Anonymised, illustrative composite. Canada requires telecommunications common carriers to be Canadian-owned and controlled — unless the carrier is small enough that the rule does not apply to it at all. Two deals by the same foreign buyer show exactly where that line falls.
At a glance
A US-headquartered telecommunications infrastructure fund wanted to expand its Canadian footprint. Its first target was National Carrier Co, a mid-tier national carrier whose Canadian telecommunications revenue the CRTC would determine at roughly 14% of the whole national market. Regulatory counsel confirmed no exemption was available at that size, the fund declined to restructure into majority-Canadian ownership to qualify under the ordinary route, and the deal was abandoned.
The fund then turned to a much smaller target: Northern Lights Networks, a fixed-wireless internet provider serving several B.C.-interior communities, with a Canadian telecom revenue share the Commission would determine at well under 1% of the national total. The fund agreed to acquire 100% of its shares.
The deal team’s first instinct, informed entirely by the National Carrier Co experience, was to assume this acquisition needed the same treatment: either a majority-Canadian ownership structure, or abandon the deal. That assumption generalised from one blocked attempt at one much larger target to every foreign acquisition of a Canadian carrier, regardless of size — and it was wrong.
National Carrier Co: roughly 14% of the national Canadian telecom revenue total — well above the exemption line. Northern Lights Networks: a share the Commission would determine at well under 1% — comfortably below it. Same buyer, same statute, two entirely different outcomes purely on the target’s relative size.
Eligibility to operate as a telecommunications common carrier is governed by s.16(2), which sets out three separate routes, any one of which is enough. The ordinary route, s.16(2)(a), requires the carrier to be “an entity incorporated, organized or continued under the laws of Canada or a province and is Canadian-owned and controlled” — defined at s.16(3) as at least 80% Canadian directors, at least 80% Canadian-held voting interests, and no outside control by non-Canadians. That is the route National Carrier Co would have needed, and the fund would not restructure to meet it.
But s.16(2)(c) supplies an entirely separate route that has nothing to do with ownership at all: “it has annual revenues from the provision of telecommunications services in Canada that represent less than 10% of the total annual revenues, as determined by the Commission, from the provision of telecommunications services in Canada.” A carrier that qualifies under (c) needs no Canadian ownership structure whatsoever — the exemption is keyed purely to the target’s size relative to the whole Canadian market, not to who owns it.
Read the unit. Sections 16(2)(a) and 16(2)(c) are alternatives, not a sliding scale — a carrier either satisfies the ownership test or the revenue-share test, and only one is needed. Northern Lights Networks, at well under 1% of national telecom revenue, satisfied (c) outright, meaning the fund could take 100% ownership with no nominee directors, no non-voting share carve-out, and no CRTC ownership-and-control ruling of any kind. The Act also aggregates: s.16(9) provides that “the annual revenues of a Canadian carrier include the annual revenues from the provision of telecommunications services in Canada of its affiliates,” so the fund’s counsel confirmed it held no other Canadian carrier affiliates whose revenue would need to be added in before relying on the exemption.
The acquisition closed with no Canadian-ownership workaround of any kind. Regulatory counsel’s entire task was to document and confirm two facts: Northern Lights Networks’ revenue share against the Commission’s determination of the national total, and the absence of any other Canadian carrier affiliate in the fund’s portfolio whose revenue would need to be aggregated in. Once those two facts were confirmed, s.16(2)(c) did the rest.
Had the deal team simply carried its National Carrier Co assumption forward, it would have proposed an expensive and unnecessary nominee-shareholder or non-voting-share structure for a target that never needed one — adding cost, complexity and closing delay to an acquisition the statute already permitted outright.
The tell is the one this whole cluster of files keeps returning to: a single prior experience, even a costly and well-analysed one, does not generalise automatically to a differently sized target under the same statute. National Carrier Co and Northern Lights Networks sat on opposite sides of the same 10% line, and nothing about the earlier deal predicted which side a new target would land on without actually measuring it.
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