‘Regulatory protection’ slowing Canadian telcos’ expansion abroad: Lacavera

KANATA, ONT.—Globalive Wireless Management Corp. would reapply to the CRTC for approval of its Canadian operations if it loses its fight in court—but company chairman Anthony Lacavera says he thinks changes to the Telecommunications Act are on the way. “The idea is, hopefully, we win,” Lacavera said Wednesday in a speech to the Canadian Telecommunications Consultant Association’s annual conference in Kanata, referring to a court appeal to be heard this month before the Federal Court of Appeal. “If we were to lose, then we would of course appeal. We would expect the government to appeal as well to the Supreme Court. If the Supreme Court says, ‘We don’t want to hear it’ or the Supreme Court says, ‘You lose,’ then we would actually go back to the CRTC and be reapplying, potentially.” Lacavera said that today Globalive could “more robustly” demonstrate its Canadian ownership and control than in 2009, when the CRTC ruled that the company was controlled “in fact” by a foreign company and ineligible to operate as a Canadian telecommunications carrier. “We were using a lot resources from Orascom and from Wind in the early-going to get the business off the ground as quickly as we did,” he said at the conference. Orascom owns a majority Globalive’s debt, which in large part led to the CRTC to conclude the company did not meet the Canadian ownership and control requirements in the Telecommunications Act. But in December 2009 the federal Conservative government issued an order-in-council that overturned the commission’s decision, and Globalive launched wireless services in Canada under the Wind Mobile brand. Last February, the Federal Court overturned the government’s decision. The federal government’s appeal, which Globalive has joined, will be heard this month in Ottawa. Lacavera told the conference that to compete in the 2008 wireless spectrum auction, his company needed “more capital than we could shore up on Canadian soil,” which is why he secured a partnership with Egyptian telecommunications giant Orascom. He added that the Telecommunications Act deserves some scrutiny given the CRTC's and the government’s differing opinions, and said he blames the act’s control-and-fact test of foreign ownership. “People ask me if I’m upset with the CRTC,” he said. “No, I’m not upset with the CRTC at all. They used all the facts and they came to their decision. Because it’s a subjective test, there’s no way for me to argue their decision was wrong. All I can say is I disagree with that decision and we believe we are in compliance with the control-and-fact test, and the government agrees with our assessment.” Following the speech, Lacavera told The Wire Report that he would like to see the government simplify the test and relax the act’s foreign ownership rules. Industry Minister Tony Clement previously laid out three options for amending the act: abolishing all restrictions; increasing the limit of foreign investment to 49 per cent; and eliminating the restrictions for companies whose market share is less than 10 per cent. Right now, the Telecommunications Act limits foreign investment to 20 per cent direct investment in the carrier and 33 per cent indirect investment in the holding company. “The foreign investor is still a minority,” he said. “Yes, they have more influence but they’re still a minority and that’s the big barrier. Foreign investors put in all this capital but they can’t actually protect their investment. It really is just not reasonable.” Raising the limit to 49 per cent would not be sufficient, he said. He proposed a phased-in approach starting with no restrictions for companies with 10 per cent market share or less and moving toward no foreign ownership limits. “We believe the best scenario is sort of a of the 10 per cent and the totally open, where we start with the 10 per cent,” Lacavera said in an interview. He said he hopes the newly elected majority Conservative government will move “expeditiously” toward amending the act within the next 12 months. “All aspects of this question and this debate need to be had in full, regardless of whether it’s a minority or a majority government. I think the Conservatives will take the approach Minister Clement has stated he will take—with a thorough debate and review of the situation,” Lacavera said. “But the goal would be to have something in place before the upcoming the 700 MHz auction.” A research note by UBS Investment Research analyst Phillip Huang published Tuesday predicted a government decision on telecom foreign ownership, as well as rules for the 700 MHz spectrum auction, before the end of the year. “With the Conservatives taking a majority in Parliament, we believe they can now push for relaxation of telecom foreign ownership restrictions without support from opposition parties,” the note said. “We continue to believe that relaxing restrictions for telecom operators with less than 10% market share will likely be favoured.” Lacavera also said Wednesday that regulatory protection has created a lack of incentives for Canadian companies to expand overseas, something he says they are quite capable of doing. “Regulatory protectionism has made it a disincentive for them to take international risk. ‘Why do that when we have a big shield up around us and we can just dominate where we are and we don’t have to worry about buying a company in Canada?’” he said. “We think changes to will help encourage Canadian incumbents to take their best practices and go beyond our borders, and I think that they will be really successful.” mburgess@thewirereport.ca

‘Regulatory protection’ slowing Canadian telcos’ expansion abroad: Lacavera

News | May 4, 2011

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