Globalive fights for life with public campaign

With Industry Minister Tony Clement mulling over how to deal with a ruling by the Canadian Radio-Television and telecommunications Commission (CRTC) that Globalive is not completely under Canadian control, the Toronto cellphone startup’s print and Web video ads say, “It’s time for a change.”

At the same time, Globalive chairman Tony Lacavera has toughened up his language, suggesting he and Egyptian partner Orascom Telecom Holding S.A.E. have gone as far as they can to please regulators.

 “The CRTC’s decision is unacceptable and we must be permitted to proceed,” Lacavera said in an interview.

“The CRTC’s decision was totally wrong.”

Lacavera is a telecom entrepreneur whose best-known company is Yak Communications, a dial-around long distance and Internet provider. He has folded his businessess into a holding company, Globalive Investment Holdings Corp. that has majority share control over Globalive Wireless.

But Orascom holds the wireless company’s entire debt of over $500 million, 65 per cent of its equity and its Wind Mobile brand.

That wasn’t a problem for Industry Canada, which earlier this year gave Globalive its spectrum licences. However, the CRTC refused to give the startup its carrier licence, saying Orascom’s level of involvement meant the company isn’t under Canadian control.

With some 800 employees and some of its network up across the country, Lacavera wants Clement to find some way to let his company open its doors.

Industry observers, however, doubt Clement will simply over-rule an arm’s length body like the CRTC.

Lacavera said the new campaign is an attempt to change the debate about Globalive from foreign control to what he says is the real issue, which is giving more choice of carriers to wireless subscribers.

Lacavera acknowledged that Globalive is one of four startups preparing to launch service shortly – the others are Toronto’s DAVE Wireless Inc., Toronto’s Public Mobile Inc. and Quebecor Inc.’s Videotron cable division. But thanks to Orascom’s financial muscle only Globalive has the ability to challenge the incumbents, he said. Unlike the other new entrants, Globalive has spectrum that covers most of the country, except southern Quebec.

“We’re the only real competitive threat,” he insisted.

He also insists that the CRTC’s ruling is wrong and that Globalive’s ownership structure complies with the Telecommunications Act.

The determining factor in the CRTC’s decision was the fact that Orascom holds all of Globalive’s debt. It has trouble with other parts of the startup’s structure, but said these could be overcome. However, it didn’t state flatly how much Globalive should reduce its foreign debt to bring it onside with the law.

But in the interview Lacavera said Globalive doesn’t need more money. It’s “irrelevant” that he has a foreign investor, he said.

Orascom insists it doesn’t want to be Globalive’s sole banker, and Lacavera has been talking with Canadian financiers for over a year about investing. But in the interview he suggested money men here don’t share his dream of going up against incumbents. The CRTC decision doesn’t help.

“Where am I going to get the capital in Canada to launch a billion dollar business?” he asked. “It’s just not realistic … I got laughed out of the room, frankly,” when looking for money to compete in last year’s spectrum auction. “I go talk to Canadian investors, they say ‘Tony, why don’t you go back to your little Yak business. You’re crazy. Go back to your little Yak thing and have fun because you’re never going to compete in wireless.

“That just emboldened me more to raise this money” from Orascom.

However, he didn’t get much sympathy from Iain Grant, managing director of the Montreal-based SeaBoard Group telecommunications consultancy.

“If DAVE Wireless and Public Mobile can find [Canadian] financing without having a deep-pocketed Sugar Daddy, presumably if Globalive. had been diligent they ought to have been able to find some too, other than Orascom,” said Grant.

DAVE Wireless, controlled by Toronto restaurant entrepreneur John Bitove, recently announced financing from ING Bank, while Public Mobile is backed in part by the Ontario Municipal Employees Retirement System (OMERS).

Globalive’s “cries that they looked and sought but did not find suggest they just didn’t seek hard enough,” Grant said.

He’s also puzzled at Globalive’s strategy. Canadians don’t need a campaign to remind them that they want wireless carrier choices, Grant said.

Besides, he added, “I don’t see the rationale that the presence or absence of Globalive means the presence or absence of competition.” DAVE Wireless, Public Mobile and Videotron will be competitive, he said, eventually Shaw Communications of Calgary and   Eastlink, the cable division of Halifax’s Bragg Group, will also start wireless operations.

Shaw and Bragg won licences in last year’s wireless auction but have yet to say when they will start building their networks.

If Clement either makes an exception for Globalive to the CRTC ruling, or sets out ways Globalive can comply with regulations, the matter goes back to the commission or the incumbents will launch a court appeal, Grant said.

Either way Globalive’s launch will be delayed, he said.

“I don’t think they have a short term future,” he said, until the ownership structure and debt are changed.

Clement’s office has given no indication of when he will make a decision.

Meanwhile, Lacavera was asked how long can Globalive can keep several hundred people on the payroll.

 “Not very long,” he replied.