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Telus’s Darren Entwistle wants the federal government to establish a plan to relax the remaining foreign investment restrictions on domestic companies over a three- to five-year period.

Rafal Gerszak/The Globe and Mail

The federal government should establish a definitive plan to relax the foreign investment rules for large telecom companies over a three to five year period to create a level playing field, says the head of one of Canada's biggest industry players.

Darren Entwistle, president and chief executive officer of Telus Corp., argues the current two-tiered system gives "opportunistic" foreign investors an unfair advantage over domestic companies that are bearing most of the burden of upgrading Canada's broadband infrastructure.

Last year, Ottawa introduced new measures that allow for 100-per-cent foreign ownership of Canadian telcos with a market share of 10 per cent or less. Incumbents, though, still face restrictions that prohibit non-Canadians from owning more than 33.3 per cent of their voting shares.

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"We believe in market liberalization. We don't think that there should be any artificial regulation or fettered access to international capital markets. We want to enjoy that on a fluid basis," said Mr. Entwistle.

He added: "We are not in favour of a tilted playing field where one segment of the market, according to certain terms and conditions, gets liberalized when another segment of the market does not. We don't think that that's fair."

The liberalization of some foreign-investment rules chafes because smaller carriers have also secured exclusive access to the wireless spectrum during the last government auction, and are poised to benefit from rules that will limit the amount of prime spectrum incumbents can purchase in the upcoming 700 megahertz auction.

At least one of those new entrants, Wind Mobile, is in the process of being formally acquired by its foreign parent VimpelCom Ltd., an Amsterdam-based carrier that dwarfs companies like Telus, Rogers Communications Inc. and BCE Inc.

Mr. Entwistle contends that large telcos have "earned the right" to enjoy a level playing field after investing billions to upgrade broadband networks across Canada. Telus, alone, has invested $30-billion in infrastructure since 2000.

"One thing I could say with confidence, I do think the telecommunications industry will get fully liberalized. It is not a question of if, but rather when," he said.

As a result, Ottawa should establish a comprehensive plan, including clear milestones, to relax the remaining foreign investment restrictions over a three- to five-year period, he said.

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Rogers and BCE also contend the same foreign investment rules should apply to all players. "For there to be real symmetry in communications foreign ownership rules, the Broadcasting Act would have to be considered as well," said BCE spokesman Mark Langton.

Most telecom providers are also subject to the foreign ownership restrictions in the Broadcasting Act because they sell television services, such as cable, satellite or IPTV, while many also own broadcasting assets.

Still, two blue-ribbon panels since 2006 have recommended that Ottawa pursue a "broader liberalization" of the foreign investment rules for both telecom and broadcasting after giving smaller carriers a head start.

The Competition Policy Review Panel was the latest to recommend that two-stage approach, suggesting the second phase of liberalization "would apply to the carriage side of broadcasting distribution." That could leave broadcasting policies to focus "any necessary Canadian ownership restrictions on 'content.'"

Even if Ottawa pursues that route, such changes are bound to prove controversial. Critics have long raised concerns about cultural sovereignty, while also arguing that lifting restrictions on large telcos would lead to foreign takeovers resulting in massive layoffs and the loss of more Canadian head offices.

Mr. Entwistle, though, takes a different view. "We also think from a takeover perspective that the best protection is a fully-valued stock price. And then in an eventuality that deal presents itself, well, the premium goes to your shareholders rather than the acquirer."

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For its part, Telus plans to proceed with a proposal to convert its non-voting shares to voting shares on a one-for-one basis. Once the share conversion is complete next month, Telus's voting shares will trade on the New York Stock Exchange for the first time – putting the company in good stead should Ottawa ever decide to relax the foreign investment rules down the road.

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