OTTAWA — The federal government will appeal a court finding that cellphone upstart Globalive, operator of the Wind Mobile service, is not Canadian enough to be allowed to operate in this country.
The announcement Tuesday by Industry Minister Tony Clement is something of a reprieve for Globalive, which had been given 45 days to comply with ownership requirements after a Feb. 4 ruling by the Federal Court — or potentially be shut down.
“Based on our interpretation of the Telecommunications Act, Globalive is Canadian, it is managed by Canadians, its day-to-day business operations are managed by Canadians, its board of directors is Canadian enough,” Clement said in making the announcement.
“We believe this is not a case of allowing a foreigner in to compete.”
The issue of Globalive was thrown into limbo earlier this month after the court ruled the company, which is largely financed by Egypt-based Orascom, did not meet criteria that would establish it as Canadian-owned and controlled.
That was the same conclusion reached by the Canadian Radio-television and Telecommunications Commission, the federal regulator, in 2009. That ruling was overturned by Clement.
Clement said the appeal of the latest decision will allow Globalive to keep operating and an extension will be sought beyond the 45-day grace period if necessary.
“It’s yet another big win for Canadian consumers and obviously we’re very pleased to see our government stand behind Canadian consumers,” said Anthony Lacavera, chairman of Globalive.
“It obviously brings certainty to our operation. We are still assessing what action, if any, Globalive will take. We’re not clear on that. This is a very unusual situation, obviously.”
The government indicated two years ago it intended to allow greater foreign competition into Canada’s telecom sector but Clement insisted his actions on Globalive has nothing to do with the broader policy direction. He said he performed a “rigorous review” of Globalive’s structure, capitalization and operations and came to the conclusion it is Canadian under existing law.
But NDP critic Brian Masse said that patently was not the case, blaming the government for creating a situation where the issue may take years to resolve as appeals stretch all the way to the Supreme Court. The legal limbo makes it less likely that competition will flourish in Canada, and that consumers will benefit through enhanced service and lower costs, he said.
“There’s was no good solution after the minister overturned (the CRTC),” he said.
“What’s going to happen now is there’s going to be a cloud over this industry and all the competitors until the situation reaches another legal hurdle, and I’m not sure consumers are going to benefit at all.”
With more than 250,000 Canadians signed on to Wind’s cellphone service, the government should have asked Globalive to restructure its ownership structure, Masse said.
Clement said the government’s motive is to defend consumer choice and increase competition. He added he has not rejected the idea of opening the entire industry up to foreign investment, but said the government wasn’t yet ready to outline its plans.
Clement announced consultations on foreign ownership in May, outlining three options — removing all restrictions, increasing the limit of foreign investment from the current 20 to 49 per cent or lifting restrictions for carriers with less than 10 per cent market share.
Lacavera said Orascom owns 65 per cent of Globalive and the Egyptian telecom still holds the majority of Globalive’s debt.
“We continue to believe it’s the ambiguity in these rules that is really costing Canadians a lot. It discourages investment.”
Though initially an Egyptian company, Orascom itself has seen a shift in the nationality of its ownership. Last October, Russia’s second-largest wireless provider, VimpelCom Ltd., and Weather Investments, majority owner of Orascom, announced a merger that would see the combined company become the world’s fifth-largest mobile telecommunication service provider.
Weather, the investment company headed by Egyptian telecom mogul Naguib Sawiris, owns 51.7 per cent of Orascom Telecom and all of Italy’s Wind Telecomunicazioni SpA, both of which are headed by Sawiris.