The federal telecommunications regulator has asked another wireless startup to fix its ownership structure to reduce the power of a non-Canadian shareholder before it can get a telecom carrier licence.
The Canadian Radio-television and Telecommunications Commission said Friday there are questions about whether Canadians will have full control over Data & Audio-visual Enterprises (DAVE) Wireless, which will go to market under the Mobilicity brand in Toronto, Vancouver, Calgary and Edmonton.
Shareholder veto rights and the monetary thresholds for vetoes, the composition of the parent company’s board of directors and the possibility the chair can be a non‑Canadian “provide the potential for the non‑Canadian shareholder to exercise a determinative influence over the decision‑making activities of DAVE,” the commission wrote.
The commission the Toronto-based company headed by entrepreneur John Bitove can get a carrier licence, the commission said, but first it has to make a number of changes to the shareholder agreement by June 7.
DAVE Wireless issued a press release saying the commission has given it a “green light” to operate as a carrier.
“We have been given the approval to offer Canadians truly competitive wireless services,” Mobilicity chairman John Bitove said in the release. The release also said the company has agreed to make the required changes by the deadline.
The changes demanded by the commission include raising the threshold for a minority (in this case non-Canadian) shareholder veto. Shareholders could only veto a board decision with a value of five per cent of the enterprise value of the company, a level the CRTC recently set for other two wireless startups, Public Mobile and Globalive Wireless Management Corp., whose brand name is Wind Mobile.
In addition, the commission told DAVE Wireless to increase the number of Canadian shareholder nominees to four, making a total of 10 directors. To avoid deadlocked votes, the commission says the chair has to have a deciding vote. “The commission considers that this new composition will better reflect the number of voting shares owned by each shareholder while providing DAVE with the flexibility to become a public company,” the decision said.
Having given the chair that power, the commission also ordered that the shareholder agreement be changed to make it clear that the chair must be a Canadian director and cannot be a director nominated by a non‑Canadian shareholder.
A corporate structure released by the commission doesn’t identify the names of the shareholders. It only says one Canadian investor has 62.6 per cent of the voting shares and 16.1 per cent of the equity, while a non-Canadian investor has 22.4 per cent of the voting shares and 75.9 per cent of the equity.
However, publicly the company has said it is lead by Bitove’s Obelysk Inc. and Quadrangle Capital Partners of New York.
In 2008 DAVE Wireless spent $243 million on licences covering much of Western Canada and southern and eastern Ontario at the AWS auction.
Like all winners, it has received its spectrum licences from Industry Canada last year. However, they all have to get wireless carrier licences from the CRTC, which is scrutinizing whether their ownership meets the requirements of the Telecommunications Act.
Meanwhile, Public Mobile has yet to make a statement on meeting the changes the CRTC demanded last month. It has until May 21 to file changed documetns with the commission. The startup has already opened a number of stores in Toronto and Montreal anticipating that it can start selling in the middle of this month.
So far of the eight new companies that bought spectrum in 2008, only Wind Mobile has started business.
Wind opened in December in Toronto and since spread to Ottawa, Edmonton and Calgary.
In addition to Public Mobile and Mobilicity, Quebecor Inc.’s cable division, Videotron Ltee., is expected to start its new wireless service shortly. Because Videotron already has to meet foreign ownership rules under the Broadcasting Act, it isn’t expected to have any trouble getting its carrier licence.
Videotron has been selling wireless for several years, but on leased spectrum from Rogers Communications Inc. By spending $555 million on AWS spectrum in 2008, Videotron will have full control over its wireless business.