The federal telecommunications regulator has started a second foreign ownership and control review of a startup wireless company, a step needed before it can start business.
The Canadian Radio-television and Telecommunications Commission (CRTC) released a letter Monday that it sent last week to the management of Toronto-based Data and Audio-visual Enterprises Wireless Inc. (DAVE Wireless), saying it has started a review of the company’s structure. If given the green light, the company will go to market under the name Mobilicity.
After a preliminary look at its documents, the commission has decided things are in order enough to hold a closed-door review of the corporate structure rather than a public hearing, as Globalive Wireless Management Corp. had to undergo last fall. Unlike the ordeal Globalive went through, the closed-door review doesn’t require testimony.
“With regard to control in fact, the commission notes inter alia (a Latin term meaning ‘among other things’) that on a fully diluted basis, 67 per cent of the [DAVE Wireless] voting interest will be held by the largest Canadian investors and that the largest non-Canadian investor has provided less than 55 per cent of the total capital of the company.”
The commission also noted in the letter that a “significant debt facility has been provided through an export credit arrangement with a foreign bank for the purchase of telecommunications equipment.” Ericsson LM is designing and building the company’s HSPA+ network.
The company has said DAVE Wireless’ biggest shareholder is Toronto entrepreneur John Bitove through his Obelysk holding company. Bitove also has a U.S. partner, Quadrangle Capital Partners of New York. In December a group led by National Bank Financial Inc. and GMP Securities L.P. also put in a combination of debt and equity.
According to a general corporate structure given to the commission by DAVE Wireless, unnamed non-Canadians have 75.9 per cent of the holding company’s equity and 22.4 per cent of its voting shares, while unnamed Canadians have 24,1 per cent of the equity and 77.6 per cent of the voting shares.
The Canadian shareholders are divided into three groups: An unnamed Canadian with 62.6 per cent of the voting shares and 16 per cent of the equity; an unnamed investor group with four per cent of the shares and 2.8 per cent of the equity; and employees. A single unnamed non-Canadian investor has the 75.9 per cent equity. A non-Canadian lendor has 51.9 per cent of the debt.
DAVE Wireless’s holding company has a nine-person board with three Canadian and three non-Canadian directors. Together they will appoint three independent Canadian directors.
While Industry Canada has approved the company’s ability to meet the ownership and control requirements under the Telecommunications Act and give it spectrum licences, the CRTC does an identical reveiw before handing out its carrier licence.
Meanwhile, the commission is continuing its closed door review of the structure of Public Mobile, which started in late December.
Both DAVE Wireless, Public Mobile and Globalive Wireless got into the wireless business buying licences in the 2008 spectrum auction. DAVE Wireless spent $243 million on 10Mhz of AWS spectrum blocks largely covering southern and eastern Ontario, Victoria, Vancouver, Calgary and Edmonton. Public Mobile spent $55 million on PCS spectrum covering southern Quebec and southern Ontario.
However, Globalive caught the CRTC’s attention because it had heavy investment from Egyptian-based Orascom Telecom Holdings S.A.E., which funded almost all of its debt and owns its Wind Mobile brand. Several months after announcing a new format for reviewing carrier licences, Globalive was told its ownership structure was so complex the commission had to hold a public hearing. After hearing public and closed-door evidence, the commission ruled Globalive wasn’t completely Canadian-controlled. But that ruling was over-turned in December by the cabinet.
Both Mobilicity and Public Mobile are eager to launch their service this spring, in part to negate the two-month start Wind Mobile has. Presumably Public Mobile will be able to start first because its review started earlier.
Meanwhile Quebec-based cableco Videotron Ltee. hopes to launch in the summer, although the CRTC hasn’t begun reviewing its ownership status. However, that is expected to zip through quickly because as a cable operator and Internet provider Videotron already had to pass Canadian control inspection under the Broadcasting Act. Videotron already resells wireless service bought through Rogers. With the purchase of spectrum, however, it gets to control its own network.