Orascom unit cleared in Canada

The Canadian unit of the Egyptian telecommunications operator Orascom Telecom Holding is set to launch mobile services this week following a year of regulatory and legal roadblocks. The Canadian government made the rare decision to overturn a ruling by the country's telecoms regulator that Globalive Wireless Management failed to adhere to Canada's foreign investment rules.

Those rules limit foreign companies to own about 47 per cent of a Canadian telecoms operator. Orascom controls 65 per cent of Globalive as well as holding C$508 million (Dh1.75bn) of its debt. "This is a new day for wireless in Canada," said Anthony Lacavera, the chairman of Globalive. Egypt's Orascom is one of the Arab world's largest telecoms companies with more than 89 million subscribers in nine countries. With a relatively low mobile penetration rate of about 65 per cent of the population, Canada fit into Orascom's strategy of investing in high risk countries with low use of mobiles.

The operator, controlled by Egyptian telecoms mogul Naguib Sawiris, formed a partnership with Globalive during Canada's advanced wireless spectrum auction last year and provided the bulk of financing in addition to strategic backing for C$442m in airwave licences. Although the Canadian government originally approved Globalive's ownership scheme, the country's three mobile operators - BCE, Rogers Communication and Telus - successfully lobbied the Canadian Radio-television and Telecommunications Commission (CRTC) in September to deny Globalive and Orascom from launching a wireless service.

The decision was based primarily on Globalive's reliance on Orascom for its debt and complex credit structure that came with strict covenants binding the unit's decision making. "Orascom Telecom does not want to be the sole lender or the primary lender for the Globalive Wireless business and is doing it out of necessity and not of conviction," Mr Sawiris said in a deposition to the CRTC in September.

That decision by the CRTC was overruled by the industry minister Tony Clement on Friday. Analysts estimated that Globalive could begin providing coverage to between 15 million to 18 million people in Canada as early as today. It's obviously important and positive news for the company," said Nadine Ghobrial, a telecoms analyst with EFG-Hermes. "It's positive but I do not think it will be a major determinant of price performance given the developments currently taking place with the Algerian and Egyptian operations."

Orascom Telecom's stock rose to its highest level in six months after the company announced it would seek shareholder approval on December 27 to raise $800m in a rights issue to strengthen its balance sheet. The company said it would use the funds to offset any costs it may incur if its dispute with Algerian tax authorities for $596.6m in taxes was not resolved in its favour. Orascom ended yesterday's session on the Egyptian Stock Exchange at 31.39 Egyptian pounds (Dh21), up 4.36 Egyptian pounds or 16 per cent, the largest gain in more than six years.

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