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Canada may be ready to ease telco foreign-investment limits

29 ноября 2011

The Canadian government could signal this week it's ready to accept increased foreign investment in the country's telecommunications industry, in an effort to spur competition in the fast-growing and profitable wireless sector.

Two government-commissioned panels have recommended liberalization in recent years, and the Conservative government of Prime Minister Stephen Harper has promised to boost competition, in order to lower prices. Canada's Industry Minister, Christian Paradis, has said recently the government hasn't yet made any decision on its plans for the sector, in which foreign ownership has long been circumscribed.

Still, industry watchers say that two high-profile appearances this week by Paradis could be opportunities for the government to signal its intentions. The minister is slated to deliver remarks at a major industry conference in Ottawa on Tuesday. He then meets with Wall Street analysts Friday. Representatives for Paradis didn't return requests for comment.

Telecoms is among a handful of industries--along with broadcasting and airlines--that are subjected to specific limits on foreign investment in Canada. Foreigners are prohibited from owning more than 46.7% of the voting shares of a telecoms company.

Senior Canadian executives say they expect the government to liberalize somewhat. They say rules could be eased to allow 100% foreign ownership in Canadian wireless companies with less than a 10% market share.

While such a move would go some way in fulfilling the government's pledge to boost competition, it would have limited impact on the country's big, incumbent telecom providers - BCE Inc., Telus Corp. and Rogers Communication Inc.. Together, these giants control 95% of the wireless market. Easing foreign ownership rules - even for smaller companies - could pressure prices. New entrants in recent years have already driven down prices.

Small Canadian wireless players, such as Wind Mobile, Mobilicity and Public Mobile, argue they need greater access to foreign capital to compete against the incumbents, because Canada's available pool of capital is just too small.

"The system is built against new entry and loaded in favor of the incumbents," said Eamon Hoey, managing director at Hoey Associates, a consultancy that advises clients in Canada's C$41 billion (US$39.2 billion) telecoms sector.

Incumbents argue foreign-ownership restrictions should only be eased if applied equally to the industry as whole.

The Canadian government is under pressure to change its foreign telecoms investment rules following a clash in 2009 with the chief telecoms watchdog over Wind Mobile.

The Canadian Radio-Television and Telecommunications Commission initially ruled Wind Mobile didn't meet the country's ownership requirements because it had too much financial backing from Egypt's Orascom Telecom Holding S.A.E.

The Conservative government overruled the CRTC's decision, arguing Wind Mobile met the ownership requirements because voting control rested with Canadians, and Canadians managed the company on a day-to-day basis. A Federal Court of Appeal upheld the government's decision. The Supreme Court of Canada has yet to decide whether it will hear an appeal.

The telecoms industry is also awaiting government details about its next wireless spectrum auction. Both big and small players want access to more spectrum, as they scramble to offer more video and other broadband services. New entrants want the government to set aside a portion of the spectrum for which only smaller firms can bid.

Without such a carve-out, they argue, they can't compete against the financially stronger incumbents. Incumbents say setting spectrum aside would create an unfair playing field.

Источник: Total Telecom

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