Globalive's changes fail to silence criticism - Mobile World Live

Globalive’s changes fail to silence criticism

02 OCT 2009

New Canadian mobile operator Globalive has made more changes to its structure and financing agreements as it fights to prove it complies with foreign ownership restrictions, but reports suggest it has failed to silence criticism. At the heart of the issue is Orascom’s economic stake in Globalive. The Egyptian operator owns a 65 percent equity interest as well as virtually all of the start-up’s debt; about CAD442 million (US$406 million) Globalive paid to acquire airwave licenses from Ottawa last year as well some CAD60 million in start-up costs, including money to build Globalive’s network. As a result, Canada’s big three mobile operators – Bell, Telus and Rogers – say Orascom effectively controls Globalive, which contravenes Canadian foreign ownership restrictions. Globalive has moved to appease these concerns by saying yesterday it will simplify its corporate structure by cutting out an intermediate holding company. Orascom has also agreed to remove or reduce its rights to veto certain corporate changes. In addition, Orascom “has agreed to remove all positive and negative covenants and all indemnities from its loan agreements with Globalive Wireless.” Last week, Globalive chief executive Tony Lacavera said he would give up a put option on his shares and Orascom would give up a related call option. Giving up put options that would allow Lacavera to sell out at a minimum price could assure that he will stay with the company. Lacavera said he would also become chairman of the Globalive wireless operating company and its holding companies, putting a Canadian in charge of the companies’ boards in hopes of further allaying regulatory concerns.

However, Canada’s Globe and Mail reports that the moves, which come about three weeks before the Canadian Radio-television and Telecommunications Commission is to make a decision on whether Globalive can operate as a telecom company, have not ended the opposition from incumbent telecom companies. Ted Woodhead, vice-president of telecom policy and regulatory affairs at Telus, said that although Globalive has made some concessions, it is still offside. “Significant levers of control have not been addressed,” he commented. “They need to fix their capital structure and significantly reduce the debt held by Orascom.” Meanwhile, Mirko Bibic, Bell’s executive vice-president of regulatory affairs, is quoted in the Financial Post as stating: “Globalive remains ineligible to operate as a Canadian carrier.”

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