Orascom is already applying its expertise to the construction of some of the 500 to 600 towers that Globalive will need to provide service in Toronto and Calgary that is scheduled to launch this fall. By the spring, it aims to add Vancouver, Edmonton and Ottawa to its network.
Orascom has also given Globalive a licence for it its European wireless brand Wind, which will give the Canadian startup immediate cost advantages on equipment such as handsets. Wind is already promising customers better value, simple billing, transparent pricing and no-contract flexibility.
Apart from tapping Orascom's market intelligence and operational expertise, Globalive will have access to Orascom's international fibre-optics network and preferred rates from equipment suppliers. Orascom told analysts last year that it is able to buy from Alcatel-Lucent for 30 per cent less than France's biggest phone company. Those kind of discounts strike fear into competitors' hearts because they can translate into lower costs - and lower prices for consumers.
Showdown in Ottawa
The two worlds of telecom - domestic and international - will collide at the CRTC hearings on Wednesday.
The current shape of Canada's market is rooted in a massive overhaul of telecommunications policy that Ottawa undertook 16 years ago as wireless technology emerged and global competition accelerated. Policy makers believed that domestic control of telecom was key to maintaining the country's identity and sovereignty. Accordingly, the new Telecommunications Act attempted to strike a balance between promoting Canadian control and fostering competition.
Since then, the wireless industry has counted on Ottawa's rules to keep major international players out of the market. In return, it has been content to pursue only domestic customers. It's a classic Canadian regulatory quid pro quo.
But since Canada put this regime in place, many major carriers abroad have reached beyond their borders, consolidating their way to goliath stature. Orascom, although it ranks as only the 15th-largest wireless carrier in the world by subscriber head count, is still about 10 times the size of Rogers, Canada's biggest mobile operator. Just last week, Deutsche Telekom and France Télécom said they planned to merge their operations in the United Kingdom. The union will create the No. 1 wireless player in the country.
Policy makers in Ottawa have remained aware of the need for more competition in wireless, and last year, as the government auctioned off new spectrum, it allocated a portion exclusively for new entrants. But the lengths Ottawa is willing to go to support new competition are still unclear.
Globalive coughed up more than $442-million in the auction to win 30 wireless spectrum licences, giving the company a presence everywhere but Quebec.
The amounts Globalive and others paid stunned everyone in the industry, including the government, which reaped at least double its anticipated take from the auction.
With the stakes raised, the ownership debate has been ignited in earnest. Ottawa's rules require that at least 80 per cent of voting shares in any telecom carrier be owned by Canadians and at least 80 per cent of the board be Canadian. Additionally, a telecom company must be deemed to be "controlled in fact" by Canadians at all times.
In the wake of the spectrum auction, Industry Canada ruled that Globalive passed muster on ownership and control. Now the question must be revisited by the federal communications regulator, which has already had an earful from Rogers, Bell and Telus about how Globalive is offside.
Globalive insists that it has satisfied the requirements with a structure where Orascom holds a 65-per-cent equity stake and 30-per-cent controlling stake in Globalive Wireless. The arrangement uses a complicated formula that involves two holding companies in which Mr. Lacavera owns the majority of voting shares.
To Globalive's consternation, the incumbents have won special third-party status at the new company's hearing, which allows them to not only make their case, but also to review materials Globalive says are confidential.
Rogers, Bell and Telus argue that it is inconceivable that an international company would provide all the startup cash and most of the expertise and yet not retain control of their investment and operation.
"When someone is having almost all the capital provided by foreigners, and the management provided by foreigners, it defies imagination that there isn't some control in fact," says Robert McFarlane, executive vice-president and chief financial officer of Telus.
Rogers is equally categorical. "It is impossible to conclude that Globalive Wireless is controlled by anyone other than Orascom," the company said.
The incumbents insist that Globalive should be held to the same standards that they have. Furthermore, if Globalive's structure is allowed to stand, they say, the ruling would fundamentally change the landscape of Canadian telecom, possibly forcing them to take foreign equity to stay competitive.
"A ruling from the CRTC that the structure does comply effectively guts the foreign ownership rule. That's a fairly significant issue and should be made by parliament and not indirectly by a regulator," says Mirko Bibic, senior vice-president of regulatory and government affairs for Bell Canada.
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