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Globalive financier: 'We will make pain, and they will suffer'

Naguib Sawiris at Claridge's hotel in London

Jonathan Worth

Naguib Sawiris is a good friend to have. In 2008, after a dinner meeting in Cairo, the Egyptian telecom titan decided to plunge roughly $700 million into Globalive, Anthony Lacavera's challenger to the Big Three Canadian wireless players. Globalive finally launched its Wind Mobile service this past December, after two years of holdups and grovelling before the Canadian Radio-television and Telecommunications Commission. So far, it has signed up 100,000 customers, and Sawiris is about to invest hundreds of millions of dollars more to keep it going. Why? For one thing, he likes Lacavera. But Sawiris is also determined to get some payback. Since taking over the telecom division of his father Onsi's sprawling Orascom empire (which started out in construction and now includes hospitality and IT), Sawiris has signed up 120 million subscribers in Africa, South Asia, Europe, the Middle East and North Korea. And to hear him tell it, not even the Supreme Leader himself caused as much hassle for Orascom Telecom as did the CRTC. As for Bell, Rogers and Telus, they might have messed with the wrong guy. Here's what Sawiris has to say-with a few notes of our own.

How did you meet Tony Lacavera?

We go where people don't dare to go. You have to ask yourself why there isn't a Vodafone or a Telefónica or a Deutsche Telekom or an Orange in Canada. It's the only country in the world that doesn't have any foreign operators. But we don't mind the bureaucracy or the risks involved, so that's how we got to know each other. Tony was nice enough to come to Cairo and have this famous dinner in a Chinese restaurant at the Four Seasons Hotel. And we liked each other. I've turned down a lot of deals in my life because I didn't like the party on the other side. It's the luxury of being rich-you are not forced to do business with anybody you don't like.

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You invested in Wind Mobile without much control. Can you elaborate on what the process was like?

We bet that this was an unsustainable situation, built on the fact that Canada cannot be the only country in the world besides China that prohibits foreign direct investment in the telecommunications sector. So we said, "Okay, we'll accept the conditions as they are now, and one day for sure, things will change." We believe that the damage Canada is incurring because of the lack of competition-and I'm not talking just about the consumers, but applications, technology, ease of use-is counterproductive. It doesn't push people to excellence because they have the consumer by the balls. If you compare Canada and the United States, there's a big gap. One day, Canada has to go out and become a global fighter. How can they fight when they haven't been exposed to global players? To give you an example, how many RIMs do you have?


Well, I think Bombardier is another. I fly Global Express, and I think it's the best plane. It was the best airplane, until two years ago, when the new Gulfstream G650 was unveiled. Bombardier doesn't have a plane equal to this plane, and it will take them 10 years to get one. So it shows you how if you interact globally and so on, you're always ahead.

When you started looking at Canada's telecom market, what did you think of the domestic players?

It was a joke. First of all, the penetration rate was stuck. Penetration rates in all European countries and the U.S. are at 100%, 120%. And it was at 60% here when we started. Fact number two, the ARPU-the average revenue per user-is, with all three players, the same. It was very clear that there was an opportunity there. Of course, we didn't estimate the difficulties-the obstacles, rather-that were put in our way: all the CRTC processes and delays. It was something we did not expect to see in a modern country that is part of the WTO and is supposed to be encouraging investment. It was a big shock. And it has cost us dearly. If it was not for the Minister of Industry, who did the right thing in the end, we would have been in deep shit.

Do you see a day when Orascom and other global telecom players have more of a presence in Canada?

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I think we will get credit for that-that we had the balls and the guts to endure all these agonies. And some of them remain. We are being confronted now with unfair competitive measures. Roaming is a seamless process in all the world. This is the only country in the world where if you roam on an incumbent, your phone gets cut off when you go from one area to the other. Everything we require them to do, they don't do. They delay. And if we are, as the strongest new entrant, incurring all these obstacles, what about the smaller ones? Mobility. And what's that other one? They will die. I call them dead-on-arrivals. So these measures are torpedoing competition. And the trick they have now is, one of the incumbents-without naming names-uses another brand to offer the same service with two prices for its consumers. It's the same people, and they're only offering this low price in the areas where we operate-depriving all these other customers of the same price.

Rogers, Telus and Bell all have discount brands. Which means their objective is not to give good service and good prices to consumers. No, it's to kill competition. It would be unlawful anywhere in the world. When we become stronger, we will hit back. And we will make pain, and they will suffer. Because we would have preferred for them to live and let live, but if they play unfairly, our day of revenge will come.

