December 11, 2009 / 1:53 PM / 8 years ago

Canada opens mobile market to Globalive

<p>Canada's Industry Minister Tony Clement speaks during Question Period in the House of Commons on Parliament Hill in Ottawa in this September 17, 2009 file photo. REUTERS/Chris Wattie</p>

OTTAWA/TORONTO (Reuters) - Canada opened up competition in its telecoms sector on Friday by overturning a regulatory ruling that had blocked Egyptian-backed Globalive from offering wireless service in a market now dominated by three carriers.

The decision will allow Globalive Wireless Management Corp to proceed with plans to launch a national mobile service in Canada, challenging the dominance of Rogers Communications Inc, BCE Inc and Telus Corp, which sought to block the newcomer.

“Consumers will vote with their feet and their pocketbooks and that’s the way the market works,” Industry Minister Tony Clement said in Ottawa after announcing the decision.

Globalive said it has built most of its network and would launch service in Toronto and Calgary as early as next week. It also plans to serve Ottawa, Edmonton and Vancouver.

The company, which will operate under the WIND Mobile brand name, said it would soon provide details about price plans, store locations and handsets, which will include BlackBerry, HTC and Samsung smartphones.

“The objective is to have a few -- quite a few -- WIND Mobiles under your Christmas tree,” Ken Campbell, chief executive of Globalive’s WIND Mobile, said in Toronto.

PRICE WAR SEEN

Shares of the established carriers dropped on the Toronto Stock Exchange after the announcement, with Rogers down nearly 7 percent, and Telus and BCE both down more than 2.5 percent.

The trio, which together control 95 percent of the Canadian market, will face an unpleasant choice, said Duncan Stewart, Deloitte Canada director of research on technology, media and telecoms.

“If it does turn into a pricing battle, where at least in some parts of the market prices drop more than 10 percent, that really does hurt the incumbents,” Stewart said in an interview.

“Either they lose customers or they end up decreasing their profitability.”

Globalive spent C$442 million ($421 million) to buy wireless spectrum in an auction held by the government last year to boost competition in the market.

The company’s Egyptian-based financial backer, Orascom Telecom, provided financial backing estimated at more than $500 million.

In October, the Canadian Radio-television and Telecommunications Commission (CRTC), the government’s regulatory arm, ruled Globalive was effectively controlled by Orascom and therefore ran afoul of foreign ownership rules.

Anthony Lacavera, chairman of Globalive, said on Friday the company’s debt was the CRTC’s primary concern.

“The question was, does the debt create a situation where the company is controlled in fact by a foreign investor?” he said.

DIFFERENT CONCLUSIONS

In his decision on Friday, Clement said that Globalive is a Canadian company and that it meets ownership and control requirements under the Telecommunications Act.

Neither BCE, nor Rogers or Telus immediately issued an official response to the government’s decision, but Michael Hennessy, senior vice president of regulatory and government affairs at Telus, was dismissive of the decision.

“If Wind is Canadian then so was King Tut,” he said on his Twitter page.

Clement said Globalive did not need to change its structure, financing, shareholding or board composition.

The minister said the government based its decision on the specifics of the case, and said the ruling would not affect Canadian ownership and control requirements.

Globalive had also passed an ownership review by Industry Canada in March, but the CRTC came to a different conclusion.

Friday’s decision was a rare case of the government reversing a ruling by the CRTC.

“It sends a message to the CRTC that things need to change,” said Carmi Levy, an independent technology and telecom analyst. “As to how they’ll change is unsure, but clearly, business as usual won’t be good enough anymore.”

Levy said that companies will likely have more transparency and less uncertainty going forward in Canada’s telecom market.

Several other newcomers are poised to enter that market as a result of the government’s wireless spectrum auction, which netted it about C$4.25 billion .

But Globalive is expected to pose the biggest competitive threat. “It’s certainly the one that Rogers, Bell and Telus seemed the fear the most,” said Deloitte’s Stewart.

“Globalive is probably, of the competitors, likely to be the most aggressive. Its parent company, Orascom, is a global mobile operator that knows what it’s doing, knows how to design pricing plans and advertising.”

($1=$1.05 Canadian)

Additional reporting by Randall Palmer in Ottawa; editing by Peter Galloway

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