To hear Canada's cellphone giants tell it, they are facing an illegitimate threat and a transformation of their industry - all thanks to a dinner at a Chinese restaurant in Cairo.
The 2008 tête-à-tête involved a Canadian telecom entrepreneur, Anthony Lacavera, and an Egyptian telecom mogul, Naguib Sawiris. Mr. Lacavera pitched his billionaire companion on the idea of breaking Canada's wireless oligopoly. Not long after, he emerged with a $700-million war chest to do just that.
Now the incumbent triumvirate - Rogers Communications Inc. , BCE Inc.'s Bell Canada and Telus Corp. - are fighting a pitched battle to keep Mr. Lacavera's challenger, Globalive Wireless Management Corp., out of the game. The mud fight comes to a head next week at an unusual set of hearings convened by the Canadian Radio-television and Telecommunications Commission in Ottawa.
The preliminary exchanges between the two sides have not been diplomatic. The incumbents have belittled Mr. Lacavera as a "peripheral" and "expendable" player, "a minnow swimming with a whale."
Mr. Lacavera is not intimidated. "We are going to be the first real competition these guys have ever seen," he says flatly.
Insults and boasts aside, two big questions hang over the proceedings. First, is Mr. Lacavera truly just Mr. Sawiris's pawn, the first play in a foreign invasion of the telecom industry? Second, and more important, is this the beginning of the end for the cozy wireless establishment in Canada? If Mr. Lacavera isn't headed off at the regulatory pass, the domestic companies - which have never ventured beyond their protected space - will suddenly have to contend with a breed of competitor they've never faced before.
Mr. Lacavera is a 35-year-old entrepreneur whose first foray into the Canadian telecom market 11 years ago has grown into a $125-million-a-year business that sells long distance, Internet access and other services, most notably under the popular Yak brand.
For a man in the centre of a storm, he's surprisingly calm - the only thing that gives away his drive is a knee that bounces continually during conversation.
From the start, Mr. Lacavera figured his ambitions to build a national wireless carrier were too big for a Canadian financier alone. Although he wasn't sure precisely how foreign expertise would help his operation, he saw a parallel to the domestic airline industry, where foreign carriers forced Air Canada to improve its game.
"I wanted to bring best international practices to Canada. With the incumbents, their only visibility is Canada," Mr. Lacavera says. "If the general consensus is we're lagging in pricing and services, why wouldn't I look externally?"
Just 62 per cent of the Canadian population had a wireless phone in 2007, ranking it dead last among the 30 members of the Organization for Economic Co-operation and Development. At the same time, carriers here reaped the fourth-highest average revenue per wireless customer, an OECD study said last month.
Mr. Lacavera's pitch to Mr. Sawiris, one of Egypt's most prominent businessmen, conveyed three important messages. First, Canada's wireless market lacked competition - and moreover, the federal government was about to attempt to fix the problem by auctioning off wireless spectrum. Second, as founder and chairman of Globalive Communications Corp., he had already proven that, even as an upstart facing a field of giants, he could make money. And third, federal rules restricting foreign ownership and control did not preclude tapping overseas funds and expertise.
Mr. Sawiris's Orascom Telecom Holding SAE enjoyed profits of more than $2-billion last year and has a substantial track record in starting up wireless carriers. Together with his holding company, Weather Investments, which owns most of Orascom, the Sawiris empire has more than 100 million customers in Europe, the Middle East, Africa and Asia.
Mr. Sawiris was quick to respond to Mr. Lacavera's proposition, committing $200-million to a partnership and later promising to sink up to $700-million into Globalive over four years. He signed on in March, 2008, and has stayed the course through rough waters that have included skyrocketing prices in the spectrum auction last summer, the global credit crunch, rising debt at his own company and delays in Ottawa's approval process.
Mr. Sawiris won't be making an appearance at the CRTC hearings. Through Mr. Lacavera, he declined requests for an interview. But he remains confident Globalive will launch, says Mr. Lacavera, who met with his partner in Paris last week.
Part of Orascom's success stems from its ability to get management teams to work together internationally, says Khaled Bichara, the company's Cairo-based chief operating officer. "It is not the same as picking up a case study of what others did in the market."
Globalive will have access to information that Orascom gathered through previous startups and will be able to build on that data and know-how, he says.
"Sure, the incumbents know Canadians well. But clearly they haven't been able to convince them all to buy their services," says Mr. Bichara, referring to Canada's relatively low number of subscribers.
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