Canada’s goal of having a viable fourth mobile operator seems to be unravelling as Orascom Telecom, majority-owned by Amsterdam-headquartered VimpelCom, has withdrawn its bid to take control of Wind Mobile.
VimpelCom’s decision casts a shadow of financial uncertainty over the wireless start-up, which has struggled to compete with Canada’s big three mobile operators – Bell Canada, Rogers and Telus.
Canada’s government has tried to stimulate foreign investment in the country’s mobile market, ruling last year that telecom carriers could have full foreign ownership if they had less than a 10 per cent market share.
VimpelCom, if it had continued with its bid via Orascom, would have taken advantage of the relaxation in foreign ownership rules by taking a 99.3 per cent stake in Wind. The dropping of Orascom’s application to the Canadian government, asking for permission to take full control of Wind, is a setback for the country’s authorities.
However, according to Reuters, the deal is not necessarily dead. Anthony Lacavera, Wind’s founder and chairman, said that despite Orascom’s withdrawal he would “continue working with VimpelCom toward achieving our mutual objectives”.
VimpelCom spokesman Bobby Leach, quoted in the Reuters report, said that the company “wanted to make clear that we may reapply”.
Dvai Ghose, an analyst with Canaccord Genuity, quoted by The Globe and Mail, a local newspaper, called Orascom’s declaration of ongoing interest in consolidating Wind “thoroughly confusing.”
The Orascom reversal comes at a time when Verizon Communications has expressed interest in acquiring Wind Mobile. The operator is “one of many” options under consideration by the US market leader, Bob Varettoni, a spokesman for Verizon, told Bloomberg in an e-mail. “We constantly evaluate a wide variety of business opportunities.”
Although headquartered in Amsterdam, VimpelCom is controlled from Russia and had apparently indicated that its Canadian operation was not part of its core business and was looking for an exit.
There have even been some press reports that Lacavera had previously made a formal bid for the company he founded though his holding company AAL Corp. Naguib Sawiris, an Egyptian telecoms mogul – and who had originally invested in the Canadian start-up – was rumoured to be teaming up with AAL Corp through Accelero Capital, Sawiris’ investment firm.
More encouragingly for the government, Public Mobile, one of the new-entrants in Canada’s mobile market, has recently been acquired by investment firms Thomvest Seed Capital and Cartesian Capital, with a “commitment to fully fund Public Mobile to a cash-flow positive position”.
Canada’s mobile market is nonetheless still dominated by Rogers Wireless (9.38 million subscribers), Telus Mobility (7.7 million) and Bell Mobility (7.67 million), according to data from GSMA Intelligence.
The country’s start-ups lag far behind. Wind has the most (around 600,000 subscribers), followed by Public Mobile (384,000) and Moblicity (335,000).