Small Canadian wireless player Wind Mobile has signed a deal to be fully foreign owned and controlled by a global telecom company.
The agreement is with VimpelCom subsidiary Orascom, which already owns 65.1 per cent of the company and was an original financial backer of Wind Mobile, chairman and CEO Anthony Lacavera said Friday.
“Assuming that the government is satisfied, then yes, this would be the first example of a foreign controlled telecommunications carrier in Canada,” Lacavera said in an interview from Toronto.
The agreement comes after recent changes by Industry Canada allowing telecom companies with less than 10 per cent of the market to have no restrictions on foreign investment.
Foreign ownership limits for large telecom companies such as Rogers Communications Inc. (TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T) remains at 33.3 per cent.
Wind Mobile launched in December 2009. The company says it now has 600,000 subscribers with its network in Toronto and southern Ontario, Ottawa, Calgary, Edmonton and Vancouver.
Rogers, Bell and Telus, have more than 24 million wireless customers combined.
Lacavera wouldn’t comment on how competition in Canada’s wireless industry will be affected by changes to foreign ownership rules for small telecom companies.
However, he did note that he pushed for changes to rules for foreign investment.
“The deal I am doing really solidifies Wind for the next five years because now a foreign carrier like Orascom can invest with confidence and certainty,” Lacavera said.
Orascom CEO Ahmed Abou Doma said Lacavera brought more competition to Canada.
“I wish to pay tribute to his leadership in making Wind Mobile the official alternative to the ‘Big three’ incumbents in Canada,” he said in a statement.
If the deal is approved, Orascom would also have a 65.1 per cent voting interest in Wind Mobile, aligning its voting interests with its ownership stake.
Lacavera said he’ll still have an economic stake in Wind Mobile and will stay on in his role until the deal closes. He didn’t release any financial details of the agreement.
He now plans to start a venture capital company focused on telecom, technology and media, saying there’s not enough capital available to young entrepreneurs.
Lacavera recalled the hurdles that Wind Mobile faced since its launch.
“It’s just been an unbelievable battle with the regulatory and legal challenges we faced,” he said.
“I am really proud of the competition that I’ve brought to the Canadian wireless industry.”
Wind Mobile had a two-year legal battle focused on whether it met the test for Canadian ownership and control when it entered the market. That argument was put to an end last spring by the Supreme Court of Canada.
The Canadian Radio-television and Telecommunications Commission prevented Wind Mobile from initially entering the cellphone market in 2009.
The CRTC had ruled that Wind wasn’t Canadian owned and controlled because most of its debt was held by Egyptian-based Orascom. A federal Cabinet order overturned the CRTC decision, allowing Wind Mobile to launch its business.
Lacavera also still owns Toronto-based Globalive telecom company, which provides long distance service and services to small businesses.