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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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