April 26, 2012 / 2:03 PM / in 5 years

Globalive wins court battle, eyes more funding

OTTAWA/TORONTO (Reuters) - The end of a long legal battle over whether Globalive’s foreign backing precluded it from offering wireless service in Canada opens the door for the company to amass more foreign cash ahead of an auction of airwaves next year, its chief executive said.

Canada’s Supreme Court declined on Thursday to hear a challenge to a government decision to allow Globalive to operate in Canada despite close ties to a foreign company, initially Egypt’s Orascom Telecom Holding SAE but now Russia’s Vimpelcom Ltd.

The court’s refusal to hear the case removed a hurdle that had kept other foreign investors from taking a stake in Globalive, CEO Anthony Lacavera told Reuters. He said he would dilute his controlling stake to welcome new investors but is not looking to sell the company.

“It gives me a very solid foundation to go out and raise additional financing to expand our network and I certainly think there are parties interested in acquiring the firm as well...but it’s not my intention to sell,” he said.

The court decision was a setback for Public Mobile, a Globalive rival that also offers a low-cost wireless service, and for Canada’s telecoms regulator, the Canadian Radio-television and Telecommunications Commission.

Public Mobile said it was disappointed by the court decision, but it said that its legal challenge had helped push the government to remove foreign ownership restrictions for smaller operators such as itself and Globalive in legislation expected to pass by June.

“These legislative changes will restore a level playing field for access to capital,” Public Mobile’s general counsel Bob Boron said.

The government announced on March 14 that it would soon allow non-Canadians to take control of telecoms carriers with a market share of 10 percent or less, which covers all but Canada’s three largest wireless operators.

Public Mobile and the telecoms regulator had contended Globalive was under Orascom’s control, making it ineligible to operate in Canada, which currently limits foreign ownership and control of all telecoms firms.

Orascom has since sold most of its assets, including its interest in Globalive, to Russia’s Vimpelcom.

In a seesaw battle, the government overruled the telecoms regulator, the Federal Court overruled the government, and the Federal Court of Appeal overturned that decision, siding with Globalive and the government.

Globalive’s Lacavera said he could now leverage the size of Vimpelcom, which operates in Italy, Asia and North Africa as well as its Russian heartland.

“Now we can take full advantage of Vimpelcom as a strategic shareholder,” he said. “My intention is to take full advantage of their global scale and buying power.”

The company is training its sights on an auction of valuable airwaves due early next year.

Lacavera estimates Globalive will need to spend between C$300 million and C$500 million to buy nationwide spectrum in its bid to establish itself as the fourth national carrier.

He maintains that the auction rules put Globalive’s Wind Mobile and other new entrants at a disadvantage versus Canada’s three dominant wireless providers - Rogers Communications Inc BCE Inc’s Bell and Telus Corp.

The government is eager to encourage competition in Canada’s wireless industry, which boasts some of the world’s highest rates. It set aside airwaves for new entrants in the 2008 auction that brought in Globalive’s Wind Mobile, Public Mobile and a third company, Mobilicity.

Vimpelcom does not directly own shares in Globalive, but has a third of the voting shares and two-thirds of the equity in a holding company that the courts consider Canadian.

The Supreme Court dismissed the case with cost, meaning that Globalive’s legal costs to prepare its defense are covered.

The name of the case is Public Mobile v. Globalive Wireless Management Corp. et al. (F.C.) (Civil) (By Leave) (34418).

Reporting by Randall Palmer, additional reporting by Alastair Sharp in Toronto; Editing by Frank McGurty

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