updated 07:10 pm EST, Fri February 4, 2011
Canada court says Globalive, Wind can't run as-is
The Federal Court in Canada on Friday rejected a government exemption that allowed Wind Mobile to run. A judge ruled that the Conservative government violated the Telecommunications Act's rules on foreign ownership by allowing Globalive, which owns Wind, to run the cell carrier with more than a 20 percent share stake owned by a foreign company. Globalive has 45 days to either appeal the verdict or reduce its foreign owner's share.
Egypt's Orascom Telecom currently has a 32 percent voting share in Globalive and 65 percent of the fiscal equity. Following the court's verdict would force it to shed much of its stake and could jeopardize Wind's fledgling network, which grew from its beginning in December 2009 to an estimated 225,000 subscribers at the end of last year, according to RBC. Globalive chairman Anthony Lacavera planned to appeal the decision.
"We don't intend to back down," he told Reuters.
The Conservatives had exempted Globalive as they hoped to foster real competition in the cellular industry. Canada's market is dominated by just three major carriers -- Bell, Rogers and Telus -- and only got additional significant entries after a 1,700MHz wireless auction opened the door to new networks.
An upheld ruling could hurt competition in Canada by forcing a reorganization at Globalive or, in an extreme case, shutting it down. The original objection was originally submitted by Public Mobile, which has just 25,000 subscribers and likely wants an edge. Incumbent carriers have also supported the move since it would prevent them from having to compete with Wind's typically lower-priced plans.
Lacavera speculated that Public Mobile was being used as a proxy by the top three carriers as it was too small to be any real challenge to carriers. He further suggested it was guilty of some hypocrisy, as it purportedly had more outside influence than Globalive.