CRTC ruling contradicts Industry Canada’s acceptance of the ownership structure in March 2009 when it granted Globalive’s licence.
Most of the new entrants entering the market are regional based, Videotron is only going to operate in Quebec, Dave Wireless is targeting three provinces (AB,BC & ON), while Shaw will focus on Western and Central Canada. Global wireless is the only true national player (except QC) and is going to be the main competitor for the Big 3 wireless companies. However, they were denied their operating license because of federal foreign ownership restrictions.
You see, in Canada any telecommunications company must have a majority of its equity and its board (about 80%) owned by Canadians. Currently Globalive has 65% of its equity owned by an Egyptian Company, Orascom Telecom. This concerned the CRTC as Orascom is the major financial backer for Globalive and has invested over 700 million dollars in the company. After several objections by the incumbent wireless companies, the CRTC was forced to review the ownership structure for Globalive and failed their application for an operating license.
So what’s next for Globalive? While this is certainly a serious setback, I doubt that this will prevent Globalive from coming to market. It will certainly delay them, however. Globalive will have to tweak its ownership structure, balance its debt and equity allocation, and adjust its board of directors to be compliant with the Federal foreign ownership rules. Will this be easy? Probably not! What Globalive really needs is a serious Canadian backer, which has been difficult to find.
I do believe, however, that with huge public pressure for a new entrant, and a “free market” minded conservative Government that Globalive’s application for its Canadian operating license will eventually be approved. This will likely delay Globalive’s entrance into the market until next year, probably in the second quarter. Certainly good news for the incumbents who will have a new entrant free holiday season, one of the busiest periods for cell phone purchases.
Hopefully canadians have enough competition to get the best cellphone deal available.