Globalive seeks cash to build new cellular network

Globalive Wireless CEO Anthony Lacavera has hardly finished mailing a $442 million cheque to Ottawa for the spectrum he won in the recent AWS auction and he’s already looking for more cash.

Lacavera, who heads parent Globalive Communications, and his partner in the wireless venture, Naguib Sawiris, who heads Egyptian-based Orascom Telecom, said Thursday they’ll need $1.9 billion over the next decade to build a national cellular network.

Of that, Orascom is willing to put in up to $700 million over the next three to four years to get the company going. That doesn’t include vendor financing of hardware the company will need.

Globalive Wireless aims to start doing business a year from now in five cities – Toronto, Vancouver, Calgary, Edmonton and Ottawa – with a target of signing up 1.5 million subscribers in the first three years. By 2014, they hope to have 3.5 million. According to an Orascom slide presentation for the press and investors, the initial target market will be consumer rather than business users. Those living in rural areas will have to wait a while. One slide says the AWS spectrum just purchased is unsuited for rural areas. Service there will have to wait until spectrum in the 700Mhz is auctioned, which, it believes, will be in 2011 or 2012.

Globalive Communications, which owns long distance dial-around services such as Yak Communications, will be able to leverage its estimated 1.5 million customer base, the presentation says. On the other hand, it adds, as a newcomer the wireless company will have trouble attracting enterprise customers.

In an interview Lacavera said he hopes the entire monetary burden won’t fall on his company and Orascom. “So we’re in discussion with various vendors, with a number of potential investors,” he said.

One of them won’t be Iceland telecom entrepreneur Thor Bjorgolfsson, who before the auction started was listed as a partner in Globalive Wireless. Lacavera wouldn’t say when Bjorgolfsson decided to end his participation in the group. He added that “at the end of the day the opportunity wasn’t big enough” for both Bjorgolfsson and Sawiris.

Instead, Orascom now has a 65 per cent equity share in Globalive Wireless and a 20 per cent voting interest. Lacavera will get a chance next week to pitch to investors when he speaks at BMO Capital’s telecom and media conference in Toronto.

Exactly what plans and phones Globalive Wireless will sell isn’t clear. Most industry analysts are certain the new entrants will go for the GSM standard, which only Rogers offers in Canada, over CDMA. Not only is GSM gear less expensive than CDMA thanks to royalty payments that have to go to Qualcom, Rogers earns fat international roaming commissions with GSM.

But Lacavera said no decision on that has been made yet. As for his product offerings, Lacavera said that initially Globalive Wireless will sell “cost-effective, simple” pre-paid plans because it’s a market less well served compared to other countries, “and then expand from there.”