Globalive’s Anthony Lacavera says his company is ideally positioned to bring U.S.-style competition to the Canadian wireless landscape if it succeeds in reacquiring the assets of Freedom Mobile, which Globalive launched as WIND Mobile in 2008.
The former WIND assets, now owned by Shaw Communications Inc. and operated under the Freedom banner, are on the block as Rogers Communications Inc. aims to offload them to gain government and regulatory approval for its $26 billion purchase of former rival Shaw.
“I think the solution is not a cable company (buyer) or any other incumbent telecom or cable company,” Lacavera said in an interview Wednesday. “What we need is a pure play, and truly independent pure play… that is only selling wireless and not any other services and bundling.”
He said any such player, including Globalive, could meet the government’s objective of bringing competition to the market by mirroring the landscape in the United States where pure-play wireless operator T-Mobile brought down prices charged by full-service telecommunications companies AT&T and Verizon.
Globalive offers $3.75B in cash for Freedom Mobile, says media report
Rogers’ sale of Shaw wireless assets may come down to how much it can keep
Rogers opened a data room this month to entertain offers for the Shaw wireless assets after François-Philippe Champagne, the federal minister of innovation, science and industry, confirmed what most analysts had been expecting: the government would not allow the “wholesale” transfer of Shaw’s wireless licences to Rogers.
A media report Wednesday said Lacavera had submitted a $3.75-billion offer, backed by financing led by U.S. investment firms Twin Point Capital and Baupost Group.
Lacavera said he was unable to confirm or comment on the Globe and Mail article, but added that he had been public about his interest in re-acquiring the wireless assets since it was suggested last fall that overlapping wireless licences and infrastructure in British Columbia, Alberta, and Ontario would have to go in order to win regulatory approval for the Rogers-Shaw tie-up.
That merger, with a target closing date of June, requires approval from the Competition Bureau and the Canadian Radio-television and Telecommunications Commission, as well as Innovation, Science and Economic Development Canada.
Jerome Dubreuil, a telecommunications analyst at Desjardins Securities Inc., said in a note to clients late Tuesday that a bid for the Shaw wireless assets would represent a “step in the right direction that would likely alleviate the concern that we believe is the main hurdle to regulatory approval.”
Andrew Garas, a spokesperson for Rogers, declined to comment on the sale process for the Shaw wireless assets or any offers on the table.
Besides Lacavera’s group, Montreal-based telecommunications and media company Quebecor Inc. has been named as a potential suitor, as well as dark-horse contenders including Ontario based cable and telecom company Cogeco Inc., rural internet service provider and mobile network operator Xplornet, and Halifax-based Eastlink, which operates a hybrid fibre optic network and has television, mobile, internet, phone and smart home services.
Lacavera and his partners sold WIND Mobile to Shaw in 2016 for $1.6 billion. He said Wednesday that decision stemmed from the need to replace his early telecom partners — which had Egyptian and Russia connections — with hedge funds and private equity players, who then opted to take Shaw’s offer within a couple of years of acquiring their interest.
“I would have never sold Wind in the first place,” he said. “Ironically, when the last invasion of Ukraine happened and Russia annexed Crimea, it became very problematic for my investors in Canada.”
The “very urgent” reshuffling in 2014 meant Amsterdam-based telecommunications company VimpelCom Ltd., whose backers included a Russian conglomerate, was replaced by private equity players, Lacavera explained.
“Of course, as soon as that happened … my investor group is no longer strategic,” he said. “As soon as Shaw made a good offer, they (would) want to sell immediately.”
Lacavera said that experience, combined with his early success with WIND in bringing down wireless prices where it operated, bolsters his case for walking away with the assets now on the block.
“That’s exactly my point right now. If a consortium of private equity buys (Freedom, without a strategic telecom partner) it’s going to happen again,” Lacavera said of the quick asset flip in 2016.
He added that a strategic operator would be more likely to stick around, and to bring competitor in the form of lower prices for consumers.
“A purely financial buyer is going to do the opposite of compete aggressively. If anything they’re going to try to raise prices and increase profits,” Lacavera said.
“So whether I’m the buyer or not, if you want a competitive marketplace, we cannot have financial purely financial investors in the market be operators.”
He acknowledged that an established cable and telecom player such as Quebecor, which invested heavily in complementary licences to Freedom’s footprint in the last spectrum auction, presents stiff competition and would likely win favour with government and competition regulators.
He added that he doesn’t believe reports that Quebecor is not talking to Rogers.
“I think they’re very well positioned,” he said, adding that his assessment also applies to some extent to Quebec-based telecommunications company Cogeco Inc., which has some operations in Ontario.
However, while companies with complementary wireless licences and infrastructure would be in a good position to roll out industry-leading 5G networks, a pure-play wireless operator would be more likely to lower prices for wireless consumers because they wouldn’t be concerned about other communications services in the bundle.
“If you’re a cable company, you don’t want to offer a very competitive wireless offering because it’s going to cannibalize your legacy business … your home phone and your home internet business, especially with 5G speeds,” Lacavera said.
“If it’s too good, your (customer is) going to say: ‘I don’t need my home phone anymore and I’m going to cancel my home phone and or if it’s a fast enough internet connection, I’m just going to use tethering I’m not going to have internet connection at home anymore.’”