Ottawa's new telecom rules could take effect by June

RITA TRICHUR - The Globe and Mail

Proposed changes to Canada’s foreign investment rules that will allow small telecommunications companies to tap more global capital could take effect before the end of June.

The federal government reiterated its plan to liberalize foreign investment restrictions in the federal budget, noting that it is planning to relax those rules for telecom companies that have a market share of 10 per cent or less.

Sources say those proposed amendments to the Telecommunications Act, which were first announced by Industry Minister Christian Paradis earlier this month, will be included in the Conservative government’s first budget implementation bill.

A draft of that bill, which has historically included the budget’s feature items, is expected in April. As a result, it is widely anticipated that legislation will pass before Parliament recesses for the summer, which is expected to occur by June 22 at the latest.

A spokesman for Government House Leader Peter Van Loan, however, declined comment on Ottawa’s plan. “We are not in a position to confirm what may or may not be in the budget implementation bill at this point,” said Fraser Malcolm in an e-mail.

If the changes are not included in the first budget bill, the government could choose to introduce a separate piece of legislation to implement changes to the Telecommunications Act but sources say that route appears unlikely.

(A second budget bill is anticipated for the fall but is expected to include items that are more technical in nature rather than key planks.)

That’s because timing of those foreign investment changes is critical for smaller telecom companies. Wireless new entrants, in particular, are eager to secure more foreign capital ahead of the government’s auction of the highly-desired 700 MHz frequency next year.

For its part, the government appears to have acknowledged the necessity of removing investment barriers for smaller companies as soon as possible. Its budget documents note that foreign investment liberalization is “a key consideration as the upcoming wireless auction planned for 2013 is expected to be highly competitive and capital-intensive.”

Additionally, the timing of the changes could also trigger other key developments in the sector. In particular, the new foreign investment rules are expected to give Amsterdam-based VimpelCom Ltd. the green light to formally take over Wind Mobile.

That, in turn, could better position the company to pursue a merger or takeover of rival Mobilicity or other strategic options.