OTTAWA/TORONTO (Reuters) - The Canadian government said on Tuesday it will appeal a court ruling that overturned its decision to allow foreign-backed Globalive to launch a wireless service over the objections of the telecom regulator.
The Canadian Radio-television and Telecommunications Commission (CRTC), had decided that Globalive’s financial support from Egypt’s Orascom Telecom made it ineligible to offer telecommunications under Canadian law.
On February 4, the Federal Court struck down cabinet’s 2009 decision to overrule the CRTC and allow Globalive to launch its Wind Mobile service. The court said the cabinet decision had no basis in law.
In announcing the government’s appeal of the Federal Court ruling, Industry Minister Tony Clement said Globalive meets ownership and control requirements under the Telecommunications Act and its presence in the market aids the government’s goal of fostering more consumer choice and competition.
“This is not a case of letting the foreigner in,” Clement told reporters in Ottawa. “This is a case of allowing a Canadian company that does have some foreign investment ... to continue to offer its services to Canadians.”
Canadian law restricts foreign ownership to 20 percent of a telecom company’s voting shares. Direct and indirect foreign control is limited to 46.7 percent.
Orascom Telecom holds 32 percent of the voting shares in Globalive and 65 percent of the total equity. It also provided the company with an $800 million loan guarantee.
“Another day in Ottawa and another extreme adjustment by the minister to deal with bad policy related to our telecoms industry,” Brian Masse, industry spokesman for the left-leaning opposition New Democrats, told reporters after Clement spoke.
Masse said Clement should ask Globalive to restructure to meet Canadian ownership requirements and avoid a lengthy court battle.
But analysts say politicians will find it difficult to gain traction in attacking the Conservative government for a move it can portray as a defense of the consumer against expensive wireless bills.
“Can you see any party leader championing higher wireless prices that a return to the pre-Wind days would bring us? Not I,” said telecom analyst Iain Grant from SeaBoard Group.
Three dominant players — Rogers Communications, BCE Inc and Telus — together control around 95 percent of the Canadian wireless market, which boasts some of the highest rates in the world.
The federal government raised C$4.25 billion ($4.29 billion), including C$442 million from Globalive, in a 2008 spectrum auction that set aside some airwaves for newcomers to give consumers more choice and increase competition.
Since its launch, Globalive has signed up more than 250,000 subscribers for its low-cost, no-contract and unlimited calling plans, making it the most successful of three upstarts that bought spectrum in the auction.
Established cable and media companies Quebecor and Shaw Communications also bought spectrum in 2008. Quebecor has launched a service in Quebec and Shaw has delayed its Western Canada launch until early 2012.
Ottawa plans two more auctions of spectrum by late 2012.
The government has been criticized for dragging its feet on a long-stated commitment to loosen foreign-ownership restrictions in the telecoms sector.
It held public consultations on the topic last July but has delayed making proposals so they can be combined with auction preparations.
“We have to move in lockstep with the public policy decisions that are going to be made when it comes to the wireless auctions,” Clement said.
Globalive welcomed the government’s appeal but its chairman, Anthony Lacavera, pushed for greater clarity in rules for the upcoming auctions to ease uncertainty for foreign investors.
“The more lead time we provide for that auction the better, because it is not trivial sums of money that are needed to participate in the auction,” Lacavera told Reuters.
“Given the sums of money that are needed, the faster we deal with the rules the better,” he added.
Muddying the waters further, Globalive’s foreign funding may be transferred to Russia’s Vimpelcom in a $6 billion deal for control of Orascom Telecom and Italian telecom Wind from Egyptian billionaire Naguib Sawiris.
Foreign ownership is a hot topic in Ottawa, with Clement saying on Monday he will review the London Stock Exchange’s bid to take over Canadian exchange operator TMX Group.
The Conservative government dented its reputation among foreign investors last year by blocking BHP Billiton’s $39 billion takeover bid for fertilizer producer Potash Corp.
Reporting by David Ljunggren and Alastair Sharp; editing by Peter Galloway and Rob Wilson