Globalive urges Canada to open up telecom sector

By Alastair Sharp

TORONTO (Reuters) – Globalive had no choice but to seek foreign funds for its Wind Mobile wireless service and wants Canada to move quickly to loosen restrictions on telecom sector investment, its chairman said on Thursday.

“It is time for competition to work in this country,” Anthony Lacavera told industry executives at the Canadian Telecom Summit in Toronto. “The existing telecommunications foreign control restrictions are, in our view, an overly broad and inefficient regulatory tool,” he said.

The company’s fate as a contender in Canada’s wireless industry rests with the courts, after the government overturned a ruling by the telecom regulator that said funding from Egypt’s Orascom Telecom gave the foreign company too much influence.

“The reality is that in order to form an effective, lasting, competitive alternative, we must access an extraordinary amount of capital,” Lacavera said in the speech.

He later told Reuters that Globalive had secured more than $200 million worth of additional loans from Orascom, adding to an original $700 million agreement, and that terms had improved as Wind hit performance targets.

Globalive also gets financing in “the hundreds of millions of dollars” from network suppliers and has ample funds for the next two to three years, Lacavera said.

But “investors despise uncertainty,” he said, which is why the company has struggled to find willing local partners.

Another new entrant, Mobilicity, raised C$215 million ($219 million) in debt financing in April.

“Unlike mining and resources, the Canadian capital markets for telecommunications are very small. More importantly, the business interests of our Canadian banks with the (wireless sector’s) incumbents make it virtually impossible to access Canadian capital to the scale that is required,” Lacavera said.

Canada’s Telecommunications Act restricts foreign ownership to 20 percent of a telecom company’s voting shares and limits direct and indirect foreign control to 46.7 percent.

The Conservative government, which was returned to power in the May 2 election with a majority in the House of Commons, has long championed the idea of greater competition in the sector, but the new industry minister, Christian Paradis, has declined to say how he expects to rule.

Lacavera said Canadians should be more concerned by increasing concentration of broadcasting assets in the hands of companies that control the bulk of Canada’s cable-TV, wireless and Internet services.

“Where we once had a variety of voices; we are increasingly living in a Canada where our content distributors own our content.”

Rogers Communications owns CityTV, Shaw Communications purchased Canwest last year and BCE Inc’s Bell Canada recently closed a deal for CTV, Canada’s largest private broadcaster.

“Those same content distributors will find ways to use their distribution pipelines to steer customers towards content they control and away from content controlled by their competitors,” he warned.

The federal communications watchdog, the Canadian Radio-television and Telecommunications Commission (CRTC) is studying this convergence in a closely watched regulatory process.

Globalive was able to enter the wireless market after a 2008 spectrum auction in which some airwaves were set aside for new entrants to foster competition.

The government plans an auction of valuable 700 MHz spectrum, likely in late 2012, which is being freed up as television broadcasters switch from analog to digital delivery. The low-frequency airwaves are valued for their ability to travel long distances and penetrate thick structures.

Globalive has asked for the big three incumbent wireless players — Rogers, Bell and Telus Corp — to be blocked from the sale.

“The government should create rules allowing the new entrants a chance to bid for access to spectrum in upcoming auctions and ensure incumbents do not acquire it at any price to stave off further competition,” he said.