Egypt-based Orascom Telecom Holding is planning to exploit a change in legislation that will allow it to take full control of Wind Mobile, its Canadian mobile-phone subsidiary.
The company has asked shareholders to approve a proposal that would let it convert non-voting shares in Globalive (Toronto, Canada), the holding company that owns Wind, into voting shares.
The share conversion would also let Orascom (Cairo, Egypt) restructure a loan it made to Globalive and cancel about C$450 million in interest payments. There is speculation that Orascom is trying to simplify Wind’s ownership structure in preparation for a merger with Mobilicity, a smaller rival.
“Orascom exercised a right they have always had to increase their voting shares,” Anthony Lacavera, Wind’s chief executive, is reported to have said by Canada’s Globe and Mail newspaper. “I see this as a big positive for Wind in that this will give them the confidence to continue investing in Canada and it positions us to lead the necessary new entrant consolidation.”
Orascom currently owns 32.02% of Globalive’s outstanding voting shares and 65.08% of total outstanding shares. If the share conversion is approved, the company would hold a voting participation stake in Globalive of 65.08% and, therefore, take control of the company.
That means the share conversion has to be approved by Canadian investment authorities, but Orascom expects to obtain this by the end of the year or early in 2013.
Its own shareholders are expected to vote on the scheme next month.
Orascom’s move comes in response to new legislation permitting 100% foreign ownership of operators that have a market share of 10% or less.
Even so, authorities are likely to consider the probability that a merger with Mobilicity (Vaughan, Canada) would follow their approval, as rumours about such a tie-up have been circulating for more than a year.
Others, however, believe some of Wind’s owners are keen to sell the company and leave the Canadian market. In 2008, Naguib Sawiris, Orascom’s founder, spent hundreds of millions of dollars to acquire licenses and build out Wind’s network, but the company is reported to have signed up only about 500,000 customers since then.
VimpelCom (Amsterdam, the Netherlands), with which Orascom merged in 2010, is thought to lack enthusiasm for the Canadian business.