Globalive wins appeal backing Wind Mobile service

* Globalive feels vindicated after two-year legal battle

* Appeals court backs gov’t, Globalive over regulator

* Ruling could bolster Globalive in upcoming spectrum sale

* Rival newcomer plans to take case to Supreme Court

By Alastair Sharp

TORONTO (Reuters) – Globalive, the owner of Canadian wireless newcomer Wind Mobile, won a court appeal on Wednesday restoring a government ruling that the company did not violate telecom rules that bar foreign-controlled firms.

A three-judge Federal Court of Appeal panel unanimously overturned a lower court decision backing Canada’s telecom regulator, which determined that Egypt’s Orascom Telecom had undue influence on Globalive due to its financing and loan commitments.

The federal cabinet had overruled the regulator — a move the appeals court supported on Wednesday.

But the legal challenges might not be over, with a rival upstart saying it will seek a hearing before the Supreme Court.

Globalive, which joined the government in the appeal, called Wednesday’s decision a complete vindication after two years of regulatory and legal battles.

“We and our 300,000 customers are thrilled with this decision,” Globalive Chairman Anthony Lacavera said in a statement.

Globalive paid C$442 million ($451 million) for wireless airwaves in a 2008 government auction. The auction rules set side some of the spectrum for new entrants to the sector, long dominated by Rogers Communications , BCE Inc’s Bell Canada and Telus.

The legal victory could boost Globalive’s position ahead of another spectrum auction due late next year.

Lacavera said earlier this month that the legal uncertainty around Wind Mobile had scared off investors.

Mobilicity, another new entrant that acquired airwaves in the 2008 auction, raised C$215 million in debt financing in April.

The appeals court challenge to the government ruling was raised by a third new entrant, Public Mobile, as well as by Telus.

Public Mobile said it now plans to take its challenge to the Supreme Court of Canada.

“Today’s decision shows us just how clouded this issue has become,” Public Mobile’s Chief Executive Alek Krstajic said.

He called for consistent rules applied equally to all wireless carriers. “If you’re going to change the rules, change them equally for everyone, not just for Wind,” he said.

“Public Mobile’s view is that having access to foreign capital is an advantage that it would also like bestowed upon it.”

 

CONTROL IN FACT

Orascom Telecom, in the process of being sold to Russia’s Vimpelcom, gave Globalive an initial $700 million loan at the time of the auction and has added to that since.

It does not directly own shares in Globalive, but has a third of the voting shares and two-thirds of the equity in a holding company that the courts consider Canadian.

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

Neither the Canadian telecommunications regulator, the government nor the judge that overturned the government disputed Globalive’s ownership on points of law.

What was at issue was a reading of a more subjective ”control in fact” clause in the act that questions whether a telecom company is controlled by non-Canadians in another way.

The appeal court judges said the government stayed within its jurisdictional boundaries in overruling the regulator, and ”in effect was saying that Canadians are entitled to a more competitive wireless telecommunications market”.

“The appeals will therefore be allowed, and the Order in Council will be restored,” Judge J Edgar Sexton wrote in the decision, referring to the cabinet decision.

The case is Globalive Wireless Management Corp and Attorney General of Canada v. Public Mobile Inc and Telus Communications Co, citation 2011 FCA 194 for dockets A-78-11 and A-79-11.