canada is that it’s a totally transparent jurisdiction and everything is right on the table in terms of what you have to do to operate here.”
And one could say that if Orascom can run a wireless company in North Korea (as it does), backing an operation in Canada has to be a little easier.
