Globalive not Canadian owned, controlled to launch as new cellphone player

By Luann Lasalle, The Canadian Press

MONTREAL - The launch of Globalive as a new national cellphone company was put in doubt Thursday after the CRTC ruled the company isn't Canadian enough.

The Toronto-based company which hopes to operate under the WIND Mobile banner, wants to be Canada's fourth major wireless carrier and compete with Rogers, (TSX: RCI-B.TO), Bell (TSX: BCE.TO) and Telus (TSX: T.TO).

"Having already received approval from Industry Canada, we are extremely disappointed that the CRTC has come to a different conclusion," Globalive chairman Anthony Lacavera said.

"This is a bad day for Canadian consumers. Canadians deserve competition in wireless and this decision represents a major step backwards."

Ken Campbell, CEO of WIND Mobile added, "We will be evaluating our options on how to proceed."

The CRTC ruled Thursday that Globalive currently doesn't meet the Canadian ownership and control requirements to operate as a telecommunications carrier.

Egyptian telecom company Orascom owns 65 per cent of Globalive, a structure accepted by Industry Canada when its licence was granted last March. Orascom also holds much of Globalive's debt.

"The commission finds that Globalive is controlled in fact by Orascom, a non-Canadian," the CRTC said in a written decision.

"Given Orascom's equity interest in Globalive, such a high level of debt in the hands of a non-Canadian is unacceptable."

Telus applauded the decision and said it upholds Canadian regulations on foreign ownership and control.

"We don't think the CRTC had any choice or latitude under the laws of Canada to make any other decision," said Michael Hennessy, senior vice-president of regulatory and government affairs.

Telus noted the decision doesn't shut out Globalive from the cellphone market.

"It merely means they must abide by Canada's laws," Hennessy said.

The CRTC also said that Orascom has the ongoing ability to determine Globalive's strategic decision-making activities.

"The commission finds that it cannot conclude that Globalive is not controlled in fact by a non-Canadian, to wit Orascom."

Rogers, Bell and Telus had said Globalive was breaking the Telecom Act because it was under foreign control.

If the CRTC had approved that Globalive was sufficiently Canadian to get into the cellphone market, it was expected that Globalive would launch in Calgary and Toronto next month.

RBC Capital Markets analyst Jonathan Allen noted Wednesday that if Globalive was denied, then lower competition would be a positive for shares of Rogers, Bell and Telus.

Globalive was aiming for a presence everywhere in Canada but Quebec.

Lacavera had maintained the company was "fully compliant" with foreign ownership and control regulations after making changes to its structure that restricts Orascom's influence on its operations.