As one of the new mobile operators that entered the Canadian market in 2008, Wind Mobile has faced an uphill task.
The market has long been dominated by Bell, Rogers and Telus, which are growing ever bigger thanks to the trend towards vertical…
As one of the new mobile operators that entered the Canadian market in 2008, Wind Mobile has faced an uphill task.
The market has long been dominated by Bell, Rogers and Telus, which are growing ever bigger thanks to the trend towards vertical integration.
Last month, BCE (Bell’s holding company) completed its US$1.3bn acquisition of broadcaster CTVglobemedia.
Wind has also struggled against Canada’s strict rules on foreign ownership.
Wind Mobile’s parent company is the communications holding company Globalive.
Egypt-based Orascom Telecom holds a 65% equity stake in Globalive, while AAL Corp, a holding company owned by Anthony Lacavera (a Canadian himself), holds a 35% stake.
This ownership has led to a legal challenge from one of Wind’s competitors, Public Mobile, that the company’s shareholding breached Canadian law.
The government (a minority Conservative administration) originally found in Wind’s favour. But this decision was subsequently overturned by a Federal Court, which argued that the government had made legal errors and the decision “must be quashed”.
Wind Mobile is appealing this ruling, and a final decision is due in May.
The government has since suffered from a no-confidence vote and a general election is set to be held, also in May. Any planned changes to regulation for the telecoms sector are likely to be on hold until then.
As if all that were not enough, the CEO of Public Mobile has said he expects Wind or another operator, Mobilicity, to run out of funds by the end of the year, triggering acquisition opportunities for his company.
Mike Kielty: What is your reaction to the claims by the CEO of Public Mobile?
Anthony Lacavera: Clearly there needs to be consolidation in the market, but Public Mobile is not in a position to lead this process. Wind is in that position. We do not see ourselves as being under threat of acquisition at the moment.
MK: Wind Mobile is appealing against a Federal Court’s ruling that an earlier government decision, which stated that your ownership complied with Canadian law, contained legal errors and “must be quashed”. Why are you appealing this decision and are you confident of success?
AL: We are very confident of success.
The federal government disagrees with the court and has also appealed against the decision.
We have gone to many lengths to prove our structure is in compliance with Canada’s foreign ownership rules. These included extensive discussions with the government on the topic for over six months.
It’s true that Orascom Telecom holds a 65% equity stake in Wind Mobile, with the rest being owned by AAL Corp. But in terms of voting rights, AAL Corp has a 66% stake, while Orascom Telecom has a stake of just 33%.
You should remember that the Canadian media company Canwest Global Communications was also 65%-owned by a foreign investor, and that was allowed to operate.
The telecoms regulator, the CRTC, agrees that we are legally compliant with Canadian foreign ownership rules. Where they take issue with Wind is in their ownership and control test.
This is a subjective assessment of whether the company is controlled by Canadians. The government thinks it is. The CRTC thinks it isn’t.
The problem with this test is that it’s subjective. It leads people to different conclusions.
A federal appeal court decision on our appeal is due on 18 May.
MK: How do you think the current political turmoil will affect the case? Before the vote of no confidence, the government seemed to be supporting you by also appealing against the Federal Court’s decision.
AL: From our point of view, the Conservative party is currently still in power.
Even if that changes, there is a clear consensus in Canadian society that prices for telecoms services are too high and we need to bring our industry up to world standards.
I don’t believe there is any debate here about the need for competition. It is clear that a majority want this.
Moreover, even if we do lose this case in the federal court, all we will need to do is go back to the CRTC and modify our offering so that (in their view) it does comply with Canadian law.
MK: More generally, how do you think the political turmoil is affecting the telecommunications sector?
AL: I don’t think there will be any change from the broad mandate that the people want more competition and lower prices in the telecoms sector.
We have some of the highest prices for telecoms in the world. We have fallen behind.
MK: Would you like to see the country’s strict rules on foreign ownership of telcos being relaxed?
AL: I would be in favour of this.
The key question is: how do we measure ourselves against world standards?
In terms of pricing and competition, we are behind, and relaxing the rules would help us to improve.
That said, I am a big advocate of Canadian content, services and culture. We need to protect these.
For this reason, I am keen to keep the broadcast act separate from the telecoms act. While the telecoms act, through its foreign ownership rules, doesn’t help to promote competition, the broadcasting act helps to protect valuable Canadian content, for example the French-language programmes produced in Quebec.
MK: Do you foresee more competition in the Canadian telecoms market in the future?
AL: I do see this happening. We are having a real impact and it’s a very positive thing, not least for customers. Canadian consumers now have more options for telecoms services than they have ever had in the past.
MK: What are Wind Mobile’s plans for expansion?
AL: Wind is planning to roll out services across the whole country. Currently, we are operating in five major Canadian cities (Calgary, Edmonton, Ottawa, Toronto and Vancouver).
We have licences to operate across the whole country except for Quebec, and we’re working on resolving that.
Long term, we’re looking to become the number four telco.
This would be a good thing for the market. Many countries (including the UK) have four strong telcos competing with one another. It’s good for consumers and good for innovation.
MK: BCE’s acquisition of broadcaster CTVglobemedia is just one recent example of vertical integration in the telecoms/television markets. Do you think that vertical integration will become more common in the near future?
AL: The big guys have pretty much consolidated everything available already! There’s not much left to go for.
But that’s not a big problem for us. We’re not looking to acquire content providers, but we do want to be able to stream their content on our services.
MK: Does the encouragement of convergence provide an opportunity for new entrants?
AL: It depends. I would say that this isn’t the case for other new entrants, but I think there is a great opportunity for us.
We have already built a network and we’re ready to stream all kinds of content.
MK: What is your reaction to the merger between Wind Telecom and Vimpelcom? Orascom Telecom, which holds a 65% stake in Wind Mobile, is a subsidiary of Wind Telecom.
AL: Overall, my feeling is very positive for the transaction.
I am very happy for the Orascom shareholders because it makes their company a true global leader.
From our perspective, we are also very pleased about the deal.
It means that we will have a stronger foreign investor.
Provided we deliver on our business plan, we should be getting stronger support from our backers.
A stronger Orascom is a better thing for Wind Mobile.
