Wind Mobile replaces CEO, hands reins to former Public Mobile rival

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Seven years ago, Tony Lacavera and Alek Krstajic almost went into business together before deciding to line up financial backers of their own and launch competing wireless startups.

Now, after years of fighting in court and just over a year after Mr. Krstajic's Public Mobile was sold to Telus Corp., they've joined forces to try to challenge incumbent wireless carriers as a team.

Toronto-based carrier Wind Mobile Corp. said Monday Mr. Krstajic will take over as chief executive while founder Mr. Lacavera will become honorary chair of the board. He is stepping down from his role as chairman to make way for Robert MacLellan, a former executive with Toronto-Dominion Bank with more governance experience.

Mr. Krstajic and Mr. Lacavera originally squared off as founders of two of the three wireless startups launched after a 2008 spectrum auction that included set-aside airwaves for new entrants.

Industry observers have long maintained that there was only ever room for one new wireless player in the Ontario, British Columbia B.C. and Alberta markets, where the Big Three incumbents dominate. In 2013, Telus bought Public, – which did not buy set-aside spectrum – but the federal government has blocked its attempts to buy Mobilicity.

In the wake of the auction, Wind and Public engaged in a drawn-out court battle as Public contended Wind's foreign backer actually had control over the company. After a series of back-and-forth regulatory, government and court rulings, Wind's ownership structure was approved and Ottawa ultimately amended the rules on foreign investment in telecom companies.

Today, Mr. Lacavera and Mr. Krstajic insist there was never any personal animosity between them over the court fight, which the latter says was simply about ensuring a level playing field.

During an interview Monday morning at Wind's headquarters in Toronto, the two men spoke fondly of their time as adversaries, noting they had held several discussions about merging Wind and Public Mobile in the past.

"I think there was a perception that we were competitors but really, I never saw it that way," Mr. Krstajic said.

Mr. Lacavera said Wind has long been looking for a CEO like Mr. Krstajic – who was president of BCE Inc.'s wireless division in 2005 and previously a senior vice-president at Rogers Communications Inc. – but was only able to attract a list of candidates from around the world after the changes over the past seven months put it on solid footing.

"It was only in September of last year that for the first time in the company's history it actually is speaking from a position of stability and strength and able to … actually talk to someone of Alek's calibre," Mr. Lacavera said. The company announced a deal for a group of American and Canadian investors to buy out Amsterdam-based VimpelCom Ltd. in September and the government gave the transaction its blessing in November.

"We don't have legal and regulatory issues, we don't have a shareholder that may or may not want to stay, may or may not want to take control again and now we have the spectrum too which obviously is a big pillar." And we're now in a position to do an LTE rollout under the leadership of someone like Alek."

The shakeup at Wind comes two weeks after the company won new licences for AWS-3 (advanced wireless services) spectrum – the airwaves used to carry cellular signals – in the federal government's most recent public auction.

Wind still needs capital to expand and improve its network – Mr. Lacavera said after the auction the company will require about $300-million over the next four to five years – and the pair said existing shareholders are willing to invest, but they will also look at raising new debt or issuing equity based on what they hope will now be a stronger valuation.

"Tony has gone and turned over every stone and he'll continue to be very involved in that," Mr. Krstajic said, pointing to Mr. Lacavera bringing together Wind's current syndicate of investors.

Mr. Krstajic, who has been on the company's board since September, said he is familiar with the business plan and doesn't plan to make sweeping changes. He said outgoing CEO Pietro Cordova has done a good job managing the company through a difficult two-year period. Mr. Cordova held the position since October after two years as chief operating officer and will return to VimpelCom for an as-yet undisclosed role.

"This isn't a turnaround. It's the opposite," Mr. Krstajic said. On further management changes, Mr. Krstajic said, "At this point, there's one person that's going to move on and do something else, but that's not going to be made public for a little while. But I don't see any major changes coming up."

Mr. Lacavera said the changes will allow him to focus more on his startup and tech investments through Globalive Capital, but insisted, "I'm still a big investor and I get to still be active with Alek, who I have a long-standing relationship with.I'm not a seller. This is not about me checking out so I can find a buyer for my shares."

On Mr. MacLellan, who is also chairman of the board at Northleaf Capital Partners and Yellow Pages Ltd., Mr. Lacavera said recruiting him to Wind seven months ago would have been impossible. "Rob MacLellan brings financial markets, capital markets track record to the table that is really leading in this country."

Wind is also adding two new board members: David Carey, who is executive vice-president of corporate services at TMobile U.S. Inc., and Hamid Akhavan, a telecom executive with European experience and current principal at investment firm Telecom Ventures LLC.

Wind already has ties to TMobile through one of its investors, Lawrence Guffey, who sits on the U.S. carrier's board and is also an adviser to U.S. private equity giant Blackstone Group.

Mr. Krstajic said TMobile, which has spurred competition in the American cellular market, and is dominated by AT&T and Verizon Communications Inc., could provide inspiration for Wind and said he would visit the U.S. company with Mr. Carey to see what information the two companies could share.

"When you look at TMobile's more irreverent and more friendly approach, it wouldn't be a shock that we would evolve in a similar way," he said.

Wind, which operates primarily in urban areas in Ontario, B.C. and Alberta, now has more than 800,000 subscribers, but Rogers, Telus and BCE have about 26 million customers between them. (BCE owns 15 per cent of The Globe and Mail.)

It needs to improve its network and upgrade its coverage to LTE (long-term evolution, or 4G) service. The new airwaves it bought will help with that, but there are not currently any handsets available that work on that frequency. U.S. carriers recently spent more than $40-billion (U.S.) on AWS-3 airwaves, however, so a handset ecosystem is expected to develop within the next two years.

In the meantime, Wind could consider some sort of partnership with Quebecor Inc.'s Videotron Ltd., which owns unused airwaves in Wind's operating territory, or Mobilicity, its fellow new entrant that has been under creditor protection for a year and a half. All three companies own AWS-1 spectrum purchased in 2008.

"If there's an opportunity to acquire more spectrum, we're always interested," Mr. Krstajic said, adding, "It would be prudent, if we could get more AWS-1 to have a quicker path to LTE or a more secure or more finite path."

Wind's shareholders include Toronto hedge fund West Face Capital, which controls 35 per cent of the voting shares, according to a disclosure to Industry Canada in connection with the spectrum auction.

The next largest shareholder is California fund Tennenbaum Capital Partners with 31 per cent, followed by a group dubbed the Globalive Capital Voting Group with 25 per cent. That group includes Mr. Lacavera's investment fund as well as investment vehicles owned by Terrence Hui, Michael Serruya and Alex Shnaider.

An investment firm controlled by Mr. Guffey owns the remaining 8 per cent of the voting shares.