It looks like the government is going to liberalize foreign ownership rules. If you don't do that, your country will always remain hostage to local constraints. Because exposing yourself to other players-that's when you really see if you're up to the challenge or not. If you are playing hockey only in Canada and have never played against the U.S. or Russia or Norway, how would you know that you're really the best?

Do you see people like Vodafone or France Telecom coming in? They are not like us. I mean, we are crazy. Adventurous. Our motto is, we go where people don't dare to go. These are bigger companies with a legal department of 100 people who will tell them why they should not come to Canada. Same report? I tore it up, and I paid the money. That's the difference. Sometimes, the legal advice can screw a company. I've never, ever listened to my lawyer. I was always right not to listen. In the foreign ownership hearings, Bell said you were offside and offered to buy up your wireless licences at 50% of what you paid for…Worse than that, two of them offered to buy me out at a very significant profit. But that means I'm a broker, not an industrialist. I'm not the kind of guy who goes for the money-it's about success. And this, I would consider it a bribe: We give you some more money, but go home and don't make our life difficult. It would also be an admission of failure, which is not in my character.

Your holding company, Weather Investments, is in discussions with Russian telecom giant VimpelCom. What can you say about that? We are not just talking to them. We are talking to anybody. We said clearly, a long time ago, that anybody who believes in my consolidation theory is welcome to come to us and discuss with us. We believe the telecom industry will have to consolidate. The vendors of equipment are shrinking, so the leverage you have in getting competitive pricing is becoming more difficult. You used to have Alcatel and Lucent. They are now one. You used to have Siemens and Nokia. They are now one. Size will matter-you will get a better price if you're bigger.

You're known for setting up telecom businesses in risky markets, like Iraq and Pakistan. Do you see any similarities between them and Canada? I hate to tell you this: It was much easier in the emerging markets than trying to do business here. We've never had this kind of red tape.

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What were some of the challenges you faced in those markets? We have 32 million subscribers in Pakistan. They're spending $2 ARPUs. We are the biggest taxpayer in Pakistan. And we're making money there. In North Korea, there is the geopolitical challenge, but there is also the human part. Today, 300,000 North Koreans who never dreamed they would be able to own a mobile phone like the rest of the world own a phone. I think by year end we'll be at 500,000 subscribers. If you go to Pyongyang, people don't know any foreign company except Orascom. The word Orascom in North Korea today is like Santa Claus. Whether we are going to make money there is still the big question, but there are some things in life besides just making money. My human encounters in North Korea have been very shaking for me.

What was it like setting up a company in post-invasion Iraq? The trick was, we had put in very little money with very little risk financing. Nobody would have gone to Iraq during the war for a two-year licence. But we said we will go. And we bid-because I knew it would never be two years, and I was right. We stayed there for four years. We doubled the amortization of our initial investment in our calculation. When they came out and asked for a billion-and-a-half-dollar licence fee, I sold my asset then. Because I was not going to pay a billion and a half in a country that has been in such a mess.

So what'd you put in and what'd you get out? We put in $5 million, and we got $1.2 billion. Very tough. They kidnapped our people two times. We were happy to leave. But we didn't leave because we were scared off. We left because they were not quite fair with the auction.

One analyst I spoke to said a merger was necessary to deal with Weather's crippling debt load. They know shit about us. First of all, all the debt, the big debt we have on Wind Telecomunicazioni, has no bearing on the mother company. And we have been performing. Our debt is trading above 100% now. Which means we're one of the best. Our company in Italy is the best-performing company in Italy right now. We're growing and the others are shrinking. In the third quarter of this year, we got 100% of the net adds. We moved from 13 million subscribers in a fully penetrated market when we came in to 20 million now. We are ahead of all of our payments, and we don't have any significant payments before 2013. It's like people just want to find something bad to say. I don't give a damn. Whether my stock goes down or up, I'm not selling my shares.

Does Canada represent a stable market for you, given the fact that some of the other markets can be volatile at times? I wish I could say that. It should have been.

I s there any plan to invest more money if the ownership restrictions get lifted? Definitely. We believe that Wind should be the consolidator of all the smaller players here. We are going to be open to that. We are not interested in smaller players that are only coming with cash or the licences they paid cash for. We want them to succeed and have some subscribers, because we can't do the job alone. And we'd be very happy to be a consolidator. We believe Canada deserves a very strong fourth player that will knock on this...what I call the monopolization of the consumer.

Would you ever consider investing in someone like Rogers or Bell? No. No. Never.

Any particular reason? Too slow. And too big for me to buy. I am not a minority shareholder. There's nothing I can do if I buy a few per cent of a company like that.

Do you see someone like Verizon or AT&T coming up at some point? It depends on your legislation. You should open your doors. It's just ridiculous. Do you want to be like China?

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