Decades from now, when the telecom industry looks back at the early part of this century, Wind Mobile will be remembered as a trailblazer of sorts, says Tony Lacavera.
“There’s no doubt we were a catalyst for the review of the foreign ownership rules, which were [liberalized] in 2012,” the CEO of the upstart wireless provider told Business in Vancouver.
“We were definitely pushing the envelope into a new frontier in terms of what can be achieved in terms of foreign ownership.”
Following years of unstable [foreign-backed] ownership, Wind Mobile announced September 16 it was recapitalizing.
The recapitalization plan, which was given government approval November 4, allowed an investment group led by Lacavera’s own Globalive Capital buy out Amsterdam-based VimpelCom’s stake in Wind Mobile for $130 million.
Globalive and the other new owners are assuming about $150 million in debt from VimpelCom.
Wind, which is headquartered in Toronto, has about 130 employees at its regional office in Vancouver. The five-year-old company operates only in B.C., Ontario and Alberta, but its 750,000 subscribers still make it the country’s fourth-largest wireless carrier.
“Compared to Telus (TSX:T) we’re very small, compared to Bell (TSX:BCE) and Rogers (TSX:RCI.A) we’re small, but we have a very significant presence out here and that’s because [B.C.] is obviously a big market and a great growth market for us,” Lacavera said, adding the Globalive acquisition means he’s spending the next six months focused on developing Wind’s brand and network.
“Obviously, that’s a big challenge for any startup in any market, but particularly in Canadian telecom where you have three large incumbents.”
The recapitalization plan also means Wind’s fate will be firmly in the hands of Canadian owners following years of headaches with major stakeholders.
Originally, Egpyt’s Orascom Telecom was the primary backer behind the wireless carrier, but a 2008 Canadian Radio-television and Telecommunications Commission (CRTC) review determined the company did not meet Canadian ownership requirements. The federal cabinet then issued an order – which Telus and Public Mobile fought for years in court – stating the company did indeed meet ownership requirements.
The federal order was eventually upheld and VimpelCom completed the acquisition of its Wind stake through a merger with Orascom in 2011.
But in January, Wind announced it had to withdraw from a coveted 700-megahertz wireless spectrum auction after VimpelCom would not fund efforts to expand the company’s reach.
Following the new ownership deal, the company finally has the licence to improve coverage and hopefully improve competition in Canada’s wireless industry, Lacavera said
The federal government is conducting its next wireless spectrum auction in spring 2015. Lacavera said Wind needs more spectrum to roll out the next generation of network and improve services in the markets it’s already in before expanding to other provinces.
“People out here in British Columbia have different characteristics and buying habits and usage habits than people in Ontario or people in Alberta,” he said.
Despite regional differences, Lacavera said all markets are ratcheting up mobile data consumption, which will be key to any future success Wind has.
Between 2013 and 2018, Canadians’ mobile data traffic is projected to increase 800%, according to Cisco’s (Nasdaq:CSCO) Visual Networking Index forecast.
That’s the equivalent of 62 million DVDs a month or 680 million text messages a second.
Meanwhile, smartphones are expected to be in the hands of 93% of mobile users by 2018, up from 66% in 2013.
Lacavera said he expects that by the time the market gets this level of data usage and mobile penetration in a few years, competition in the Canadian telecom industry will be far healthier. This is partly due to Wind’s new ownership deal allowing it to become a legitimate challenger to the big three carriers.
“I’ve been criticized in the past for being [in favour of] too much foreign capital and creating all sorts of difficulties,” Lacavera said. “But it also led to a lot of opportunity because I don’t think I would have been able to raise the capital in Canada alone to do what we did with Wind.”
