On Wednesday, March 14, 2012, the federal government announced
its proposed changes to the foreign ownership requirements for
Canadian telecom carriers.
The government will lift the foreign ownership restrictions
completely for all telecom carriers with less than a 10% share of
the national telecom market. However, as no changes have been
proposed regarding the foreign ownership restrictions relating to
Canadian broadcasting licensees, integrated carriers holding
broadcasting licences will still be subject to the foreign
ownership restrictions imposed by the Broadcasting Act.
The proposed changes will therefore have the greatest impact on
Canadian carriers which do not hold broadcasting licences. For
those types of carriers, there will no longer be any restrictions
on foreign direct investment in the voting shares of Canadian
carriers, subject to any issues that may arise under the
Investment Canada Act, which applies generally to foreign
investments in Canada.
Prior to this announced change, foreign investors were
restricted to direct and indirect investment of 46.7% in the voting
shares of Canadian carriers. Moreover, under the old rules,
potential foreign investments were also scrutinized under a
"control in fact" test that looked beyond the ownership
of the voting shares to see if actual control rested with
non-Canadians through the use of other control levers such as
trade-mark licensing agreements, consulting agreements, minority
shareholder veto powers and undue influence over the board of
directors. Such issues were at the heart of a CRTC ruling regarding
Globalive Wireless Management Corporation (now known as Wind
Mobile) which rejected the Globalive structure and found that
Globalive was not eligible to operate in the Canadian wireless
market. For further information on Globalive, see our previous
October 2009 and
The announcement also addressed the auction rules for the highly
coveted 700 MHz spectrum. In the Advanced Wireless Spectrum Auction
in 2008, Industry Canada had set aside certain portions of the
spectrum which was being auctioned for new entrants. Since that
time, the new entrants have complained that their entry into the
wireless market has been hampered by a variety of issues, including
the lack of access to foreign capital. By allowing new entrants
unlimited access to foreign capital, Industry Canada has partially
met the concerns of the new entrants. In the announcement, the
government stopped short of granting a set-aside as it did in the
2008 AWS auction. In fact, each incumbent will be limited to
winning one of the four main blocks of spectrum with no
restrictions on the remaining blocks.
The proposed changes will require amendments to the
Telecommunications Act as well as consequential amendments
to various regulations governing wireless and wireline carriers.
The government has indicated that such amendments will be passed
before the 700MHz auction commences, which is scheduled to occur in
the first half of 2013.
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