The Egyptian-controlled company that has funded one of Canada’s wireless startups is now in the hands of VimpelCom. It’s still unknown, however, if it means more financing for the Canadian company
It took 10 months, but international wireless carrier VimpelCom Ltd. has finally sewn up a deal to buy the parent company that has financed almost all of Toronto-based Wind Mobile’s operations
VimpelCom said Friday it has closed a US$6 billion deal to buy Wind Telecom, which controls Orascom Telecom Holding S.A.E. The deal creates the sixth largest mobile telecom provider by subscribers with operations in 20 countries.
One of them is Canada, where Orascom holds 65 per cent of the equity of Wind Mobile and is the source of almost all of the $700 million the Canadian carrier has needed to buy spectrum and build its network. Wind operates in Toronto, Ottawa, Vancouver, Calgary and Edmonton and has an estimated 250,000 subscribers.
It isn’t clear, however, whether a new partner with deeper pockets than Orascom will help Wind Mobile with the hundreds of millions of dollars it needs to expand its network and bid on spectrum in upcoming auctions.
Anthony Lacavera, chairman of Wind Mobile’s parent, Globalive Wireless, said in an email Friday that “we see this (deal) as positive, as our major investor, Orascom Telecom, is now part of a larger, stronger organization. As Wind Mobile continues to deliver on its business plans, ad we continue to demonstrate the greater opportunity there is in the Canadian market, we have a stronger investor group with global supplier relationships that will help us get wireless costs down further for Canadians.
“I am confident it will be an attractive place for them to continue to invest capital.”
Excatly how much VimpelCom can put in the Canadian unit is unknown. At a recent telecom conference, one of Wind’s lawyers suggested that Orascom may not be able to put any more into the company. She also mentioned, as has Lacavera at other times, that Wind has been unable to borrow money
, although she also said that wouldn’t be uncommon for a startup.
While Orascom’s investment allowed Wind Mobile to open its doors, it has also been a source of controversy. In 2009 the Canadian Radio-television and Telecommunications Commission (CRTC) ruled it wasn’t Canadian-controlled as required by law. That decision was overturned by the federal cabinet, which gave the carrier the go-ahead to start business.
However, competitor Public Mobile challenged the cabinet order, saying it unfairly interpreted the investment rules in favour of one company. Earlier this year a Federal Court judge agreed
. Next month lawyers for the federal government and Wind Mobile will try to persuade the Federal Court of Appeal that decision was wrong.
At VimpelCom, Wind Canada will be in a business unit along with Wind Italy, which had been owned by Wind Telecom (formerly known as Weather Investments). The company now controls wireless operations in Russia, the Ukraine, Africa and Asia.
The deal took so long because one of VimpelCom’s investors, Norwegian telecom company Telenor Group, objected to its shareholdings being dilluted. In 2009, Telenor and Russia’s Alfa Group put their international telecom holdings into VimpelCom, with Telenor having a reported 36 per cent of the company and Alfa Group 45 per cent.
However, after losing a bid for an injunction preventing VimpelCom shareholders from voting on the deal, Telenor agreed to let part of the dispute be settled by arbitration.
After buying Wind Telecom, Telenor’s holdings have been dilluted to 25 per cent and Alfa Group has 31 per cent.
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