The Government of Canada's omnibus budget implementation bill (Bill C-38) received Royal Assent on June 29, 2012. Included in the bill were amendments to the Telecommunications Act to eliminate foreign ownership restrictions for certain telecommunications carriers .
The foreign ownership restrictions required telecommunications carriers in Canada that own and operate facilities other than satellites, earth stations and submarine cables to be Canadian-owned and controlled. To be "Canadian-owned and controlled", the voting shares of a carrier must be 80 per cent beneficially owned by Canadians, Canadians must comprise at least 80 per cent of the board of directors of the carrier, and the carrier must not be controlled in fact by non-Canadians. A corporate shareholder of a carrier will be Canadian if Canadians beneficially own at least 66 2/3 per cent of the voting shares and the corporation is not controlled in fact by non-Canadians.
As a result of the amendments to the Telecommunications Act included in Bill C-38, which are now in force, these foreign ownership restrictions no longer apply to carriers with less than 10 per cent share of the total Canadian telecommunications market.
The restrictions will be removed only from telecommunications entities and not from broadcasting entities. In this context, broadcasting entities include cable television distributors and direct-to-home satellite distributors.
The market share threshold will be based upon total Canadian telecommunications revenue as determined by the CRTC. The last monitoring report released by the CRTC referred to annual Canadian telecommunications revenue of $41.7 billion, so carriers could have annual revenue of up to $4.17 billion and be exempt from foreign ownership restrictions. The legislation permits exempt carriers to retain the exemption if they grow beyond the threshold by means other than mergers with, or acquisitions of, other carriers.
The exemption will apply to all telecommunications carriers, and not just wireless carriers. Exempt carriers will include incumbents such as Sasktel and MTS Allstream, and all wireless new entrants (Globalive, Mobilicity, Public Mobile). MTS Allstream has already publicly announced that it expects non-Canadians to consider investments in the carrier with the removal of the restrictions.
The structure of some exempt carriers with significant foreign investors may now allow foreign investors to automatically, or by election, achieve voting power commensurate with their current equity ownership. However, the most significant opportunities will be for non-Canadians seeking to acquire control of incumbents or replacing non-Canadian investors in wireless new entrants. The removal of the restrictions may also encourage broader participation in the upcoming wireless spectrum auctions by non-Canadian entities.
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