Videotron ideal suitor for Globalive: analyst

Quebecor's Videotron telecom arm might be the ideal candidate to help solve Globalive Communications' foreign ownership problems, an analyst at Royal Bank suggests.

Last week, the CRTC found that Toronto-based Globalive, which is65 per cent ownedby Egypt's Orascom and had plans to launch a wireless service in Toronto and Calgary this year under the Wind brand, does not meet foreign ownership and control rules.

Industry Canada is reviewing the decision and the regulator's recommendations can be overruled or ignored by government. But since the CRTC at least temporarily put the brakes on Globalive's wireless ambitions, speculation has run rampant about how the company might satisfy ownership requirements.

Among the theories is that a regional Canadian company with more modest ambitions might link upwith theupstart Globalive to satisfy Canadian ownership rules in exchange for a minority stake in a new wireless player.

The theory was floated as Manitoba Telecom posted its quarterly earnings on Thursday. But company management poured cold water on the idea ofa Globalive partnership, as CEO Pierre Blouin said MTS isn't looking to be a national wireless player at this time.

The company is in the midst of building an advance wireless network with Rogers Communications Inc., which will also give it access to the national Rogers network as a roaming partner.

"Right now, we're happy with the arrangement that we have with Rogers," Blouin said.

The deal includes a $50 million break fee in the first year if MTS backs out of the deal. Barring "exceptional economics from the arrangement," that makes it prohibitively expensive for MTS to ponder linking up with Globalive, RBC analyst Jonathan Allen said in a note yesterday.

But Allen did float the intriguing possibility that Quebecor Inc. subsidiary Videotron might beGlobalive's ideal dance partner.

Videotron has $96 millionof strandedToronto-area spectrum, Allen said, that the company currently hasno plans to develop.The company could flip the 10 megahertz they picked up in the 2008 federal auction of wireless spectrum to Globalive as in-kind equity for an ownership stake.

That could help satisfy the CRTC's concerns that Globalive is controlled by Egyptian-based Orascom, and give Videotron a toehold outside its home turf of Quebec.

The theoretical alliance makes further sense, Allen said, becauseGlobalive would not be a competitor in Videotron's home market of Quebec. The company plansto launch in Toronto and Calgary before launching nationally.

"And the roaming arrangement[Videotron] already brokered with Rogers does not have a prohibitive break fee attached," Allen said.

Officials with Globalive and Videotron did not respond to requests for comment.