Canada: CRTC Follows The Money, Concludes Globalive Does Not Satisfy Canadian Ownership And Control Requirements

Canada's federal telecommunications regulator, the Canadian Radio-television and Telecommunications Commission (CRTC or Commission), has recently released the stunning decision that Globalive Wireless Management Corporation (Globalive) is not currently eligible to operate as a telecommunications common carrier (TCC). According to the CRTC, Globalive, which recently purchased 30 advanced wireless spectrum licences at auction from Industry Canada, may not act as a TCC because it does not meet the requirements set out in section 16 of the Telecommunications Act (the Act).

The decision is stunning because the conventional wisdom to date has been that parties found to be offside foreign ownership and control requirements would be given an opportunity to remedy any offending aspect of their business in order to achieve CRTC approval. In fact, the Globalive proceeding before the CRTC played out in such a manner, with Globalive proposing changes during the course of the public hearing to address express or implied concerns raised by the CRTC Commissioners and intervening parties. Despite the effort and an approach consistent with past practices, the CRTC found that Globalive has not met the Canadian ownership and control requirements, a first in the case of a prospective TCC.

Section 16 of the Act and its associated regulations set out the framework within which Canadian TCCs are eligible to operate (the Ownership and Control Regime). The Ownership and Control Regime requires that TCCs be Canadian-owned and controlled. Specifically, the Ownership and Control Regime sets out certain quantitative benchmarks that a TCC must meet, and also provides that a TCC must "not otherwise [be] controlled by persons that are not Canadians". Control, for this purpose, means control in any manner that results in control in fact. Thus, the Ownership and Control Regime sets out both a de jure and a de facto control test. In practice, the question of de facto control is usually the principal issue considered by the CRTC and is assessed in light of the applicable personal, financial, contractual and/or business relationships, as well as any other considerations considered relevant to the determination of control.

In July of this year, the CRTC reconsidered its method of reviewing compliance under the Ownership and Control Regime. Previously, the CRTC had conducted confidential hearings involving only the potential carrier and the Commission. This method did not result in a public record or public release of a decision. In an attempt to add transparency to the process, the CRTC established a new method of reviewing eligibility under the Ownership and Control Regime. This method assigns matters to one of four types of hearings depending on the features of the ownership and governance structure to be considered.

A Type 1 hearing is similar to the old method of determination and is conducted on a confidential basis between the Commission and the applicant. Type 2 hearings are also conducted on a confidential basis between the Commission and the applicant, but will result in a public decision with reasons. Type 3 hearings are public hearings with multi-party proceedings, whereby third party submissions will be limited to written submissions. A Type 4 hearing is the most public of the four types and involves a public multi-party hearing in which third parties provide both written and oral submissions. Type 4 hearings are reserved for those exceptional instances where the CRTC determines that a complex and novel ownership and governance structure is likely to provide precedential value.

The Commission's review of Globalive's ownership and governance structure was determined by the CRTC to be a Type 4 hearing, due to the complexity of Globalive's corporate structure and financing arrangements. It was also determined that third-party submissions would assist the Commission in making its ruling. As a result, over 22 parties applied to be a part of the hearing, including Shaw Communications Inc., three of which participated in the oral phase: Rogers Communications Inc., Bell Canada and TELUS Communications Company.

As is invariably the case when the CRTC examines issues of control, Globalive had structured its ownership and board composition so as to meet the quantitative tests prescribed by the Ownership and Control Regime (i.e., the de jure test of control). Thus, the principal issue before the CRTC was whether Globalive was otherwise controlled by persons that were not Canadian.

