Telus counters ‘misleading allegations’ from Globalive, dissident shareholder

Date: Tuesday, July 24, 2012
Author: Jamie Sturgeon, Financial Post

Telus Corp. has rebuffed claims it’s offside with Canada’s foreign-ownership laws, filing documents with regulators on Monday denying what the wireless carrier calls “misleading allegations” made by competitor Wind Mobile and a dissident shareholder.

As of June 29, 32.59% of the company’s voting shares were held by foreigners, Telus said, a percentage that narrowly keeps the telecom giant within bounds of sector laws that forbid a major phone or wireless firm from being more than 33.3% owned by “non-Canadians.”

Wind and U.S. hedge fund Mason Capital Management LLC have each raised questions about whether Telus stands in violation of the rules. The former filed a formal complaint with regulators at the Canadian Radio-television and Telecommunications Commission last month.

Telus, the country’s third-largest mobile operator, had 30 days to respond, which it did Monday.

The Burnaby, B.C.-based firm said its “long-established systems to monitor and control foreign ownership of its voting shares have kept the company compliant.”

In its filing, Globalive Wireless Management Corp., the parent entity of Wind, said a failed plan by Telus this spring to collapse its voting and non-voting shares into one pool had pushed the carrier over the permissible level. Globalive claimed 48% of Telus’ common shares are held by foreigners.

Globalive has 10 days to refile arguments with CRTC regulators, after which the commission will determine whether a formal inquiry is needed.

Telus warned in March that it faced the prospect of reaching foreign-ownership levels that would exceed the maximum allowed. At the time, Mason was acquiring blocks of voting shares in a successful attempt to scuttle Telus’ share-combination plan. Through the purchases, Mason amassed nearly 20% of Telus voting stock.

The carrier’s statement reiterated its position that Mason’s aim was to prevent completion of the share plan, which Telus has said it will continue to pursue. The hedge fund is using the foreign-ownership allegations as a means to “frustrate” the process and force Telus to pay a conversion premium for voting share holders.

Mason and Globalive — which began competing in late 2009 against Telus and the country’s other incumbent providers, Rogers Communications Inc. and Bell Mobility — are relying on a report commissioned by Globalive from Broadridge Financial Solutions Inc.

Telus said Monday that it believes Broadridge’s methodology is faulty, double counting foreign-held votes and artificially ballooning the overall number held by non-Canadians to 214 million shares — which would exceed the 175 million that Telus says are actually on its share registry.

“Any reports that add 39 million extra shares to your actual total cannot form the basis for determining an accurate percentage of foreign owners,” Telus chief financial officer Bob McFarlane said. “The CRTC should dismiss the complaint.”

For their part, Globalive officials say their intent is to have the rules clarified by the commission. The startup has been plagued by regulatory and legal challenges since its launch, in large part as result of challenges from Telus.

The bigger operator spearheaded a joint incumbent attack on Wind’s controversial ownership structure in rare public proceedings three years ago. Telus, Rogers and Bell each claimed financial backing from Egyptian carrier Orascom tipped the startup offside with domestic law.

Telus also led a subsequent legal challenge, filing suit against the government’s decision to allow Wind to launch, a process only recently concluded with a decision from the Supreme Court of Canada to dismiss the matter.