Communication
Dec. 11 (Bloomberg) — Globalive Communications Corp. can start selling wireless service in Canada immediately, after the government overturned a ruling that blocked the startup from competing with three other national carriers.
Globalive is a “Canadian company” and its entry into the market will give consumers more choice and lower prices, Industry Minister Tony Clement told reporters today in Ottawa. All three major carriers on the Toronto Stock Exchanges telecom index fell, led by Rogers Communications Inc.
The announcement, which overrules an Oct. 29 decision by the Canadian Radio-television and Telecommunications Commission, signals Prime Minister Stephen Harpers Conservative Party government may be heading toward easing ownership restrictions, lifting barriers to foreign acquisition of even incumbents such as Rogers, BCE Inc., and Telus Corp., said Michael Geist, a law professor at the University of Ottawa.
“Its pretty clear the government strongly believes competition is job one,” Geist, who specializes in Internet and technology issues, said in a telephone interview. “It could open the doors to a pretty dramatic reshaping of the Canadian market.”
The cabinet decision released today cited the need to apply requirements for Canadian control in support of greater competition. The government said Canadas telecommunications legislation should be interpreted in a way that ensures access to foreign capital.
“These are the money paragraphs in this in terms of where things may be going,” Geist said.
Rating Reduced
Bank of America-Merrill Lynch analyst Glen Campbell cut his ratings on Rogers and Telus to “neutral” from “buy” after the decision this morning.
Rogers fell C$2.32, or 7 percent, to C$31.05 at 4:10 p.m. in Toronto Stock Exchange trading, the biggest decline since Feb. 18. BCE dropped 2.4 percent to C$27.35. Telus shares decline 2.3 percent to C$32.90.
Rogers CEO Nadir Mohamed said in an interview yesterday that Canadas wireless market cant sustain a fourth national mobile carrier, calling the prospect “inconceivable.”
The company, Canadas largest mobile-phone provider, has cut jobs to prepare for competition after the government auctioned wireless spectrum last year.
“Theyre all going to lose,” said Elroy Jopling, an analyst with Mississauga, Ontario-based Gartner Inc., atechnology research company. “It all depends on how quickly they react and how well they react.”
About 65 percent of Canadas population had a mobile phone last year, according to the International Telecommunication Union. That compares with 88 percent in the U.S., 70 percent in Mexico and 74 percent in Peru. This low market penetration rate justifies having another provider, Jopling said.
Wireless companies had claimed that letting Globalive operate threatens Canadas national ownership rules in telecommunications and broadcasting industries and was unfair to existing carriers.
“Its disappointing as we think Globalive quite clearly does not meet the requirements for Canadian control,” BCE spokesman Mark Langton said in an e-mail. “Well be taking a close look at the reasoning behind this decision.”
“I dont think the cabinet fully understands the import of what they did or the precedent they have set,” Michael Hennessy, Telus senior vice-president for regulatory affairs, said in an interview.
Starting Service
“Weve always thrived in a competitive environment and were ready to meet the competition head on,” Rogers spokeswoman Odette Coleman said in an e-mail.