TORONTO A Canadian court struck down on Friday a federal government move to allow Globalive, a company with substantial foreign control, to operate a wireless service in Canada.
The Federal Court judgment said the government's decision to overturn a federal telecoms regulator's ruling, which sought to prevent Globalive from operating, was "null and void in that it was determined on a basis in law not provided for in the Telecommunications Act."
The court decision will not go into effect for 45 days, leaving room for an appeal or changes to be made to privately held Globalive's ownership or management structures.
Globalive launched wireless services in Canada under the Wind Mobile brand in December 2009, and has since signed up more than 250,000 subscribers to its low-cost, no-contract and unlimited calling plans.
The regulator, the Canadian Radio-television and Telecommunications Commission (CRTC), had blocked Wind Mobile from operating, ruling it was not sufficiently Canadian-owned due to its financial backing from Egypt's Orascom Telecom.
Canadian law restricts foreign ownership to 20 percent of a telecom company's voting shares. Direct and indirect foreign control is limited to 46.7 percent.
Orascom Telecom holds 32 percent of the voting shares in Globalive and 65 percent of the total equity. It also provided the company with a $800 million loan guarantee.
"We are currently examining our options but this is not over yet. We don't intend to back down," said Anthony Lacavera, Globalive's chairman.
Industry Minister Tony Clement, who made the initial ruling allowing Wind Mobile to operate, said the government was also studying the ruling and considering its options.
"Our government stands with consumers who want more competition," he said on the microblogging website Twitter.
Clement said on Thursday his government would overturn another CRTC ruling if the regulator did not reconsider it. The ruling, which the regulator later said it would reconsider, would have forced usage-based billing on all Internet service providers.
The Globalive case, docket number T-26-10 in the Federal Court in Ottawa, was brought to court by competitor Public Mobile which, like Globalive, bought wireless spectrum in a 2008 government auction.
Public Mobile was supported in its submission by Canada's major established wireless providers: Telus, BCE Inc's Bell Canada, Rogers Communications and Shaw Communications.
"In my view, Public Mobile has more foreign influence than Globalive and yet they were not subjected to a public review," Globalive' Lacavera told Reuters in a telephone interview. "They are a smaller competitor and they are not seen as a threat by the incumbents."
Public is backed by MC Ventures and Columbia Capital.
(Reporting by Alastair Sharp; editing by Rob Wilson and Peter Galloway)