Globalive Says It Will Avoid Spectrum Auction Without Set-Aside

Globalive Communications Corp., a recent entrant to Canada’s wireless market, will boycott the next government auction of spectrum unless frequency is reserved for new companies and its right to operate is sealed.

“If they don’t set aside spectrum for new carriers, then the incumbents are going to bid it up to a price we cannot rationalize in any business case,” Anthony Lacavera, chairman of Toronto-based Globalive, said today in a telephone interview.

Globalive, other new carriers and the three established operators BCE Inc. (BCE), Telus Corp. (T) and Rogers Communications Inc. (RCI/B) are lobbying the federal government as it prepares rules for an auction of 700 megahertz-frequency spectrum expected in 2012. Globalive, backed by Egyptian billionaire Naguib Sawiris’s Orascom Telecom Holding SAE (ORTE) has faced repeated challenges from rivals who say it doesn’t meet Canada’s foreign-ownership rules.

In the last auction in 2008, the government set aside some spectrum just for new entrants, allowing Globalive, Public Mobile, Mobilicity and Videotron Ltee to offer consumers a wider choice of carriers. BCE, Telus and Rogers argue they need equal access to new spectrum to meet surging demand for data delivered on smartphones, which they sell more of than smaller carriers.

‘Totally’ Regrets

Lacavera spoke the day after Sawiris told the Globe and Mail that he “totally” regrets his decision to invest in Canada.

Globalive spent C$442 million ($431 million) on spectrum in 2008 with a $700 million loan from Orascom and has been engaged in a legal fight for its right to operate ever since. Globalive won a court appeal in June that secured its right to continue selling phones in Canada, reversing an earlier decision that Globalive did not meet the country’s foreign-ownership rules. That decision could yet be appealed to Canada’s Supreme Court.

Orascom merged with Russia’s VimpelCom Ltd. (VIP) in April to create the world’s sixth-largest telecommunications company. Lacavera said that while Vimpelcom has deep pockets, it won’t bid on more spectrum if it doesn’t have the certainty it needs about Globalive’s right to operate.

“I am very confident I have investor support for this auction but I am not going to have the investor support if the right conditions don’t exist,” Lacavera said today.

“No investor, Vimpelcom and Orascom or any other investor is going to come to the table with the ambiguity that’s currently in the foreign-ownership rules, coupled with the Globalive fiasco as it’s continued to unfold and we still have the Supreme Court overhang.”

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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