Globalive's ownership and governance structure

Initially, Globalive's proposed corporate structure involved a two-tier holding company structure. Globalive's immediate parent was Globalive Canada Holdings Corp. (Globalive Holdco), which was in turn owned as to a 66.67% voting interest by Globalive Investment Holdings Corp. (Investment Holdco) and as to a 33.33% voting interest by Orascom Telecom Holding (Canada) Limited, an indirect subsidiary of Orascom Telecom Holding S.A.E. (Orascom), one of the world's largest telecommunications carriers. Investment Holdco was in turn owned as to a 66.68% voting interest by AAL Telecom Holdings Incorporated (AAL) and as to a 32.02% voting interest by Orascom, with the remaining voting equity in the hands of other shareholders. Orascom also held non-voting shares. AAL is the holding company of Anthony Lacavera, a Canadian and Globalive's Chairman and CEO. Under the terms of the various governance agreements that were in place, Orascom was entitled to two nominees (out of five) to the board of Investment Holdco, and three nominees (out of seven) to the board of Globalive Holdco. These agreements also provided Orascom with a number of veto rights, including vetoes over the disposition of more than 5% of Globalive's assets or the incurring of expenditures in excess of $10 million. Orascom also held a call right over AAL's shares in Investment Holdco and a drag-along right that could, in some circumstances, force AAL to sell its interest in Investment Holdco in the event of a sale by Orascom.

In response to concerns expressed by the Commission during the hearing, Globalive revised its corporate structure by eliminating Globalive Holdco (making Globalive a wholly-owned subsidiary of Investment Holdco). The overall equity positions of the shareholders remained unchanged. The board of directors of Globalive was expanded to eleven individuals, at least nine of whom would have to be Canadians. Four directors were to be nominated by AAL, and four by Orascom. Globalive also removed the proposed call and drag-along rights, substituting in their place a mutual liquidity right with, in AAL's case, a guaranteed floor price.

Given this proposed structure, the equity of Globalive was effectively divided between AAL (Anthony Lacavera) and Orascom, with Orascom holding an approximately 65% interest in Globalive, and AAL holding an approximately 34% interest. In addition to being an indirect shareholder of Globalive, Orascom was also Globalive's principal lender, having extended secured loans to Globalive totaling approximately $508,403,000 (representing substantially all of the capitalization of Globalive). As a lender, Orascom enjoyed various rights under its loan agreements with Globalive, including the benefit of positive and negative covenants that circumscribed Globalive's activities and a secured interest in all of the property of Globalive. During the hearing, Orascom agreed to remove all of its positive and negative covenants and all indemnities from its loan arrangements with Globalive and granted Globalive an option to have its existing loans extended for up to three years from the current maturity date at the same or lower interest rates.

Orascom also provided a wide-ranging suite of technical services to Globalive pursuant to a technical services agreement. These services ranged from advice and assistance on the design of Globalive's network to assistance with negotiations with international and local vendors. Globalive was also provided with a licence to use the trademark WIND in association with Globalive's services in Canada. The WIND trademark is used by other Orascom affiliates in Greece and Italy and is controlled by the controlling shareholder of Orascom.

CRTC decision

The CRTC noted four areas as raising concerns relating to control in fact, namely, corporate governance, shareholder rights, commercial arrangements between Globalive and non-Canadians and the economic participation by AAL and Orascom in Globalive.

Many of the issues raised by the CRTC relating to corporate governance and shareholder rights were addressed by Globalive during the course of the hearing; as noted above, a practice that is usually followed in matters before the Commission. Despite the changes that had been proposed to the board composition of Globalive (i.e., a board of 11 members, with four nominated by each of AAL and Orascom), the Commission remained unsatisfied, referencing Broadcast Decision 2008-69 (the BCE decision) in its determination that not only must there be a majority of Canadians on a prospective carrier's board, but that the nominees of the Canadian shareholders must be sufficient in number to offset the substantial influence of non-Canadian investors on the board. In this case, the CRTC found that in order to comply with the Ownership and Control Regime, Investment Holdco's board composition would need to be revised to give AAL five nominees, or one more than Orascom. Although the CRTC seems to have been largely satisfied by the changes to the other shareholder rights in favour of Orascom (i.e., the removal of the call right and drag-along right and changes to the various veto rights of Orascom), the CRTC did note that even in their revised form, the various liquidity rights granted to Orascom under the Investment Holdco's unanimous shareholder agreement provided an indication of Orascom's influence over Globalive.

