By Wojtek Dabrowski
TORONTO, Oct 29 (Reuters) - Startup wireless carrier Globalive does not comply with Canada's foreign ownership regulations because it is effectively under the control of its Egyptian-based financial backer, Orascom Telecom, Canada's telecom regulator said on Thursday.
The ruling deals a major blow to Globalive, which said it will now delay the launch its mobile phone service.
It had planned the service to compete against the country's established Big Three wireless providers, BCE, Telus Corp and Rogers Communications.
The Canadian Radio-television and Telecommunications Commission said in a ruling that 'Orascom has the ongoing ability to determine Globalive's strategic decision-making activities.'
The regulator said that Orascom owns 65.1 percent of Globalive's equity, has entered into a strategic technical arrangement with Globalive, and controls and holds the Wind brand under which Globalive had been set to operate. It also holds the overwhelming majority of Globalive's outstanding debt.
'The commission finds that Globalive is controlled in fact by Orascom, a non-Canadian,' the CRTC said, and is therefore not currently eligible to operate as a telecoms carrier.
Under federal regulations, telecom companies must be majority-owned and controlled by Canadians.
Globalive spent more than C$442 million ($413.1 million) on buying wireless spectrum in a government auction held last year. Orascom provided Globalive with financial backing that is estimated to total more than $500 million.
'We are ready to bring competition to the market,' Ken Campbell, chief executive of Globalive's Wind Mobile, said in a statement late on Thursday. 'We will be evaluating our options on how to proceed.'
Rogers, BCE and Telus had argued that Globalive's structure and Orascom's investment mean the company is effectively controlled by foreigners.
'I don't think the CRTC had any choice,' said Ken Engelhart, vice-president of regulatory affairs at Rogers. 'This set of facts is so clearly indicating foreign ownership that I don't think the CRTC could have done anything different.'
Telus Corp had a similar response and added it thinks the decision does not hamper competition on Canada's wireless landscape.
'It is important to note that this decision does not prevent Globalive or any other new wireless company from competing in Canada or accessing capital,' said Michael Hennessy, Telus's senior vice-president of regulatory and government affairs.
'It merely means they must abide by Canada's laws.'
To try to appease regulatory concerns about the influence that Orascom could wield over Globalive, the carrier altered its shareholder agreement with Orascom and made other changes to its structure.
Globalive also said that the federal Industry Ministry had found its shareholder arrangements to be in compliance with Canadian ownership rules.
($1=$1.07 Canadian)
(Reporting by Wojtek Dabrowski; editing by Rob Wilson) Keywords: GLOBALIVE/ (wojtek.dabrowski@reuters.com; +1-416-941-8009; Reuters Messaging: wojtek.dabrowski.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
TORONTO, Oct 29 (Reuters) - Startup wireless carrier Globalive does not comply with Canada's foreign ownership regulations because it is effectively under the control of its Egyptian-based financial backer, Orascom Telecom, Canada's telecom regulator said on Thursday.
The ruling deals a major blow to Globalive, which said it will now delay the launch its mobile phone service.
It had planned the service to compete against the country's established Big Three wireless providers, BCE, Telus Corp and Rogers Communications.
The Canadian Radio-television and Telecommunications Commission said in a ruling that 'Orascom has the ongoing ability to determine Globalive's strategic decision-making activities.'
The regulator said that Orascom owns 65.1 percent of Globalive's equity, has entered into a strategic technical arrangement with Globalive, and controls and holds the Wind brand under which Globalive had been set to operate. It also holds the overwhelming majority of Globalive's outstanding debt.
'The commission finds that Globalive is controlled in fact by Orascom, a non-Canadian,' the CRTC said, and is therefore not currently eligible to operate as a telecoms carrier.
Under federal regulations, telecom companies must be majority-owned and controlled by Canadians.
Globalive spent more than C$442 million ($413.1 million) on buying wireless spectrum in a government auction held last year. Orascom provided Globalive with financial backing that is estimated to total more than $500 million.
'We are ready to bring competition to the market,' Ken Campbell, chief executive of Globalive's Wind Mobile, said in a statement late on Thursday. 'We will be evaluating our options on how to proceed.'
Rogers, BCE and Telus had argued that Globalive's structure and Orascom's investment mean the company is effectively controlled by foreigners.
'I don't think the CRTC had any choice,' said Ken Engelhart, vice-president of regulatory affairs at Rogers. 'This set of facts is so clearly indicating foreign ownership that I don't think the CRTC could have done anything different.'
Telus Corp had a similar response and added it thinks the decision does not hamper competition on Canada's wireless landscape.
'It is important to note that this decision does not prevent Globalive or any other new wireless company from competing in Canada or accessing capital,' said Michael Hennessy, Telus's senior vice-president of regulatory and government affairs.
'It merely means they must abide by Canada's laws.'
To try to appease regulatory concerns about the influence that Orascom could wield over Globalive, the carrier altered its shareholder agreement with Orascom and made other changes to its structure.
Globalive also said that the federal Industry Ministry had found its shareholder arrangements to be in compliance with Canadian ownership rules.
($1=$1.07 Canadian)
(Reporting by Wojtek Dabrowski; editing by Rob Wilson) Keywords: GLOBALIVE/ (wojtek.dabrowski@reuters.com; +1-416-941-8009; Reuters Messaging: wojtek.dabrowski.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.