Sawiris says he is ‘finished with Canada’ after Allstream deal sours

Naguib Sawiris was instrumental in bringing WIND Mobile to Canada, as at the time he controlled parent company WIND Telecom, which in 2011 merged with Russian telco giant VimpelCom. Sawiris removed himself from the running of the company he founded and began looking for other potential deals, continuing to work with Canadian business through his investment firm, Accelero Capital Holdings.

Not only was Sawiris, along with Globalive founder Anthony Lacavera, rumoured to be pursuing the buyout of WIND Mobile from Orascom (now VimpelCom), which owns a 65% share in the company, but he was making a lateral move by offering to buy Allstream, the network- and enterprise-related side of MTS, for $520 million.

That particular deal was shut down in early October over national security concerns, which Sawiris says are ridiculous and unfounded. “I am finished with Canada,” he told an Egyptian newspaper. “I regret that we wanted to invest in Canada,” angry at being turned down and discouraged from further investment in the country. He had expressed similar concerns before, when WIND Mobile was sued by Public Mobile over foreign ownership rules, a suit that was later overturned by the same government body, Industry Canada, that denied the Allstream deal four years later.

Sawiris was dumbfounded by the announcement, as was MTS, which has been looking to unload its Allstream property for years. Sawiris told the paper, “They don’t have anything specific to say. They were very worried we could sue them. We spent millions of dollars to prepare [for the transaction].” He mused that perhaps it was his connection with North Korean telco Koryolink, of which Orascom owns a 75% stake.

Because Allstream carries important government data over its considerable fiber networks, the government of Canada ostensibly wanted to ensure no equipment owned by Chinese manufacturer, Huawei, would be used after the deal closed. Though neither Allstream nor WIND Mobile currently buy from Huawei, according to sources there were concerns Accelero would pursue deals with the company.

The government’s oversight of the deal is disingenuous, according to Sawiris, who claims that on one hand they want the market open to foreign investment, but on the other are quick to stop anything that may fall outside the bounds of their narrow scope. For example, the government was eager to have Verizon enter Canada, but investment from Orascom’s chairman, who was instrumental in bringing competition into the mobile market through WIND Mobile, is seen as risky.

Of course, that’s only one side of the story: the government of Canada will likely never divulge what specific security concerns were at play with the Allstream deal, or whether they were merely hedging their bets against future risk.

Sawiris claims there isn’t any “real political will to introduce competition to a closed market,” and that the government is just beating the drum to drudge support for the Conservative Party.

Providing the death blow was Sawiris’s advice to other potential outside investors: “The incumbents have enough muscle to prevent real competition in the market, and my advice for any foreign investors is not to waste their time investing in Canada. They change their laws for foreign investment, and then they block you.”

[source]Ahram[/source]