Anthony Lacavera, chairman and chief executive of GlobaliveRyan Remiorz/The Canadian Press
Startup wireless carrier Globalive Communications says talks with new financial backers have stalled and its entire business is in danger following a ruling by Canadian regulators that found the company was controlled by foreigners.
"The whole business has been put at risk by this decision," Globalive chairman and founder Anthony Lacavera said in an interview. "We're not near resolving the financing issue and I don't see how we resolve it with this kind of pressure."
Privately held Globalive secured $700-million in financing from Egyptian-based Orascom Telecom. It hoped to launch a wireless service in the next several weeks and challenge Canada's established Big Three carriers in a fight for mobile phone subscribers.
Globalive spent more than $442-million on buying wireless spectrum in a government auction held last year.
While its regulatory woes are nearly catastrophic for the company, they are a big boon for the country's incumbent telecom companies, BCE Inc. , Telus Corp. and Rogers Communications Inc. , which will enjoy less competition.
"We've got everyone hired, we've got the network built, we're ready to launch and they stop us at the goal line," Mr. Lacavera said of last week's ruling by the Canadian Radio-television and Telecommunications Commission.
"To have the commission stop me now is totally unacceptable."
The CRTC found that, contrary to telecom rules, Globalive is under Orascom's control, since the Egyptian company "has the ongoing ability to determine Globalive's strategic decision-making activities."
The regulator said that Orascom owns 65.1 per cent of Globalive's equity, has entered into a strategic technical arrangement with Globalive, and controls and holds the Wind brand under which Globalive had been set to operate. It also holds the overwhelming majority of Globalive's outstanding debt.
But Mr. Lacavera said the ruling kills the possibility of attracting new investment from outside backers.
"Now we're in a position where we have no ability to actually negotiate on commercial terms with the investment community ... because they've created this totally artificially distressed situation for us," he said.
"If anything, discussions are now ground to a halt."
The CRTC's ruling is a major blow to Globalive and could soon mean the company will miss the crucial Christmas shopping season. Its suppliers and employees have remained supportive, but are nervous about what's happening, Mr. Lacavera said.
Industry Canada - which had earlier okayed Globalive's ownership and control structure - is reviewing the CRTC ruling, but no quick decision is expected.
Even though they publicly disparage Globalive as unimportant, the big carriers have long worried about its arrival in the market. They've adjusted prices and bulked up their discount brands to help fight whatever Globalive offers.
But with Globalive delayed from launching service indefinitely, Rogers, Bell and Telus may be able to preserve pricing levels and continue enjoying better profit margins.
Globalive's problems come at a time where Canada's wireless market is undergoing rapid change.
Rogers is about to lose the exclusivity over Apple's iPhone in Canada as BCE and Telus complete a network upgrade that will let them sell the smartphone.
As well, a small flock of other newcomers is planning to enter the market to compete against the Big Three. Among them, Quebecor's Videotron promises to be a well-financed challenger.