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How Stewart Lyons plans to transform telecom TeraGo

Stewart Lyons, CEO of TeraGo Inc.

Anthony Jenkins/The Globe and Mail

Stewart Lyons's first business idea had nothing to do with telecom.

He may be best known as the new CEO of TeraGo Inc. and the former president of Mobilicity, but as a young man, Mr. Lyons dreamed of being the guy who would bring Victoria's Secret to Canada.

About 20 years ago, long before the women's lingerie retailer arrived in this country, Mr. Lyons wrote a letter to Leslie Wexner, the founder and chairman of U.S. parent L Brands Inc., previously known as Limited Brands. Mr. Lyons was hopeful that he had an "in." After all, Mr. Wexner knew his grandfather, Bill Drevnig, the founder of Penningtons Stores Ltd., a plus-size women's retailer that is now a subsidiary of Reitmans.

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"I had this whole plan. This was like the entrepreneurial side of me when I was 20 years old," Mr. Lyons says over lunch at Stratus Restaurant in downtown Toronto. "He was kind enough to write back and said 'I totally remember your grandfather. He was a great man … We're not going to do that [take Victoria's Secret to Canada]. But you can talk to my M&A guy and he can give you some more insight as to what we would do and what we wouldn't do.'"

Victoria's Secret ended up expanding to Canada in 2010, after Limited Brands acquired La Senza Corp. Mr. Lyons chalks it up to a learning experience. "They obviously wanted to control the process," he says, dining on a sesame chicken salad. "But, hey, I didn't know what I was doing. I was 20 years old."

Fast forward two decades, and Mr. Lyons is a key player in one of Canada's most provocative industries. These days, there is little else that is sexier than spectrum – the radio waves that are used to provide a variety of wireless services. A bitter feud between the telecom industry and the federal government has gripped the country for the past year. Not only is a national debate raging over the future of publicly owned spectrum, but there is increasing confusion over the sector's foreign investment rules.

Mr. Lyons is no longer with Mobilicity, but he continues to have a front-row seat to the drama in his new role at TeraGo. The Thornhill, Ont.-based telecom uses spectrum to provide small and medium-sized businesses with wireless broadband, data and voice services.

Mobilicity and Wind Mobile are now his customers, and he is among those craving clarity on the foreign ownership rules for small telecoms.

TeraGo embarked on a months-long strategic review after the government made legislative changes to allow for small telecoms to be 100-per-cent foreign-owned, but ultimately decided not to proceed with a sale. Nonetheless, Mr. Lyons says companies like TeraGo would benefit from a better understanding of the rules.

"The company went through that process last year. Who knows if the company may or may not go through that again in the future. Clarity around those rules, I think, is pretty important to us – in terms of who is allowed to buy [companies] and when," Mr. Lyons says. "I understand that security is a concern but people need to operate businesses here and it would be helpful to know what [Ottawa's] parameters are."

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TeraGo's stock has fallen sharply since announcing last year that it would proceed with a new strategy – one that involves acquiring data centres and expanding into IT services – instead of a sale. There had been speculation that TeraGo would be scooped up by a U.S. company such as Towerstream Corp. or Airband Communications Inc., and while there was interest from a number of potential buyers, the price was never right.

Mr. Lyons concedes that TeraGo is a bit of a fixer-upper – "half startup, half clean up." Still, he is confident that he can take the company to the next level. "I am always trying to have multiple Plan Bs, Cs," he says. "I've been in environments where things don't always work out the way that you anticipated."

A knack for contingency planning is useful in his personal life as well. He and his wife Nicki, a dentist, have four children: Josh, age 9, Zac, 5, and 3-year-old twin girls, Julia and Abby. "My weekends are like running around between the hockey rink and playing outside. It is all kids, all the time. We make a scene when we go to restaurants. We make a scene when we go on an airplane," he says.

"We're not fun for other diners in restaurants. In fact, me and my wife's joke is we're not offended if you move tables. That happens to us a lot. We're a loud family, but we have a lot of fun."

