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Clement approves Globalive bid, opens telecom sector to foreign ownership

On December 11, 2009, Industry Minister Tony Clement announced that the federal cabinet had over-ruled a Canadian Radio-television and Telecommunications Commission (CRTC) decision and would allow Globalive to sell mobility and cellular service to Canadians.

Clement said, “We have concluded through normal review that Globalive meets the Canadian ownership and control requirements.”

Clement’s statment came just six weeks after the CRTC denied Globalive’s bid.

The CRTC had said, “During its proceeding, the commission examined the influence of Orascom Telecom Holding over Globalive’s business decisions and day-to-day operations. Despite the fact that Globalive made significant structural changes to reduce its dependence on Orascom, there were other factors that, taken together, led the commission to conclude that Globalive does not meet the statutory test.”

The Egyptian firm Orascom owns 65.1 per cent of the equity in Globalive. Orascom also owns the company’s brand, Wind Mobile, and holds the majority of the company’s outstanding debt.

The Globe and Mail notes that, “Under CRTC rules, a Canadian carrier is eligible to operate as long as it is a Canadian-owned and controlled corporation. To meet this test, at least 80 per cent of the members of the board of directors must be Canadian, at least 80 per cent of the voting shares must be owned by Canadians, and the company can’t be indirectly controlled by non-Canadians, through other methods such as holding companies.”

“Analysts had predicted that the structure, if approved (by the CRTC), would have had broader implications for the telecom sector, allowing other companies to seek more foreign ownership.”

Clement’s decision to approve the Globalive bid and disregard the current regulations will have profound implications with respect to foreign ownership in the Canadian telecommunications sector.

On January 8, Public Mobile asked the Federal Court to overturn the cabinet decision that permitted Globalive to proceed. Public Mobile doesn’t want to shut down Globalive’s Wind Mobile, but rather to ensure “all wireless provides are treated equally and given the same access to capital.”

Public Mobile is funded in part by Canadian investors, including the Ontario Municipal Employees Retirement Systems (OMERS), but much of its seed capital comes from US investors, such as Columbia Capital and M/C Venture Partners.