CRTC’s Globalive decision – A big NO

CRTC has handed down its decision (Telecom Decision CRTC 2009-678 or PDF). A scan of the CRTC decision leads me to look at the last two pages of charts plus  107, 108 and 119 summing up the decision,

“107. The concentration of debt and equity in the hands of a single entity can create an opportunity for influence. In circumstances such as the present, where a company is heavily debt financed, this opportunity can translate into significant influence over the venture by the debt holder.”

“108. The magnitude of the debt provided by Orascom, the relative debt to equity financing, and the fact that the debt is concentrated in the hands of a single entity cause the Commission concern with the loans as a source of Orascom influence. The modifications to the covenants and terms of the loans do little to reduce this concern. Furthermore, the Commission notes that covenants similar to those deleted from the Orascom loan agreements are still contained in Schedule A to the Shareholders’ Agreement.”

“119. In light of all the above, the Commission finds that Globalive is controlled in fact by Orascom, a non-Canadian. Therefore, the Commission concludes that Globalive does not meet the requirements set out in section 16 of the Act and is not currently eligible to operate as a telecommunications common carrier.”

I think less competition is bad for Canadian consumers. By the way, in the happier times of Sept 2008, I conducted a phone interview with Tony Lacavera, CEO of Globalive, after they launched a few interesting initiatives that I thought would be good for Canadian consumers.

From CBC,

“The commission found it particularly important that Orascom owns 65.1 per cent of the equity, has entered into a strategic technical arrangement with Globalive, controls and holds the ‘Wind’ brand under which Globalive will operate, and holds the overwhelming majority of the outstanding debt,” the regulator said.

“The commission therefore determines that Globalive has not met the requirements of the ownership and control regime and is therefore not currently eligible to operate as a Canadian telecommunications common carrier.”

The CRTC prescribed a list of changes the company could theoretically make in order to bring itself into compliance, which would include amendments to the composition of its board of directors, liquidity rights and the threshold for veto rights.

However, the fact that Orascom controls almost all of the company’s debt is a factor that cannot be easily resolved.”

More report and analysis from Toronto Star.

From WIND mobile’s own press release “A Bad Day for Canadians and Wireless Competition in Canada“,

“In its decision, the CRTC came to a different conclusion than Industry Canada and has indicated that Globalive Wireless is not in compliance with the Canadian ownership and control requirements set out in the Telecommunications Act.

“Having already received approval from Industry Canada, we are extremely disappointed that the CRTC has come to a different conclusion,” said Anthony Lacavera, Chairman, Globalive Wireless Management Corp. “This is a bad day for Canadian consumers. Canadians deserve competition in wireless and this decision represents a major step backwards.””

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Oct 29, 2009 Morning: Looking forward to the CRTC Globalive decision to be announced later today after markets close. Here is an excerpt from a Canadian Press report,

If the CRTC decides that Globalive is Canadian enough to compete as a new national cellphone company, it’s a decision that’s likely to shake up foreign ownership rules.

Toronto-based Globalive wants to be Canada’s fourth major wireless carrier and compete with Rogers, (TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T) for consumers who want to buy cellphones. But before Globalive can go ahead with its launch later this fall, it must survive a CRTC ruling expected Thursday on its ownership and structure.

[... RBC Capital Markets analyst Jonathan] Allen said if the CRTC approves Globalive’s bid, it will likely launch in Toronto and Calgary next month.