There is growing speculation that Canada’s new Conservative government will relax the country’s notoriously strict rules on foreign ownership for telcos and increase competition in the sector.
National newswire Canadian Press reported yesterday that…
There is growing speculation that Canada’s new Conservative government will relax the country’s notoriously strict rules on foreign ownership for telcos and increase competition in the sector.
National newswire Canadian Press reported yesterday that Pierre Blouin, the CEO of fixed-line operator and ISP Manitoba Telecom Services, had said that he expected the new government to act quickly to relax the foreign ownership restrictions.
Analysts and media commentators have made similar comments in recent days.
On 2 May, a new parliament with a Conservative majority was elected.
The Conservative Prime Minister Stephen Harper had held his role since 2011, but only through minority governments. The last of these came to an end in March when a no-confidence vote in parliament against his government forced a new election.
But Harper and the Conservatives fought back on the campaign trail and managed to take 167 of the 308 electoral districts, giving them a majority in parliament.
The new government is yet to make a statement on its policies for the telecoms market, and the Ministry of Industry did not reply to questions before the press deadline.
Restrictions on foreign ownership
The Canadian Telecommunications Act states that carriers must be Canadian-owned and controlled.
The act defines a Canadian company on three conditions: not less than 80% of the board of directors are Canadians; Canadians own directly or indirectly not less than 80% of the voting shares; the Corporation is not otherwise controlled by persons that are not Canadians.
A parliamentary committee argued back in 2003 that these foreign ownership restrictions should be removed, but little substantive change has taken place.
In July 2010, a government consultation paper put forward three options for reforming the system.
One of these involved taking away foreign ownership restrictions entirely, while another involved relaxing the restrictions for companies with a small market share (less than 10%).
In a research paper published on Tuesday, the UBS analyst Phillip Huang said: “With the Conservatives taking a majority in parliament, we believe they can now push for relaxation of telecom foreign ownership restrictions without support from opposition parties.”
Opportunities for the smaller players
According to Huang, UBS believes that the way this will probably happen is by relaxing foreign ownership restrictions on companies with less than a 10% market share.
If this does take place, it would primarily affect the three new mobile operators that entered the market in 2008: Mobilicity, Public Mobile and Wind Mobile.
Wind Mobile has recently been the subject of legal action regarding its ownership.
Wind Mobile’s parent company is the communications holding company Globalive.
Egypt-based Orascom Telecom holds a 65% equity stake in Globalive, but its voting interest is just 33%.
AAL Corp, a separate holding company owned by Globalive’s chairman, the Canadian Anthony Lacavera, holds a 35% equity stake and a 66% voting interest.
In February, the Canadian federal court overturned an earlier government decision, which had stated that Globalive’s shareholding was in line with the foreign ownership rules.
Globalive is appealing against the ruling. Before the parliamentary election, the government was also making an appeal.
These are set to be heard on 18 May.
