Originally published in Blakes Bulletin on
Communications, October 2009
In a widely anticipated decision, Canada's national
communications regulator, the Canadian Radiotelevision and
Telecommunications Commission (the Commission), announced on
October 29, 2009, that Globalive Wireless Management Corporation
(Globalive) is controlled in fact by non-Canadians and that
Globalive is not eligible to operate as a carrier in the Canadian
wireless market, as currently structured. Despite the rejection,
the decision leaves open the door for Globalive to return to the
Commission with an amended governance and financial structure.
While the decision notes the numerous concessions made by
Globalive during the course of the proceeding and several
additional changes to the governance structure that the Commission
proposed in its decision, the major stumbling block was the fact
that Orascom Telecom, a strategic investor, held virtually all of
the debt and 65% of the equity.
Globalive was a successful bidder in the Advanced Wireless
Services Spectrum Auction. As a result of that auction, it and a
number of other new entrants were granted spectrum licences by
Industry Canada in 2009. However, in order to operate as a Canadian
carrier, Globalive is also subject to an ownership and control
review by the Commission under Canada's Telecommunications
Act. In order to be Canadian owned and controlled, a
corporation operating as a telecommunications common carrier in
Canada must meet the following requirements:
at least 80% of its board of directors must be individual
Canadians must own at least 80% of its voting shares; and
the corporation must not be otherwise controlled in fact by
in addition, at least two-thirds of the voting shares of a
Canadian carrier's parent company must also be held by
The test for control in fact is dependent on the particular
facts of each situation and, therefore, the control in fact
assessment is highly subjective and presents the greatest
difficulties in practice. In addition, a wireless carrier must also
meet the same foreign ownership requirements pursuant to
Canada's Radiocommunication Act in order to be granted
a spectrum licence by the Minister of Industry. In other words, a
public mobile wireless carrier such as Globalive must undergo two
separate foreign ownership assessments: one by the Minister of
Industry and the other by the CRTC, to ensure that it is not
controlled by non-Canadians.
Orascom Telecom is an international wireless telecommunications
company, controlled by Weather Investments. In 2008, Orascom
Telecom decided to invest in Globalive by partnering with AAL
Telecom, a Canadian telecommunications service provider owned and
controlled by Mr. Tony Lacavera, a Canadian entrepreneur.
Orascom Telecom and Weather Investments have over 100 million
wireless customers in various countries around the world, including
Greece, Italy, Algeria, Egypt, Pakistan, Tunisia and Bangladesh.
Due to its size and influence, Orascom Telecom has asserted to be
able to purchase telecom equipment from Alcatel-Lucent at prices
that are 30% less than France Telecom can negotiate. The wireless
revenues of Orascom and its affiliates in 2008 were $5.3-billion.
The wireline revenues of Globalive in 2008 were just over
The decision is by no means the final word in this saga. As the
Commission notes in the decision, the changes that were made by
Globalive during the hearing, coupled with the additional changes
required by the Commission in the decision, would be sufficient to
overcome the remaining concerns that the Commission had
the fact that Orascom holds 65% of the equity;
Orascom's influence over strategic decisions arising from
the Technical Services Agreement; and
the access to an established WIND trademark.
However, Globalive would need to be able to arrange either
independent debt financing or additional Canadian equity financing
before the Commission would accept the structure.
Blakes represented one of the incumbent wireless operators in
the Globalive proceeding.
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