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Federal budget disappoints on telecoms foreign ownership

5 Mar 2010

Canada’s federal budget speech yesterday gave confusing signals to the telecoms industry as to whether the country will relax restrictions on foreign ownership of domestic fixed line, mobile and broadband network operators. According to CBC News, the government merely said that it will ‘increase competition and investment in the telecoms sector, which will lead to greater innovation and lower prices for consumers by removing foreign ownership restrictions on satellites.’ The speech continued: ‘This will allow firms to access foreign capital and know-how and to invest in new and advanced technologies … The removal of restrictions will also allow Canadian firms to develop strategic global relationships that will enable them to participate fully in foreign markets.’ A day earlier, the government’s annual key policy announcement – ‘the throne speech’ – had strongly hinted that both the telecoms and satellite industries would be opened up to further overseas investment, stating that Ottawa would ‘open Canada’s doors to venture capital and to foreign investment in key sectors, including the satellite and telecommunications industries, giving Canadian firms access to the funds and expertise they need.’ Comments by Industry Minister Tony Clement in interviews after the throne speech also supported this impression, but the budget speech identified only the satellite sector as an immediate target for liberalisation.

However, there is a general sense that it is only a matter of time before the rules are changed, at least in the cellular sector. In 2008 the Competition Policy Review Panel recommended reducing or eliminating foreign ownership restrictions for network infrastructure-based operators. Then, in December 2009 Clement overturned a ruling by telecoms regulator the CRTC by ruling that start-up mobile operator Globalive Wireless (Wind Mobile) met Canadian ownership and control requirements under the Telecommunications Act. The minister decided that Globalive – 65%-owned by Egypt’s Orascom Telecom but technically meeting legal requirements on the basis of Canadian-held voting shares – did not need to make any changes to its ownership structure. Clement added at the time that the ruling was a one-off that would not alter existing foreign ownership laws. However, subsequent government announcements seem to hint that the Globalive ruling could set a precedent and lead to relaxing the ownership rules. Meanwhile, Canada’s planned transition from analogue to digital broadcasting in 2011 will open up more wireless spectrum for auction, potentially generating more interest from foreign firms.


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