Orascom/VimpelCom’s move was not unexpected after Ottawa changed the Telecommunications Act last fall to allow foreign companies to completely own a Canadian carrier with less than 10 per cent of the market. Then in October VimpelCom’s board voted to convert its non-voting shares of Wind into voting shares.
At the time Wind’s Canadian founder, chairman, CEO and controlling shareholder, Anthony Lacavera, said if that occurred he and Canadian directors would still be in control.
But VimpelCom [NYSE: VIP
] wanted full control, or made Lacavera an offer he couldn't refuse. Lacavera said in an interview he'd been negotiating with Orascom for a "long time."
"I'm very proud of what I accomplished with Wind," he said Friday, a journey that began when the government announced in 2007 it would set aside spectrum for new entrants to encourage competition in the wireless market. Ultimately Orascom was the only investor Lacavera could find.
"I set out to create a fourth national carrier, and I've done that .... The company's on a great growth track and I'm comfortable handing it over."
Orascom, which has held 32 per cent of Wind’s voting shares and 65.1 per cent of its equity, will take complete control of the wireless carrier once regulatory approvals are given.
Lacavera will transfer to Orascom his indirect 66.7 per cent voting shares and 34.4 per cent economic interest.
Lacavera will keep a small percentage in the carrier, but Orascom will end up with 99.3 per cent indirect interest in Wind’s parent company, Globalive Wireless Management Corp. (GWMC).
GWMC is a partnership between Lacavera, who contributed his Canadian telecom assets including the Yak long-distance dial around service and OneConnect, a cloud-based service for some 8,000 small and medium businesses, and Orascom, which contributed close to $1 billion needed to buy spectrum in 2008 and build the wireless network.
As part of the deal, Lacavera will get back Yak and OneConnect and some cash, which he’ll use to start a venture capital firm called Globalive Capital.
Just as Orascom’s proposed share deal simplifies its position in Wind, it could have an effect on the Orascom/VimpelCom’s participation in the upcoming spectrum auction in the prized 700 MHz band. It’s an auction industry observers believe bidders will need hundreds of millions of dollars if they hope to get any frequencies. The department hasn’t set a date but hopes it will be conducted this spring.
The 700 MHz band is highly-valued by carriers for deploying the latest and fastest LTE networks.
Bell, Rogers, Telus Corp. have launched LTE service on the AWS spectrum they bought along with Wind and fellow startups Mobilicity and Videotron. However, the startups concentrated on building their new networks, which run the 4G but slower HSPA+ technology.