Source: Ottawa Citizen

The decision of a federal judge to strike down a government ruling that allowed Globalive Communications Inc. to open for business in Canada may force a rush rewriting of foreign investment laws in Canada, an analyst says.

Iain Grant, principal at Toronto based telecommunication researcher the Seaboard Group, said forcing Globalive out now would result in mass inconvenience for its customers and a likely lawsuit against the federal government.

The government rolled out the red carpet for Globalive, which operates under the brand WIND Mobile, by allowing it to bid in a 2008 spectrum auction and by overturning a regulatory decision that determined the company violates foreign ownership rules, he noted in an interview Monday.

The company has since spent more than $1 billion on spectrum and cellular technology, hired around 1,000 employees and attracted more than 250,000 subscribers to its cellular network.

“They will say, ‘See you in court.’ This is more of a government problem than a WIND problem,” he said. “It’s on Canada to fix the problem and that means to change the law.”

Current Canadian law states foreigners can own no more than 20 per cent of a wireless operator or 33 per cent of its holding company.

While trying to raise money to enter the Canadian market in 2008, Globalive attracted more than $700 million from Egypt’s Orascom Telecom.

Orascom holds a 33-per-cent voting interest in Globalive and an overall economic interest of 65 per cent. The Canadian Radio-television and Telecommunications Canada (CRTC) ruled the company’s ownership structure, coupled with longer-term loan agreements with Orascom, were enough to push Globalive over foreign ownership restrictions.

But the government overruled the CRTC decision, citing a need to open the Canadian cellular market to more competition. Friday’s decision calls all of the company’s investment into question.

“We are currently examining our options but this is not over yet. We don’t intend to back down,” Anthony Lacavara, chairman of WIND Mobile, said in a statement. “We are very disappointed with this decision. We won’t let this be a setback for wireless competition in Canada and are consulting with our advisers to determine our next steps.”

The court put in place a 45-day stay of judgment to allow Globalive to continue operating while it determines a response. The company can appeal to the Supreme Court of Canada or ask Parliament to can step in and amend foreign ownership guidelines.

The ruling came as a result of a complaint by another wireless newcomer, Public Mobile, which called for a judicial review of cabinet’s decision. Grant said Public’s complaint wasn’t based on a protectionist stance, because the cellular newcomer would also like to tap into sources of foreign investment that would allow smaller firms to better compete with large companies such as Rogers and Bell.

Grant said the only way to fix the situation is to change the regulations governing foreign investment in Canada’s telecommunications networks. The changes would require legislators to rush new legislation through Parliament.

Heading into a year in which many expect a federal election, the ruling could add more fuel to a debate over foreign investment in Canadian telecoms and the impact such investment could have on competition. Last week, the government ordered the CRTC to reconsider a decision that effectively ended the availability of unlimited Internet-use billing plans for consumers.

Changes to the regulation would also create more opportunities for newcomers to buy new cellular frequencies during the next cellular spectrum auction, expected in late 2011 or early 2012.

Repeated calls to Industry Minister Tony Clement for comment went unanswered Monday.

© Ottawa Citizen