Telecom tycoon says Ottawa's policy imperils Wind, foreign investment

Reuters

By Alastair Sharp and Euan Rocha

TORONTO, Oct 16 (Reuters) - Lack of clarity around Ottawa'stelecommunications policy has jeopardized foreign investment inCanada and cast doubt over the future of Wind, the largest newplayer in the Canadian wireless market, said Egyptian telecommagnate Naguib Sawiris on Wednesday.

Sawiris bankrolled the start-up of new telecom player WindMobile in 2008, but he lost his ties with the company after hiscontrolling stake in Orascom was sold to European telecoms firm Vimpelcom Ltd in 2011.

He retained an interest in investing in the Canadian telecomsector until earlier this month, when the Canadian governmentblocked his bid to buy Manitoba Telecom Services Inc's Allstream fiber optic network, citing unspecified nationalsecurity concerns.

"Canada is behaving like a third-world country. It is notbehaving like a Western developed economy," Sawiris said in aninterview with Reuters on Wednesday.

Sawiris, whose investment firm Accelero Capital Holdings hadoffered C$520 million ($500 million) for the Allstream unit,said he was livid about the Allstream ruling and he vowed not toinvest any further funds in Canada.

A spokeswoman for the Canadian government, responding to thecomments, said Canada "is open to foreign investment in allsectors of the economy, but not at the expense of the securityof Canadians."

Investors have become much more wary about Canada's foreigninvestment rules after Ottawa blocked a handful of high-profiledeals, including the 2010 attempt by BHP Billiton toacquire fertilizer giant Potash Corp. Last year, Ottawaallowed a Chinese firm to buy domestic energy company Nexen, butmade clear it would block further investments in oil sands byforeign state-owned enterprises.

Sawiris said he now plans to redirect his investment focustoward other markets, including Italy where he has investedheavily in the past. He plans to invest as much as $1 billion ina range of industries in Egypt over the next 18 months.

"We are looking at other markets. We will look in Italy, wewill look everywhere, but I will definitely not be wasting anymore time on Canada," he said. "I will not waste another minute,or another penny on Canada."

WIND IN DANGER

Sawiris said he believes the lack of certainty around whocan pour money into the Canadian telecom sector puts Wind atrisk of going "belly up."

Asked about the health of the company, a spokesman for Windsaid by email: "We can't comment on Mr. Sawiris' statement as itis his personal opinion and he is no longer connected to WindMobile Canada."

Sawiris' scathing remarks come just as Canada has launched acrucial auction of airwaves, which has failed to draw interestfrom any major foreign telecoms.

Sawiris said Ottawa's opaque policy has scared away manyinvestors. He also argued that Wind would be hamstrung in the700 megahertz spectrum auction and would struggle to survive inthe long term.

A Wind spokesman downplayed these concerns saying, "Thedecision to participate in the 700MHz auction will be decided bythe current shareholders of Wind Canada -- Vimpelcom and AAL."

AAL is the holding company of Wind CEO Anthony Lacavera, whoholds a majority of voting shares but a minority stake in Wind.A spokesman for Vimpelcom declined to comment.

DUPLICITOUS POLICY

Canada's Conservative government initially cheered for thesuccess of Wind. But Ottawa dragged its feet on approving achange-of-control request from Vimpelcom, whose top investor isMoscow-based Altimo, controlled by billionaire Mikhail Fridman.

Vimpelcom, which has hired UBS to assess a possible sale ofWind. In June it withdrew its request for a change in controlthat would have given it voting power equal to its equity stake,when it appeared that U.S. telecom giant Verizon CommunicationsInc was keen to strike a deal and acquire Wind.

However, Verizon's interest has cooled, and while Wind isbidding in the spectrum auction it is unclear the extent towhich Vimpelcom and its other backers will be willing to fundits bids - given doubts around whether they can eventually sellthe business and who may be allowed to acquire it.

Wind is the fourth-largest telecoms player in Canada, butboth it and other new entrants have struggled to turn a profit.Last month, Mobilicity, one of the smallest players in Canada,filed for creditor protection.

Ottawa has loosened foreign ownership rules in the sectorand startups appear keen to sell out to larger players. ButOttawa's ruling on Allstream appears to show that only a smallpool of foreign bidders may be allowed to invest in the sector.

The government has also indicated it does not want the bigdomestic players, BCE Inc, Telus Corp and RogersCommunications Inc, to acquire the startups. In June,Canada rejected the transfer of Mobilicity's wireless spectrumlicenses to Telus, stating that it would not approve deals thatled to undue spectrum concentration.

"Canada's not serious about having foreign direct investmentand they are not serious about opening their telecom market,"Sawiris said. "It's a waste of time, and investors like us wedon't have time to pay lawyers and accounting firms and do duediligence and block our capital for six, eight months."

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