June 20, 2012 / 11:45 PM / in 6 years

Globalive complains that Telus breaks ownership rules

TORONTO (Reuters) - Globalive, an upstart entrant to Canada’s wireless industry that fought court battles over its own level of foreign ownership, has filed a complaint to the regulator over the concentration of foreign funding at its much larger rival Telus Corp (T.TO).

Almost half of Telus’ voting shareholders live outside Canada, which suggests they are not Canadian, Globalive said in a filing to the Canadian Radio-television and Telecommunications Commission (CRTC) on Wednesday.

In response, Telus said that the allegations are unfounded and misleading, and that it had comprehensive controls in place to ensure it does not run afoul of the law.

Canadian law currently bars foreigners from owning more than one third of the voting shares in any telecom company operating in the country, but pending legislation would loosen this restriction for small operators such as Globalive, while keeping it in place for Telus and other large operators.

Globalive, which operates under the Wind Mobile brand, is calling on the CRTC to open a public review of whether Telus is breaking the rules, in part so any decision would clarify what level of foreign involvement is allowed and how much responsibility a company has to act to remain compliant.

“The answers to these questions are very relevant to all actual and potential telecommunications and broadcast industry participants, and even the general public,” Globalive’s chief regulatory officer, Simon Lockie, wrote in the submission.

Globalive finally shook off years of legal uncertainty in April after Canada’s Supreme Court declined to hear a challenge to a government decision allowing it to operate despite close ties to a foreign company, initially Egypt’s Orascom Telecom Holding SAE ORTE.CA but now Russia’s Vimpelcom Ltd VIP.N.

That court decision was rendered effectively moot by a March announcement that the government planned to loosen restrictions on foreign investment for small telecom firms.

In its filing, Globalive cited reports compiled by Broadbridge Financial Solutions Inc, an independent investor relations firm, that showed that 48 percent of Telus’ voting shares were held by investors outside of Canada.

But Telus said those reports, which rely on a postal or zip code rather than actual residency, were insufficient.

“If you have an investor who is temporarily in the U.S. for work or who invests through a U.S. institution they may show up as having a U.S. address in this report,” Telus spokesman Shawn Hall said in an emailed statement.

Telus’ ownership and share structure was brought into focus earlier this year when the company sought to unify its dual-share structure.

The Vancouver-based company was forced to withdraw the plan in May after it became clear dissident shareholder Mason Capital could block the vote.

The dual-share structure, split into voting and nonvoting shares, was established to comply with the foreign ownership laws at a time when U.S.-based Verizon Communications Inc (VZ.N) was a major investor.

Telus plans to return to shareholders with a similar proposal in future, while a source has told Reuters that Mason is looking to sell its roughly 19 percent stake.

Reporting by Alastair Sharp in Toronto; editing by Carol Bishopric

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