Public Mobile’s request to challenge Globalive “could drag out for months”

John Connors

January 11, 2010 9:24am

On Friday Public Mobile asked the Federal Court to overturn the decision that allowed Globalive to launch. Public Mobile CEO Alek Krstajic said “We believe Cabinet’s decision is unfair to other wireless carriers, especially new entrants like Public Mobile that have played by the rules and secured substantial Canadian investment. Furthermore, while we respect the Government’s authority we believe what it has done amounts to a change in law, and only Parliament can change Canadian law.”

Jeff Fan and his team over at Scotia Capital have weighed in on the continuing topic. In their Daily Edge newsletter titled “Public Mobile Challenges the Government’s Globalive Decision”, they state some possible implications of the action and believe “This could drag out for months”. It reads:

“Last Friday, wireless new entrant Public Mobile applied to the Federal Court (Canada) to overturn the Government of Canada’s decision that allowed Globalive Wireless to operate.

Highlights of Public Mobile’s Federal Court Application
■ Public Mobile applied to the Federal Court (Canada) asking it to overturn the Government’s Dec. 10, 2009 decision that allowed Globalive Wireless to operate. Public Mobile believes the Government’s decision effectively “threw out” Canadian foreign ownership laws, which Public Mobile asserts only Parliament can change.

■ Specifically, Public Mobile is asking the court to quash the Government’s decision and to declare:
1. The decision was made without, or was beyond, the Government’s jurisdiction;
2. The Government’s decision was an error in law;
3. The Government’s decision was contrary to law.

■ Public Mobile is not opposed to Globalive’s presence in the marketplace and is not opposed to more competition. However, it is looking for a level playing field for all wireless carriers.

■ The Federal Court, Canada’s national trial court, hears and decides legal disputes, including claims against the Government of Canada.

■ Public Mobile is in the process of building a wireless network covering 19 million POPs in Ontario and Quebec to provide unlimited talk and text for $40/mo, with a service launch anticipated in 1H/F10.

■ Public Mobile is backed by numerous Canadian investors with the largest being the OMERS pension fund.  Public Mobile also has non-Canadian investors.  The CRTC initiated on December 18, 2009, a Type 2 Ownership and Control review (non-public process) of Public Mobile.

Our Thoughts on Public Mobile’s Application
■ We believe this was a good move by Public Mobile.  Whichever way the court rules, we believe Globalive’s competitors (other new entrants and incumbents) will benefit.

■ Greater uncertainties and costs for Globalive. We believe this adds uncertainty and potentially costs for Globalive. While we do not expect this application will stop Globalive from operating immediately (i.e., no injunction), it could impact its efforts in successfully attracting new investors given the possibility that the court could overturn Industry Canada’s decision. At a minimum, even if investors come forward, this could raise Globalive’s borrowing cost.

■ Incumbents could benefit. Incumbents (Rogers, TELUS, and BCE) are not the applicants in this case.  We believe they passed at the opportunity as this could damage relationships with Industry Canada, which is currently reviewing annual spectrum fees.  Nevertheless, we believe they should benefit from the Globalive uncertainties and potentially the higher  borrowing costs.

■ Public Mobile and DAVE Wireless could also benefit. Public Mobile and DAVE do not plan to launch for several more months and anything that creates a barrier for Globalive should be beneficial for the other new entrants.  With Orascom being a significant foreign backer, we believe Globalive has some competitive advantages over the other new entrants. Furthermore, Public Mobile and DAVE could also benefit if this leads to changes in foreign ownership rules.

■ This could drag out for months. Public Mobile also believes it has a reasonable chance of success.

■ This could be the catalyst for broader changes.  We believe this could be the catalyst that begins the process that would ultimately lead to a relaxation of the foreign ownership rules.  If the court rules against the government, in order for the government to maintain its pro-competition objective, it may have to consider changes to the foreign ownership rules.

  • Colin

    Why don’t public mobile just get on with building their network rather than doing this? It isn’t exactly helping their image.

  • Msk12

    They are it’s just unfair, when your back up with billion dollar company. Why can have DAVE and public mobile have the same rule bender ! It’s odd how people stop at WIND and praise it again and again when other new players will have similar options.

  • Hugo B.

    For once the coverage of this seems balanced!! The government overturning the CRTC is a big deal as it goes against current law. PM are doing a good thing (and if they didn’t do it, someone else would). Globalive have been given what is an unfair competitive advantage and the real question isn’t really whether they’ll stay in business (that ship has sailed), but more what comes next. Will there be more open foreign ownership rules? Will Globalive have to change it’s capitalization to comply with current laws?) That is what needs to be clarified so that all the industry plays on equal footing.

  • situashaun

    Said it once and I’ll say it again. In order to be a viable company, Wind needed serious financial backing which didn’t come from us Canadians. Otherwise you just have a public mobile. All that money spent into purchasing (which gets you crap by the way) and they can still barely touch the incumbents. They should start looking at wireless as a whole otherwise we’re stuck getting raped by Bell, Rogers and Telus.

  • Serge

    Msk12, Hugo B., what is it that you think Public Mobile doesn’t have access to? If Public or DAVE has a viable business plan that can attract foreign funding on exactly the same terms as WINDMo, then by all means, they should go for it. There is nothing stopping them. The rules are the same for everyone.

  • situashaun

    On a fair level playing field? Public’s offering is garbage. The world is going one with technology and they throw in CDMA. If wind came in with the same garbage offering that public has, there would be no point to this new competition thing at all. Notice how dave isn’t make a big stink anymore either? Unless Public has something up their sleeve, they should get their act together, pronto. No one will want to sign with them.

  • John

    Serge, it was illegal to obtain foreign money at more than 20% or so if i am right. That’s why PM is filling, bcoz if they knew that gvmt would accept 65% + of foreign monies 12 months after the auction was completed they would have tried to get it has well and maybe get more spectrum….

  • Scott S

    If you omitted Public Mobile from this article you would think the company harassing WIND is from Bell or Telus or Rogers. Oh wait he basically is from Bell. You have to break a few eggs to make an omelet, the omelet being a wireless company that doesn’t rape and pillage like Robelus.

  • Hugo B.

    @ Serge,

    That’s precicely it, rules aren’t the same. John summed it up nicely.

    I wouldn’t be surprised that, if the Cap structure adopted by Wind had been legal and open for consideration at the time of the auction, the players and outcome of it might have been quite different (and likely more expensive).

  • Serge

    No, John and Hugo B., it wasn’t illegal. The rules are exactly the same. Globalive and Public Mobile found themselves in exactly the same position. They had to be vetted by exactly the same bodies. The difference is that Public Mobile sat back and did nothing. But, hey, if Public Mobile wants to go raise foreign money and put together a deal that looks exactly like what Globalive did, then they should go for it instead of running to court.

  • Rishi

    Canadians are sissy. We fear foreign competition. They preach open markets for the third world, and protect our big companies. Rules are written by the powerful to benefit the powerful. Why not have Verizon or T-Mobile in Canada? You see foreign companies operating everywhere in the world. Why is it that we never see foreign companies here, and we never see Canadian companies operating abroad?

  • Michael

    Jeezus public mobile. Just ask for a settlement (like towersharing sites) and be done with it. God.

    If they do manage to push them out of the market place there will be quite an angry mob after them of only 500,000 or so people.