Globalive Says Telus Breaks Canada’s Ownership Rules

Telus Corp., Canada’s third-largest wireless carrier, may have violated the country’s restrictions on foreign ownership of phone companies, a competitor backed by VimpelCom Ltd. said in a regulatory filing.

About 48 percent of the holders of Telus’s voting shares reside outside Canada, Globalive Wireless Management Corp. said today in a Canadian Radio-television and Telecommunications Commission filing that was obtained by Bloomberg News.

Foreigners can hold no more than 33.3 percent of companies that own telecommunications carriers under Canadian law. Shawn Hall, a spokesman for Telus, said in an e-mail that the company is “fully compliant” with the restrictions and that Globalive’s methodology is faulty.

Canadian phone companies are competing to raise capital and build speedier networks for wireless customers. Telus Chief Financial Officer Robert McFarlane said earlier this month that the government must loosen foreign ownership restrictions for large phone companies, making it easier to get funding.

“If Globalive has its facts correct, it presents an interesting view, as well as a dilemma for both Telus and the Industry Minister, given restrictions surrounding telecom ownership in Canada,” Neeraj Monga, an analyst at Veritas Investment Research Corp. in Toronto, said in an e-mail.

Review Requested

Globalive, which is backed by Amsterdam-based VimpelCom and offers wireless services in Canada under the WIND Mobile brand, has asked regulators to review whether Telus complies with the ownership rules.

“WIND is bringing this application because Telus’s complicated and rarely used measures for controlling the level of foreign ownership of its publicly traded voting shares, along with its recent proposal to restructure its share capital by converting its non-voting shares into voting shares, raises complex and novel issues that have not been dealt with by the CRTC to date,” Simon Lockie, chief regulatory officer for Globalive, said in an e-mailed statement.

Globalive, based in Toronto, says it based its estimate of Telus’s foreign ownership on an analysis of the location of owners who hold shares through Canadian brokers, dealers and other financial intermediaries.

Assessing Residency

Telus’s Hall took issue with Globalive’s approach. The report that supports Globalive’s allegation relies on postal codes rather than actual residency, and it covers shares that are “materially different” than those used in Telus’s share register, he said.

“Telus has been and continues to be fully compliant with foreign-ownership restrictions, and have our own control processes in place to ensure we remain compliant,” Hall said in the e-mail.

Telus, based in Vancouver, said in March that “approved and pending” applications to buy its shares threatened to push foreign ownership beyond the 33.3 percent limit. At the time, the company told non-Canadian investors that some of their stock purchases may not be approved.

McFarlane said on June 5 that Canada should allow foreign investment for all companies in the telecommunications industry. In March, Industry Minister Christian Paradis said the federal government would allow companies with less than 10 percent market share to be fully owned by foreign investors.

Globalive has faced its own criticism over ownership. Telus asked the CRTC in 2009 to review the company’s ownership structure. While the commission initially ruled that Globalive violated the foreign-ownership rules, Prime Minister Stephen Harper’s cabinet reversed the ruling. In April, the Supreme Court dismissed a challenge to the government’s decision.

Denis Carmel, a CRTC spokesman, confirmed that the commission has received Globalive’s filing. The public typically has 30 days to respond to the application, after which Globalive will have 10 days to reply to any submissions, although the deadlines could be extended, he said.

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