Orascom Weighs Up Options for Wind Mobile on the Canadian Wireless Market

by Istvan Fekete on March 12, 2013

In January, Orascom announced that it would take advantage of new foreign investment rules allowing 100% foreign ownership of small telecom companies. As a result, Orascom has bought out Wind founder Anthony Lacavera to secure full control of its Canadian business, Wind Mobile. As the deal goes through regulatory approval, Mr. Lacavera will step down as CEO, a move that sparked speculation about Orascom’s future plans for Wind.

The move to simplify Wind’s ownership structure and clean up its balance sheet could mean Wind’s days are numbered in its current form. Possible scenarios: Wind merges with Mobilicity; Wind gets sold to a Canadian incumbent once a standstill agreement expires in 2014.

Even the words of Orascom CEO, Ahmed Abou Doma, contributed to the speculation. Although the formal takeover of Wind Mobile is still subject to final regulatory approval, the company is eager to secure this approval before it makes any final decisions about how to handle its Canadian investment.

Jo Olav Lunder, VimpelCom CEO, has further emphasized the above during a conference call on Wednesday: “Step 1 now is to take control of the company and the reason for doing that is basically to decide our own destiny in the country without having to deal with partners and too many stakeholders. And then we will just evaluate the options available – and there are multiple options available for us in Canada.”

“We will test the different options available,” Mr. Lunder added. He also stressed that recent commentary he made at the Mobile World Congress in Barcelona about potential opportunities in Canada “was not meant to be a declaration of an acquisition strategy in Canada – even though maybe it was maybe perceived like that.”

Other available alternatives could be the company’s exit from Canada, an “in-market merger” with another Canadian carrier, or a merger with another to continue to grow organically.

And when it comes to growth, Wind’s curve is trending upwards: It increased its subscriber base by 47% on a year-over-year basis to 590,438 and switched on its network in Ontario cities Peterborough and Windsor.

Also, Wind enjoyed a strong holiday season with its fourth quarter revenue per user increased to $28.10, up from $26.40 reported a year previously.
As the above numbers show, Wind’s results are improving as VimpelCom/Orascom is in the process of taking over their Canadian business, but analysts question whether the owners want to put in another $1 billion in capital to fund LTE upgrades and the 700 MHz spectrum.

Now, if we put Wind Mobile’s quarterly results side by side with those of the incumbents, there is a huge gap there, as the big three control roughly 94% of the cellphone market. While there is a great potential in the Canadian mobile market, the new rules the government is laying down to boost competition may have come too late for start-ups.

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Written by: Istvan Fekete. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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