Anthony Lacavera is embarking on what could be the biggest business adventure in his 34-year life.
The chief executive officer of Globalive Communications Corp. has entered his company, best known for its Yak long-distance calling service, in the race for new wireless spectrum that will be auctioned off in May.
Perhaps it's just youthful bravado, or maybe the knowledge that he has the backing of two foreign billionaires, but this wireless venture has Mr. Lacavera excited even though he'll have to beat larger rivals to secure those valuable wireless airwaves.
"I'm always up for a good fight," he said in an interview at the new downtown Toronto digs for Globalive, which has 175 full-time employees.
Anthony Lacavera, 34 and chief executive officer of Globalive Communications Corp., which also owns the Yak long-distance service, has entered his company in the race for new wireless spectrum to be auctioned off in May. (ARANTXA CEDILLO FOR THE GLOBE AND MAIL)
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That go-getting attitude has served the Welland, Ont.-native well. During the past decade, he evolved from a University of Toronto computer engineering graduate and founder of a telecom upstart in 1997 to the head of a company that took home $125-million in revenue last year.
Taking on the big phone boys has become a way of life for Mr. Lacavera. He entered the industry in 1998, the year the federal communications regulator opened the local phone market to competition. His first venture was providing teleconferencing, directory and operator services to new local phone entrants, called CLECs (competitive local exchange carriers).
Making money, however, proved to be a challenge for those newcomers and Globalive looked for opportunities elsewhere in telecom land.
"That business plan was not going to work," Mr. Lacavera explained. "The CLECs were not succeeding."
So he expanded into other areas, including selling telecom services directly to hotels and hospitals. Until now, he hasn't strayed from the landline business.
What propelled him down the wireless path was the purchase of Yak in 2006. Yak wasn't a cellphone carrier, but it had a well-established product that let people dial a number to make cheaper long-distance calls. Mr. Lacavera recognized that this could come in handy if he ever moved into wireless.
"I'm a big believer that it takes a long time to establish the trust of customers and establish a brand," he said. "I believe there's a lot of value in the Yak brand."
During the first year after that acquisition, he bulked up Yak's range of products, launching a high-speed Internet and home phone service. He reckons each of those is adding more than 1,000 new customers every month.
Mr. Lacavera believes those new products are a valuable way of testing whether customers would buy other communications services, including wireless. "Is it just Yak long distance or would the consumer trust Yak with something more significant?" he said, explaining his tactics. "What we've found is Yak consumers are embracing [these products]."
He hopes this success will continue in the cellphone space. But first he has to get his hands on some spectrum.
Wireless is a bright spot in a dull telecommunications market. Revenue growth is strong, rising 15 per cent in 2006. And the number of Canadians with cellphones - some 60 per cent - is much lower than in the United States, Europe and Asia. No wonder then that more than 20 companies are eager to break into the market with the upcoming auction.
"Really the only significant growth industry in telecom now is wireless," Mr. Lacavera said. "It's kind of an obvious place to go for growth."
Ottawa wants more competition in the industry and has reserved a certain amount of airwaves just for would-be new players such as Yak to buy. As a result, these hopefuls will not have to outbid the three wireless kings, BCE Inc., Telus Corp. and Rogers Communications Inc. for spectrum (the three giants will be bidding on other spectrum access).
While it's a promising opportunity, there are more-brawny rivals than Yak vying to be a new cellphone company, including Manitoba Telecom Services Inc., Shaw Communications Inc. and Quebecor Media Inc.
Mr. Lacavera, nevertheless, has attracted some impressive partners in his quest. Globalive is bidding for the spectrum with Weather Investments, an international wireless company controlled by Egyptian billionaire Naguib Sawiris, along with Bjorgolfur Thor Bjorgolfsson of Iceland, who is behind the European wireless investment firm Novator.
Having financial backers with bulging wallets is key, because Globalive will not only be bidding for what will likely be pricey spectrum, but will also have to build its own network. (In its landline businesses, in contrast, Globalive owns some parts of the network and leases others, such as fibre, from rivals.)
Mr. Lacavera stresses that having partners in the bid for the wireless spectrum is not just about money; his international partners also bring valuable strategic knowledge. They have been able to grow in markets where the revenue per user is just $6, and there is plenty of money to be made in Canada since customers spend $60 or $65 a month on their cellphones, he explained.
Mr. Lacavera said the costs of vying for the valuable airwaves can't be pinned down right now. But National Bank Financial analyst Greg MacDonald reckons that buying spectrum across the country and setting up a network would cost at least $1.2-billion.
One challenge such international groups could run into is Canadian ownership rules, which restrict foreigners' holdings in telecom assets to a minority stake. Mr. Lacavera would not provide details on the ownership structure for his group, but insists they will comply with those limits.
If successful, the group's strategy won't be about launching the cheapest service on the market. Instead, its pitch will be no surprise charges, such as the much-maligned system access fees that other cellphone carriers slap on to monthly bills.
Mr. Lacavera will keep that strategy firmly in mind in May as the group tries to acquire spectrum. In the end, however, he's not willing to buy it at any cost, no matter how alluring the opportunity may be.
"It's not a business that I want to be in if it turns out that we have such enormous upfront costs that we're into having to change our business model," he said.
AIRWAVES AUCTION
Beginning May 27, Industry Canada will auction off new licensing rights for wireless spectrum, in an effort to create more competition in the cellphone market.
Thirty companies have registered to take part in the auction for the airwaves, 40 per cent of which is being set aside for would-be new players in the industry. On Monday, Industry Canada will release the list of approved bidders. Here is a look at a few of the applicants:
Data & Audio-Visual Enterprises Wireless Inc.
Bid submitted by John Bitove, who founded XM Canada satellite radio service and is in charge of Priszm Income Fund, which owns hundreds of KFC, Taco Bell and Pizza Hut outlets across Canada. It is not known whether he has other backers.
Globalive Wireless LP
Toronto-based Globalive Communications Corp. (parent of Yak Communications Inc.) has joined forces with two international investors: Egyptian Naguib Sawiris who controls Weather Investments, and Bjorgolfur Thor Bjorgolfsson of Iceland, who is behind the European wireless investment firm Novator.
Jaguar Wireless Holding Corp.
A new Toronto-based company, set up for the auction, is backed by Canadian and foreign private equity players whose identities have not been revealed.
Triple Five Universal
Enterprises Ltd.
The Ghermezian family of Edmonton owns Triple Five Group; its assets include the West Edmonton Mall and the Mall of America. It's not known whether they have other backers.
6934579 Canada Inc.
The lead investors, Boston-based M/C Venture Partners and Virginia-based Columbia Capital, have experience backing wireless carriers. Their Canadian partner is private equity firm Novacap, of Longueuil, Que.
Quebecor Media Inc.
The parent company of Quebec cable firm Vidéotron Ltée aims to build a national cellphone network.
Manitoba Telecom Services Inc.
The phone company sells cellphone services in Manitoba, but is still considered a new entrant and plans to bid on spectrum across the country. Its backers are Canada Pension Plan Investment Board and Blackstone Group LP.
Catherine McLean
