Globalive's launch put in doubt after CRTC says it's not Canadian owned

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," said Globalive chairman Anthony Lacavera.

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

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

The CRTC said 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, a sticking point for the CRTC.

"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.

Telecom analyst Eamon Hoey said Globalive will have to restructure itself to get into the cellphone business.

"It all comes down to that they have too much debt," said Hoey of Hoey Associates Management Consultants Inc.

He called the CRTC's decision "anachronistic."

The CRTC said 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," the CRTC said.

"The concentration of debt and equity in the hands of a single entity can create an opportunity for influence."

While the CRTC said Globalive has made changes to its corporate structure and documents to address concerns, more changes are still necessary to reduce Orascom's influence.

"These changes related to the composition of the boards of directors, liquidity rights and the threshold for veto rights."

The CRTC also said an ability to obtain financing from other parties may also be relevant to the issue of who's controlling Globalive.

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.

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