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Telecom: Wireless wonder boy

Anthony Lacavera is puzzling over his cellphone bills. Spread out on a boardroom table are two multi-pagers detailing his mobile use — one from Rogers and another from T-Mobile, his U.S. provider. “I spend 500 bucks and they give me five bucks off,” he says. “Isn’t that a joke, man?” More items catch his attention. “Look at this: pooling fee. Isn’t that crazy?” Lacavera says he has no idea what a pooling fee is.

He’s almost certainly hamming it up. Lacavera knows wireless. At least he should. He’s taking a billion-dollar gamble that his privately held company, Globalive Communications Corp., based in Toronto, will be the next national wireless carrier, alongside Bell, Telus and Rogers Communications Inc. (parent of Canadian Business). He’ll need to know about his competitors’ operations in detail (pooling fees, too) before he launches a wireless service in two yet-to-be-determined cities (among Toronto, Vancouver, Edmonton, Calgary and Ottawa) later this year, followed by the remaining three in early 2010.

Lacavera, an audacious 35-year-old with gelled hair and well-tailored suits, is either poised to shake up the cozy $16-billion wireless industry in Canada — or about to fail spectacularly. “I would not under any circumstances bet against him,” says Duncan Stewart, director of Deloitte Canada Research. “The only thing is, he’s in an industry where an awful lot of smart, intelligent people have done their best and not succeeded.”

A handful of newcomers are itching to charge into wireless. But Globalive is the only one with national aspirations. Lacavera spent more than any new player to scoop up spectrum the federal government auctioned last summer — $442 million on licences in every province except Quebec. And he’s committed to spending another $1.4 billion over 10 years, largely to build his network. Other newcomers have smaller ambitions, focusing on either a specific region, such as Vidéotron in Quebec, or on a single tier of customers.

Lacavera wants more. “If I say we should raise a million dollars for a venture, he’ll say, ‘Why don’t we raise $25 million?’” says Ari Yakobson, a friend and business associate. Lacavera went so far as to land a billionaire investor for Globalive — Naguib Sawiris, who runs Orascom Telecom Holding in Egypt and presides over a wireless empire in Africa, the Middle East and Asia that has more customers than Canada has people.

The partnership suggests Lacavera’s goal of snatching up to 15% of the Canadian market in less than a decade may be more than mere fantasy. But huge obstacles stand in his way. Lacavera is squarely in the sights of the three market giants—and he’ll have to fend off attempts to crush him as he girds for a possible price war. The incumbents pumped up promotion of their discount brands months ago in response to the new competition, and they’re now locking users into contracts to shrink the potential customer base available to a new rival.

Lacavera’s billionaire backer, meanwhile, is swimming in nearly US$8 billion in debt after a handful of expensive telecom acquisitions. And as if that wasn’t enough, Telus recently wrote to the Canadian Radio-television and Telecommunications Commission (CRTC), urging it to take a hard look at the partnership. In September, the regulator will subject Globalive to a rare public review to determine if it complies with foreign-ownership rules. The incumbents will no doubt argue Orascom’s involvement runs afoul of the law. The CRTC is making the review public to clarify foreign ownership rules, analysts say.

Effectively, this is a test case. Lacavera could be forced to alter the very arrangement that gives him an edge, and he clearly hates being slowed down. He bristles with energy, knee bouncing during conversation, his speech jumbled with too many thoughts. Not even building a national wireless business is enough — this guy has dabbled in producing Broadway theatre, angel investing, and he operates a charitable organization. But wireless is his biggest and riskiest venture yet — and he responds to the challenges with characteristic bravado. “We’re still going to be in the market,” he says. “There’s nothing they can do to stop us.”

Going wireless was obvious. Roughly 30% of Canadians are not yet mobile users, a large percentage compared with other countries. It was a natural extension of the business Lacavera founded in 1998 after graduating with a degree in computer engineering from the University of Toronto. Lacavera was an average student, more interested in girls and bars than studying, but he developed an entrepreneurial streak in the mid-1990s after joining a web-design business founded by fellow classmates. The venture didn’t last, so he quickly zeroed in on another.

A crop of new carriers sprouted up to compete with the likes of Bell Canada after Ottawa deregulated local phone markets in 1998. Lacavera formed Canopco Inc. with some engineering buddies at age 24 to provide the companies with teleconferencing, directory and operator services. The venture got off the ground with a $250,000 small-business loan from the Royal Bank of Canada.

After nearly a year of working the phones to pitch his services to potential customers, Lacavera had enough of a client list to embark on a $1.4-million equity financing. He targeted high-net-worth individuals, even securing cash from the late CRTC chairman Charles Dalfen. He also learned very quickly what investors want to hear: never oversell or undersell the opportunity, and be consistent with the message. Canopco hit its first major hurdle a few years later when the tech bubble burst and 11 of its first 12 customers imploded. The company intensified its focus on providing similar services to hotels, and pulled through the crash.

Lacavera created Globalive in 2003, absorbing Canopco and building a going concern of telecom services through a handful of brands. The most well-known is Yak, a discount provider of home phone and Internet. He purchased the company, then-publicly traded, for $76 million after a relentless seven-month pursuit in 2006.

Yak was bleeding cash, and analysts credit Globalive for stitching the wound. It’s difficult to know for sure how successful it has been because the operation is private. But the fact that Yak is still around is a testament to the Globalive team, according to Iain Grant, managing director of telecom consultants the SeaBoard Group in Montreal. “They’ve got the tenacity and the staying power for a market that has not seen many survive,” he says. Grant credits the company’s success in part to its brash marketing campaigns.

Stefan Raducanu

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