Wind Mobile's parent company, Globalive Wireless Management Corp., is in another scrapping match with Telus Corp. And this disagreement is all too familiar.
In a Canadian Radio-television and Telecommunications Commission filing originally obtained by Bloomberg, Globalive claims that Telus has crossed the line on foreign ownership, and that 48 per cent of the company's voting shareholders reside somewhere abroad. Unfortunately, the maximum foreign control of telecom carriers allowed by Canadian law is 33.3 per cent.
“Wind is bringing this application because Telus's complicated and rarely-used measures for controlling the level of foreign ownership of its publicly-traded voting shares, along with its recent proposal to restructure its share capital by converting its non-voting shares into voting shares, raises complex and novel issues that have not been dealt with by the CRTC to date,” Gloabalive said in an e-mailed statement.
If you're feeling a hint of deja vu, it's likely because a sort-of reverse of this accusation caused problems for Globalive's Wind brand starting in 2009 when Telus asked the CRTC to take a look at the company's ownership. At the time, the majority of Globalive's funding came from Egyptian billionaire Naguib Sawiris and his company, Orascom. (Since then, Orascom has merged with Amsterdam-based VimpelCom Ltd.) A series of disputes followed as the regulator, federal government and Supreme Court weighed in on the subject.
But Telus doesn't think Globalive is fighting fair this round. In fact, it calls the allegations "completely unfounded and misleading." Telus said in an e-mailed statement that Globealive's information came from a document that wasn't meant to be read in the way it has been. "The report used by Globalive to support its allegation relies on the postal or zip code of an account rather than actual residency, and is not intended to be used to determine foreign ownership compliance," the statement said.
That means that Canadian investors acting through a U.S. institution, for example, could appear to have American addresses in this report. The note goes on to say "Globalive itself acknowledges that the Broadridge reports include double counting."
The statement also said that Telus's annual report filed on May 9 (and statutory declaration with the CRTC) indicates that it has complied with the regulations.
But Globalive isn’t so sure “double counting” can account for a 14.7 per cent discrepancy in ownership. “Publicly-available reports and TELUS’s own statements strongly suggest that, whatever its controls and processes might be, it would appear that Telus is currently well in excess of the allowable foreign ownership of its voting shares,” Globalive noted.
And with these levels so high, Globalive says it has concerns that Telus’s proposal to convert its non-voting shares to voting shares would only make this issue more pronounced.
Globalive maintains that the goal of the application isn’t to pull Telus down, but to provide clarity for all players in the industry. “It is our firm belief that only in this way will the CRTC accomplish what it has stated is its goal: an informed “substantive precedent and a level of much needed certainty to all industry players,” the company said. It pointed to a statement from Telus in 2009 that said all market participants should know what the Telecom Act deems acceptable when it comes to corporate, capital and debt structures as well as other agreements.
But even if the motivation is industry clarity, it’s hard not to see this as a purposeful jab at Telus.
Just a few weeks ago at the Canadian Telecom Summit Tony Lacavera, chairman and chief executive officer, said that Wind would be "on the offense" as it moved past its own legal hurdles. The plan is to try to partner with regional telecom companies to offer better coverage and wider distribution.
But this application makes it seem unlikely Telus will make for a friendly partner. Scuffles between the two companies seem to be increasingly common. In May, for example, Globalive asked the CRTC to get involved in its disagreement with Telus and the City of Vancouver over access to the underground rapid transit line. At the time, the city called the application "premature."
The application to the CRTC can be viewed on the left of the screen. Chapter 18 looks at Telus’s proposal to restructure its share capital. The report starts getting into ownership concerns around paragraph 23. And paragraph 44 begins to explore the regulator’s approach to addressing conformity to the ownership rules.