Although Globalive largely addressed, during the hearing, the control in fact concerns that had been raised by its proposed corporate governance structure and the various shareholder rights in favour of Orascom, the issues raised by the commercial arrangements and the overwhelming level of economic participation in Globalive by Orascom remained. The CRTC noted that the Technical Services Agreement entered into between Orascom and Globalive provided Globalive with "benefits that operate as a key determinant of its success [and that] this reliance by Globalive on Orascom.defines their relationship and allows Orascom the opportunity to influence a wide range of operating and strategic decisions". The Commission was of the view that Globalive's reliance on Orascom through the Technical Services Agreement was another measure of Orascom's control. The Commission also noted that Globalive's use and adoption of a trademark belonging to an Orascom affiliate provided Orascom with influence over Globalive, as Orascom would have the power to limit how the brand could be used.

The ultimate determinative factor for the CRTC, however, seems to have been the extent of debt and equity participation by Orascom. The ownership by Orascom of approximately 65% of the overall equity of Globalive was not in and of itself sufficient for a finding of control, although the CRTC did note that when a non-Canadian investor's equity participation exceeds 50% in a telecommunications carrier in Canada, it may raise red flags with respect to compliance with the Ownership and Control Regime. Orascom had also provided, however, through its various loans, the vast majority of Globalive's total financing. The CRTC noted that "the concentration of debt and equity in the hands of a single foreign entity can create an opportunity for undue influence over the venture by that non-Canadian entity". The Commission further found that the modifications to the covenants and terms of the loans that had been made during the hearing did little to reduce these concerns. It was ultimately the Commission's view that such a significant concentration of debt in the hands of Orascom, particularly given the difficulty of Globalive in raising substantial alternate financing, served to provide Orascom with leverage over Globalive. Given Orascom's equity interest in Globalive, such a high level of debt in the hands of a non-Canadian was unacceptable.

In its findings, the Commission was clear that it considered the overall equity participation of Orascom, as well as its provision of technical expertise and the WIND trademark, to raise significant concerns regarding the control in fact of Globalive. Such concerns would not necessarily have resulted in a conclusion of ineligibility, however, assuming that the revisions to the corporate governance and shareholder rights required by the CRTC were made. The Commission noted that control in fact is only established where influence is dominant or determining. While the CRTC found that the indicia of control outlined above, taken together, were significant, the tipping point in this instance would seem to have been the level of debt financing provided by Orascom. This influence, when coupled with the other levers of control, led the CRTC to conclude that Orascom would have the ongoing ability to determine Globalive's strategic decision-making activities.


It was clear when first reading the Globalive documents that, even with concessions by Globalive and changes to its corporate structure in order to address anticipated CRTC concerns, a CRTC decision to approve would have represented a significant change in acceptable ownership and control arrangements. The outright finding by the CRTC that Globalive is controlled in fact by a non-Canadian has sent a strong signal that there is now a risk in presenting corporate arrangements designed to satisfy Canadian ownership and control provisions on the basis that they may be resolved with bargaining in a regulatory proceeding before the Commission. The adage that it is "easier to ask forgiveness than to ask permission" has been rejected by the Commission in dramatic and forceful terms.

The Telecommunications Act provides for an appeal to the Governor in Council (effectively the Federal Cabinet) on a petition by an aggrieved party or on the Governor in Council's own motion. Within 24 hours of the CRTC decision, the Minister of Industry Canada (who, in a separate proceeding, had found Globalive to be Canadian owned and controlled pursuant to the Radiocommunication Act), announced that there would be a review of the CRTC Globalive decision. The stage, therefore, has been set for a renewed debate on foreign ownership restrictions in the Canadian telecommunications sector.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions