Orascom withdraws bid for control of Wind Mobile

Orascom Telecom Holding announced Wednesday that it is pulling back its bid to buy out Wind Mobile Canada founder and CEO Anthony Lacavera and acquire full control of the company, in which it already holds a 65 per cent interest.

TheEgyptian company, which is majority-owned by VimpelCom Ltd. and provided much of the financial backing for Wind Mobile when it entered the Canadian wireless market in 2008, withdrew its application for full ownership, which was awaiting approval by federal regulators as required under the Investment Canada Act.

Wind and Orascomannouncedin January that Lacavera would transfer his35 per cent staketo Orascom and step down as CEO, giving Orascom a 99.3 per cent indirectinterest in GlobaliveWireless Management Corp.,the holding company that operates Wind Mobilein Canada. At the time, Orascom held a 32 per centvoting interest and a 65.1 per centeconomic interest in Wind.

Lacavera vows tobuy outVimpelCom

On Wednesday, Lacavera saidthat now that VimpelCom has pulled back, he willretain his 35 per cent ownership stake in the company and will go back to the capital markets to raise money to buy the rest of the company.

"I am going to continue approaching VimpelCom about acquiring their stake," he told The Canadian Pressin an interview.

He assured Wind Mobile'smore than 600,000 customers that nothingwould change while the search for new capital continues.

"It's business as usual," he said.

Orascom said in a brief statement that it's interested in working with the government on another approach for Wind Mobile but didn't go into details.

Although the government approvalwas taking longer than expected, strictly speaking there doesn'tseem to be anything in Canada's wireless regulations that would have prevented Orascom from acquiring Lacavera's stake.

Thegovernmentrelaxed limitsonforeign ownership last year, allowing foreign takeovers of wireless companiesthat control 10 per cent or less of the Canadian wireless market which would apply to Wind.

But telecommunications analyst Neeraj Monga of the investment research firm Veritas says there is a lot going on in the background involving the labyrinthine ownership structures of Orascom, VimpelCom and VimpelCom's owner, Russian telecoms investment firm Altima, that may have influenced Orascom's decision to pull out of the acquisition.

For one,onceOrascom said it would buy outLacavera, VimpelCom announced it intended to sell Wind Mobile.

"Perhaps the government might have felt that if control wastransferred toVimpelCom and they were to sell it to somebody else, it may not work out that well for Canadians," said Monga. "[But] this is all really speculative."

Verizon a potential player

A failed attempt to take Orascom private may have also played a part, Monga said. VimpelCom controls 51.7 per cent of Orascom, but the rest of itis publicly traded in London and Egypt.

"VimpelCom (through Altima) wanted to take Orascom Telecom Holding private," Monga said. "It failed in that effort. Perhaps that has also contributed to Orascom Telecom Holding withdrawing its intention to buy Lacavera out and commit more capital to the Canadian market."

Monga said there is little doubt that Lacavera will now try to buy Wind from VimpelCom and pursue his vision of building it into a true fourth contender that can compete with the "big three" carriers in the Canadian market.

It's likely Lacavera will partner up with Egyptian telecoms entrepreneur Naguib Sawiris, who sold Orascom to VimpelCom in 2011 and now heads Accelero, an Egyptian company that is seeking to buy Allstream from Manitoba Telecom Services, Monga said.

It's also possible that he'll enter some kind of partnership with U.S. carrier Verizon Wireless, whichis rumoured to be eyeing the Canadian wireless market.

"To the extent thatVerizon does go and kick the tires atWind, Orascom mightbe willing to sell their equity stake to Verizon," Monga said. "And now that 100 per cent ownership of companies with less than 10 per cent market share is allowed under the new regulations, thenVerizon could buy the equity stake fromLacavera or maybe he can be a small shareholder in the combined company."

Turbulent time for telcos

For now, all of this is speculation, Monga said, but things will become a lot clearer in the coming months.

It has been a turbulent time for Canada's wireless sector.

Earlier this month, the governmentblockedthe takeover of Mobilicity, another new entrant that began operating after the 2008 spectrum auction, by Telus Corp., whichhad agreed to buy the company for $380 million.

Part of its rationale for doing so was that Mobilicity acquired its spectrum in the auction at rates subsidized by taxpayers on the understanding that they were subsidizing new entrants, not existing large telcos like Telus and Rogers,and under the condition that the spectrum would not be sold to an incumbentfor five years.

The government is set to announce new rules on the transfer ofwireless spectrum licences by the end of June.

Monga said that and some other forthcoming decisions, including the approval or rejection ofBell's takeover of Astral Media, will help clarify which players will be bidding in Canada's nextspectrum auction, which is set to take place in 2014 and which has a September deadlinebid submissions.

"Between now and September, everything should be really clear as to what's going to happen," Mongasaid. "A lotof the confusion should go away."