The Canadian government is facing another claim for more than $1-billion in damages over its policy on competition in the wireless market.Fred Lum/The Globe and Mail
The Canadian government is facing another claim for more than $1-billion in damages over its policy on competition in the wireless market.
Wind Mobile Corp.'s previous owner, Cairo-based Global Telecom Holding SAE, alleges that the government breached its obligations under a foreign investment agreement between Egypt and Canada. GTH has filed a request for arbitration with an arm of the World Bank that handles commercial disputes.
Industry participants that launched new wireless services in 2008 and 2009 believed that they would be able to sell their businesses – and the wireless airwaves they bought at a discount from the government – to one of Canada's Big Three carriers after a five-year moratorium expired. They were surprised when Ottawa blocked the sale of startup carrier Mobilicity to Telus Corp. in 2013.
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The GTH claim, as well as a lawsuit by Moblicity's original investors, both stem from the government's apparent reversal of its policy.
Mobilicity's investors – Canadian businessman John Bitove and New York-based private equity firm Quadrangle Group LLC – launched a court case against the government in 2014 claiming misrepresentation and breach of contract and seeking $1.2-billion in damages.
The Mobilicity lawsuit claims that government representatives sought out investors for the spectrum auction and provided assurances that they would be able to sell to one of the incumbents after the moratorium expired.
Wind Mobile and Mobilicity were both eventually sold, but their initial backers lost the majority of their investments. Wind was purchased in March by Shaw Communications Inc. of Calgary.
GTH – which was previously known as Orascom before its sale to Amsterdam-based VimpelCom Ltd. in 2011 – was founded by Egyptian billionaire Naguib Sawiris, who has been outspoken in his complaints about investing in the Canadian telecom market. Mr. Sawiris is not involved with the GTH arbitration claim, but Orascom was Wind Mobile's original financial backer.
The full details of the GTH claim are currently confidential, Penny Madden, a London-based lawyer with global law firm Gibson, Dunn & Crutcher who is acting for the company, said on Wednesday.
However, a summary of the claim posted on the Global Affairs Canada website in late June indicates that GTH is claiming damages of "at least" $1.32-billion.
"The government of Canada's actions caused loss to GTH including the sale of its interest in Wind Mobile in September, 2014, at a significantly distressed price," the company said in a statement. A representative did not return a request for further comment on Wednesday.
The summary on Global Affairs' website says that over the investment period of 2008 to 2014, "GTH alleges that Canada failed to create a fair, competitive and favourable regulatory environment for new investors in this sector."
While GTH says it invested more than $1.32-billion in Canada, Wind Mobile was sold in September, 2014, to a consortium of investors for $135-million and the assumption of about $160-million in debt.
Those investors subsequently sold the company to Calgary cable operator Shaw Communications Inc. in a $1.6-billion deal.
Rogers Communications Inc. purchased Mobilicity for $465-million last year. The government required Rogers, which is Canada's largest wireless carrier, to divest a large swath of Mobilicity's airwaves to Wind Mobile as a condition of approval.
Government lawyers tried to persuade the Ontario Superior Court of Justice to dismiss the Mobilicity case, but both a trial judge and appeal court ruled last year that the case could proceed.
Diana Khaddaj, a spokeswoman for Global Affairs Canada, said on Wednesday that the government could not comment on ongoing litigation. But she said that "the government of Canada will vigorously defend the claim by Global Telecom Holding."