In this week's speech from the throne, the Canadian federal
government announced its intention to "open Canada's doors
further to venture capital and to foreign investment in key
sectors, including the satellite and telecommunications industries,
giving Canadian firms access to the funds and expertise they
The 2010 budget announced by the government on March 4 contained
a proposal to remove restrictions on foreign ownership of Canadian
satellites, citing the report of the 2008 Competition Policy Review
Panel, commonly known as the "Wilson Report." However,
the budget provided no details on how it would allow for increased
foreign investment in the telecommunications market generally.
If Parliament proceeds with legislative amendments to follow
through on the government's throne speech announcement, that
would have a significant impact on domestic and cross-border
M&A in the telecommunications space. However, the timing and
type of transactions will depend on the details of implementing the
The Wilson Report recommended liberalizing foreign investment
restrictions in telecommunications and broadcasting through a
two-phased approach. In the first phase, the Telecommunications
Act would be amended to allow foreign companies to establish
new telecommunications businesses in Canada or acquire existing
telecommunications companies with a market share of up to 10% of
the Canadian telecommunications market. The second phase would
follow five years later and would involve a broader liberalization
of the foreign investment rules governing both telecommunications
and broadcasting distribution.
If the government proposes to implement the first phase of the
Wilson Report's recommendations, foreign entry will change the
structure of the market and may increase pressure for domestic
consolidation. In addition, there could be foreign acquisitions or
financings of the new wireless entrants that won licences in the
2008 AWS spectrum auction and that are just beginning to acquire
Substantially all of Canada's telecommunications incumbents
also hold broadcasting distribution licences. As a result, the
impact of this development will depend on the government's
approach to the foreign ownership rules under the Broadcasting
Act. The government could implement the second phase of the
Wilson Report's recommendations along the recommended five-year
timeline or the government could choose to give the incumbents
access to foreign investment at the same time as the smaller
While the nature and timing of any changes to the foreign
ownership rules are still unclear, the announcement signals a
significant shift in the government's approach to foreign
investment in the Canadian telecommunications industry.
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Pursuant to several recent legislative amendments and enactments, Ontario corporations holding a legal or beneficial interest in real property in Ontario are now subject to more onerous record-keeping requirements.
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