Foreign ownership rules likely to be relaxed under new Tory majority government

4 May 2011

Expectation is high that strict foreign ownership rules in Canada’s telecoms market may be relaxed soon following the weekend’s elections which saw a majority conservative government take power. Previously, the conservatives had led a minority administration and lacked support for plans to reform the ownership framework from other parties which opposed changing the country’s telecoms legislation. TeleGeography’s GlobalComms Database says that under the Telecommunications Act, foreign investment in facilities-based telecoms operators (fixed or mobile) is permitted up to a cumulative total of 46.7% of voting shares, with no more than 20% direct share or 33.33% indirect share. Put another way, direct voting control must be at least 80% Canadian, and indirect voting share, such as in Bell Canada’s case through BCE Inc, must be at least 66.66% Canadian. Furthermore, at least 80% of the members of the board of directors must be Canadian. These limits do not apply to resellers, or to operations conducted under an international submarine cable licence, fixed satellite services or mobile satellite services. Last year Industry Minister Tony Clement declared that the government will push to loosen foreign ownership restrictions on telecoms companies, while excluding the broadcasting sector from such measures, including media and broadcasting content divisions attached to telcos.

The foreign shareholding debate was polarised in December 2009 when Industry Canada issued a decision overruling autonomous telecoms regulator the CRTC, which had declared that a new mobile entrant, Globalive Wireless (Wind Mobile), contravened the foreign ownership laws; the ministry interpreted the rules differently and cleared the cellco for launch. However, in February 2011 the Federal Court overruled the government’s approval of Wind’s ownership and ordered the company to comply with the CRTC’s original ruling; both the company and the federal government have appealed the decision. Wind is aiming to prove it is controlled by Canadians and is not ‘overly influenced’ by its financial backer, Orascom Telecom, which until recently was Egyptian-controlled before being merged with Russia’s Vimpelcom.

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