Winds shift for wireless carrier
Founder’s departure at money-losing company signals competition concerns
TORONTO — The chief executive and founder of Wind Mobile is headed for the exit, saying Friday he plans to step down to focus on a new venture capital fund.
With the departure of Toronto-based entrepreneur Tony Lacavera, Wind Mobile is left in the hands of foreign conglomerate VimpelCom Ltd., whose patience with the scrappy but still money-losing carrier may well run out sooner rather than later.
The executive’s departure leaves serious doubts that a class of new wireless entrants Ottawa expressly shepherded to market a few years ago will ever have the intended outcome of introducing meaningful and lasting competition in a wireless market still overwhelmingly ruled by Rogers Communications Inc., BCE Inc. and Telus Corp.
Two other wireless startups, Mobilicity and Public Mobile, have similarly met unforeseen growth challenges, with heavy speculation that the backers of both will seek tidy exits — if they haven’t already — including potential sales to incumbents once a moratorium is lifted on them next year.
In contrast, Wind Mobile, the largest of the new corps, seemed the only one in the bunch committed to a game plan to take on the market giants indefinitely. But that may change with the management shakeup and change of control.
“My worry in this trans- action is now you have a situation where (VimpelCom) uses it purely as a financial investment. My concern is the long-term future for competition,” a source close to the deal said.
“I can see a scenario now where because everyone is just a financial investor, a speculator, this thing could all get tucked back into Bell, Telus or Rogers or a combination of them.”
Lacavera doesn’t see it that way. Instead, he said the young carrier, which has attracted about 600,000 subscribers since late 2009 — far less than what Wind predicted it would have by now — is on solid ground and poised for growth.
With an economic stake still in the company, the 38-year-old is simply hungry for another challenge.
“The management is stable, the network is stable, the stores, everything is on a stable growth track. And as an entrepreneur, I’m comfortable now turning it over to operational management,” he said in an interview.
Legal and regulatory challenge have dogged growth at Wind, he and others say, starting with an unprecedented public review by regulators in 2009 who ultimately rejected the company’s controversial partnership with original partner Orascom. Wind’s reliance on the Egyptian carrier actually meant the foreign investor was in control, at the time illegal under investment laws.
The rejection halted Wind in its tracks, disrupting and delaying its launch plans.
And even after launch, the firm was hounded. Telus Corp. and Public Mobile would bring a legal challenge against Wind on the same grounds that regulators based their decision — that Wind was effectively foreignowned — resulting in a protracted and distracting courtroom scrap that was only resolved by a Supreme Court of Canada decision last spring in Wind’s favour.
Alongside the legal win, foreign ownership restrictions have also been lifted, allowing Wind’s new owners, Amsterdam-based VimpelCom, to take control.
Now, without the encumbrances and uncertainty hanging over it, the upstart has shifted strategy and is seeing its numbers improve, the outbound executive says.
Some analysts agree. “Wind’s subscriber growth seems to have accelerated,” Dvai Ghose at Canaccord Genuity said in a note Friday.
However, the true test for VimpelCom’s commitment — and whether Ottawa will have succeeded or failed at creating lasting competition when it set airwave spectrum aside for Wind and others in 2008 — will come later this year.
That’s when Industry Canada will again auction off crucial airwaves that support mobile broadband, which Bell, Rogers and Telus are betting their futures on.
It remains quite uncertain if VimpelCom, which has already sunk $1.4 billion in startup costs into its Canadian venture, will pony up the additional funds required to make its own gamble.