Canadian incumbent Telus has come under further pressure from rival telco Globalive.
The challenger operator dismissed Telus’ insistence that it complied with Canada’s stringent foreign investment laws, calling for the regulator to…
Canadian incumbent Telus has come under further pressure from rival telco Globalive.
The challenger operator dismissed Telus’ insistence that it complied with Canada’s stringent foreign investment laws, calling for the regulator to intervene.
Canadian law dictates that telcos with more than 10% of market share can be no more than 33.3%-owned by non-Canadians.
In June, Globalive – which operates under the Wind Mobile brand – had called on the Canadian Radio-Television and Telecommunications Commission (CRTC) to undertake a full review of Telus’s ownership structure.
Globalive cited reports from financial services firm Broadridge suggesting that 48% of Telus’ voting stock was registered at addresses outside of Canada.
But in late July, Telus rebuffed these claims, saying that it had systems in place and that only 32.59% of its voting shares are held by non-Canadians. The incumbent dismissed the Broadridge reports saying they did not account for short trading and other factors that resulted in votes being counted twice.
In its latest filing, Globalive points out that it doesn’t matter if Broadridge did double count votes – it is the percentage of the votes linked to addresses outside Canada that is significant, not the amount.
Globalive also says that Telus’ compliance methods are not legally enforceable and that, according to its research, many brokers and intermediaries who buy and sell Telus stock are not aware of the compliance mechanisms.
“Telus’ complex and evidently ineffective systems to maintain compliance with these clear ‘bright line’ restrictions need to be subjected to Commission scrutiny in a public review,” said Simon Lockie, chief regulatory officer at Globalive.
Telus hit back saying: “Much like its allegations, Globalive’s response is inaccurate and misleading, relying on false data to make a sensational claim.
“The issues they are putting forward simply don’t exist, and have been proven baseless. Their filing is a waste of the CRTC’s time and taxpayer dollars, and should be dismissed.”
Commenting on the matter, Ronald Gruia, an analyst at Frost & Sullivan, said: “The CRTC will definitely investigate. The only question is whether or not they hold the investigation in public or in private – it will be an interesting test case for the new CRTC chair Jean-Pierre Blais.”
Activist investor Mason continues to stir
Meanwhile, Telus’ activist investor Mason Capital has requisitioned a meeting of shareholders in a bid to block the company from mothballing its dual-class share structure.
The hedge fund controls nearly 20% of Telus’ stock and its holdings are largely in voting stock.
Earlier this year, Telus proposed to do away with its dual-class structure by giving non-voting shares a vote, which would have temporarily devalued the voting stock held by Mason.
Telus eventually withdrew its proposition in May, accusing Mason of so-called ‘empty voting’ to enhance its influence. But the incumbent pledged that it would continue to try and eliminate its dual-class structure.
Now, Mason has proposed a change to the company’s rules that would preserve a higher valuation for voting shares. It suggested that if Telus tries to eliminate the dual-class structure again, holders of voting stock would get a guaranteed premium of at least 4.75% more than holders of non-voting stock.
