The Canadian Radio-television and Telecommunications Commission has corrected a public notice after a new entrant to the nation’s wireless industry complained that about a possible delay to the launch of its network and stifled competition.
Toronto-based Globalive Holdings paid Industry Canada nearly half a billion dollars for wireless spectrum that covers most of the country. Its successful bid was made official when Industry Canada granted Globalive Wireless a licence to do business March 13. But now the CRTC wants to do a further investigation in a public forum.
The company is in the midst of raising an estimated $1.9 billion required for building the infrastructure needed to operate a reliable cell phone network. It had planned to start operating in five major Canadian cities before year’s end – but a CRTC review may have thrown a wrench in the works.
On Monday, the commission stated it would deliver a decision 120 days after the date of the public hearing into its wireless carrier licence to take place in September.
Globalive chairman Anthony Lacavera voiced his frustration at the notice, saying Industry Canada has already conducted a similar investigation and granted a licence for its spectrum.
“Canadians have waited too long for more wireless choice,” he said in a press release. “We are concerned that a lengthy public hearing process will delay Canadians’ overdue access to a new competitive offering.” But the chairman changed his tune after the CRTC issued a correction to its original notice on Tuesday. It now says it will deliver a decision just 30 days after the public hearing. “The commission is being responsive,” Lacavera said in an interview. “The speculation is that incumbents were trying to get this review to delay us coming into the market.”
But Globalive recognizes the CRTC’s right to do a review and is no longer concerned about delays, he adds. It also supports having its ownership structure reviewed for foreign ownership control.
The CRTC imposes limits on foreign ownership of all telecom operators in Canada. Cairo-based Orascom Telecom Holding, led by billionaire Naguid Sawiris, holds a 65 per cent indirect equity ownership in Globalive. But the company says Orascom’s voting share is 33 per cent.
That should be kosher under the CRTC’s foreign ownership rules, which allow up to one-third of voting shares to be foreign-owned, says Lawrence Surtees, an industry analyst at IDC Canada. “It strikes me as a bit odd because Industry Canada is ultimately responsible for the act,” he says. “They wouldn’t have issued a licence to Globalive if they felt they were in breach of those rules.”
It’s a strange move that is out of character for the CRTC, the analyst adds. The public hearing will serve as a distraction to a company that is busy trying to build a wireless network and raise hundreds of millions in funding.
The CRTC’s online notice outlines the reasons for taking the hearing public. It characterizes the firm’s financial structure as complex. The proceeding is to “consider the compliance of Globalive with the ownership and control regime.”
“Industry Canada does not provide that aspect of investigation,” a CRTC spokesperson said. “They purchased some spectrum and now they need to respect the regulations of the CRTC.”
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Orascom operates GSM networks either directly or through affiliates in eight countries located around the Asia-Pacific region. It is providing Globalive $700 million over four years for infrastructure investment.
The CRTC hearing also threatened to delay the creation of about 1,000 jobs to support Globalive’s network. The new entrant into the wireless industry plans to set up shop in Windsor and hire hundreds of RF specialists, network managers, and operational software support system specialists.
“There’s still a risk of delay, but at least now we have a condensed timeline,” Lacavera says. “As long as this regulatory process is done rapidly, it’s not going to affect our plans.”
Globalive will compete with value brands such as Bell’s Solo, Rogers’ Fido and Telus’ Koodo networks. Its first focus will be wining over consumers without cell phones by offering simple, pre-paid plans.
Canada has the lowest wireless penetration rate of 22 developed countries, Globalive says. It is only 65 per cent compared to the U.S. at 90 per cent and many European and Asian countries at over 100 per cent.
Industry Canada held the spectrum auction to spur more competition in the sector. Canadians typically pay more for wireless plans when compared to other developed countries.
The CRTC’s deadline for intention to participate in the hearing is Aug. 10. The hearing is scheduled for Sept. 23.
“The concern is that Orascom is a large and international company, and it’s the first international wireless company coming into the country,” Lacavera says.
Lacavera holds the other two-thirds of Globalive’s voting shares, and holds one third of the total equity.