Fongo offers $1 plus 49 per cent of the company in exchange for control of the cellular carrier. But Wind chairman wants to mount his own offer
The fight over ownership of Wind Mobile has started with an Ontario-based mobile VoIP supplier offering to pay $1 and swap 49 per cent of its equity for control of the wireless carrier.
Fongo Inc., based in Waterloo, issued a press release this morning with the offer for Wind, whose biggest shareholder, Dutch-based VimpelCom, is looking to sell its Canadian unit.
Backed by venture capital funding from Tech Capital Partners and other investors, Fongo offers a Skype-like app for iOS and Android smart phones and VoIP home phones. If the deal goes through, the merged company would be able to offer home and cellular service.
The press release doesn’t say how Fongo values its 49 per cent.
Wind is on the selling block after VimpelCom announced it wants to buy out majority Canadian shareholder Anthony Lacavera, who is also chairman and CEO of the carrier. After launching in December, 2009, Wind has some 600,000 subscribers but has spent hundreds of millions of VimpelCom’s money building a network in many cities across much of the country.
Earlier this month Wind’s partner, Orascom Telecom Holdings – now a VimpelCom subsidiary – wrote off $339 million in interest in loans to Wind, which leaves it still owing some $770 million in principal. Apparently tired of losses, VimpelCom wants to get out of Canada.
Any offer made to VimpelCom will have to come close to paying off that $770 million in some way or another – either directly or over time.
However the federal government first has to approves VimpelCom’s takeover of Lacavera’s shares to give it complete control over Wind.
If that goes through, Fongo may face a competing bid from Lacavera, who says he wants to team up with Orascom chair Naquib Sawiris, who first backed Lacavera in 2009. “If VimpelCom will sell, I’m going to be at the table bidding,” Lacavera said in an interview last week.
In a news release announcing the offer, Fongo said over 250,000 people have signed up for its service which offers free calls to thousands of Canadian communties in 10 provinces to people who have a Wi-Fi or cellular connection. Part of the way Fongo makes money is through long distance charges to towns not on its network, as well as on calls out of the country. It also has sponsorships. For example, this month it announced that customers of Discount Car & Truck Rentals are eligible for a special mobile app with the Discount logo. The Fongo service is the same, but users get reminded of Discount’s name every time they use the app.
In a news release announcing the offer, Fongo CEO Jody Schnarr said that Wind “has done a fantastic job of signing up some of the most forward thinking mobile consumers in the country and has taught Canadians that there can be alternatives to traditional wireless service, By combining WIND’s wireless assets with Fongo’s proven ability to deliver innovative mobile solutions, Canadians will have true choice and a service that is radically different from anything else out there.”
While saluting Wind, the statement also, in its words, said Fongo wants to “re-think many aspects” of the carrier’s business. “The concept of paying $8 a month for voicemail, or being forced to buy airtime minutes when you really only want a data plan—these are outdated ideas that simply exist because ‘that’s the way it’s always been done’,” said Fongo president Dave Bullock.
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