His own upbringing likely acclimatized him to such conviviality. Born on May 12, 1973, Mr. Lyons grew up in Toronto as the middle child of three siblings. Although he continues to reside in the city, both his sisters live overseas. "I'm your classic Canadian. I live in Toronto, which means I'll probably die in Toronto," he says with a grin.

His mother held a variety of jobs, while his father worked as a lawyer and later as a lobbyist at Toronto City Hall. He initially tried to follow in his father's footsteps, but quickly discovered that a career hinging on billable hours held little appeal.

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He stumbled upon his Plan B while reading an article about Toronto's Olympic bid, a campaign spearheaded by entrepreneur John Bitove. After learning that Mr. Bitove was also a lawyer, Mr. Lyons promptly pulled out his Ontario legal directory and began cold-calling him. "He didn't call me back, obviously. But I called him five, ten more times. Eventually he called me back," Mr. Lyons says. "He basically blew me off."

Mr. Lyons, though, ended up getting hired there anyway through another connection. In 1999, he became the director of operations for Toronto 2008 Olympic Bid Corp. "I didn't hire Stewart originally; someone else in the Olympic bid did," Mr Bitove says. "But after six months, I kept throwing stuff at him to do, and he got whatever I asked done well and fast – something essential in a bidding environment."

Although Toronto did not win the games, Mr. Lyons and Mr. Bitove became friends. Eager to work together again, the men partnered on bringing satellite radio to Canada while Mr. Lyons completed his MBA. After graduation, Mr. Lyons got a full-time job as a trader at Scotia Capital, while spending his nights working on the satellite radio business.

In doing so, the men sparked a fierce regulatory battle with the Canadian radio industry. The way Mr. Lyons tells it, established players wrapped themselves in the flag and issued dire warnings about the demise of Canadian culture. "But John and I were undaunted. I plugged away at it, and four years later, I got a licence," Mr. Lyons says.

He eventually left Scotia Capital and helped launch XM Satellite Radio Canada from his apartment, taking the company public in 2005. (XM later merged with rival Sirius Canada Inc. following a similar deal in the U.S.) "Satellite radio is considered one of the great regulatory underdog stories of all time in Canada because nobody thought we would get the licence. Everybody was against us," he says.

That experience, though, proved instructive – Mr. Lyons' next project with Mr. Bitove was Mobilicity.

Mr. Lyons left the small carrier last October, shortly after it began operating under creditor protection. In April, Mobilicity announced it had agreed to be acquired by Telus Inc. – the third such attempt at a sale in a year. All of those attempts have been rejected by the federal government, which says it will not approve a deal that decreases competition, leaving the upstart carrier's future uncertain.

Ultimately, Mr. Lyons believes there were "too many factors working against" the carrier from the outset, chief among them was the "conservative nature" of Canadians. "Canadian consumers, they talk about how they want competition," he says. "But all they really want is Bell, Telus and Rogers [and] cheaper prices. That's all they really want."


Stewart Lyons in his own words

On foreign investment in telecom: "We need foreigners to think that Canada is an open place to invest and that capital can flow here freely. And that you can get in and out of investments, and it's not a big deal."

On Telus's latest attempt to buy Mobilicity: "The government has made it position on this acquisition clear so that may end the discussion."

On Ottawa's approach to regulation: "The government has a careful balancing act to do, which means corporate interest and public interest. I respect the tough situation that they are in, but I do think it is unfortunate that they've apparently caused confusion in the industry."

On competition in the wireless industry: "It's competitive among three players. It's not really a competitive market if you know what I mean … I think pretty much most consumers would agree it is not competitive from their perspective."

On the music business: "I love going to concerts and kinda being someone on the inside of the music industry. I thought that was very exciting … I saw Pamela Anderson kiss Fergie from the Black Eyed Peas at a Junos party. True story!"

On being an entrepreneur: "What I like to do is take a proven business model or pick someone that's had success, typically south of the border or somewhere else in the world, and try to emulate that in Canada. Because if you can find a business model that has been proven somewhere else … it is really easy to raise money for it and it is really easy to get people to believe in it."

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