The federal cabinet says the new, lower rates that Canada’s large phone and cable companies are allowed to charge smaller internet providers for access to their networks could stifle investment in telecom infrastructure.
However, the Governor in Council declined to overturn the August 2019 ruling that reduced wholesale broadband rates or send it back to Canada’s telecom regulator for reconsideration, saying it would be premature to do so because the Canadian Radio-television and Telecommunications Commission (CRTC) is already in the midst of reviewing its decision.
“We will continue to monitor the CRTC proceedings closely,” Navdeep Bains, Minister of Innovation, Science and Industry, said in a statement Saturday.
Consumer advocates and smaller internet service providers (ISPs) criticized the decision, saying it would result in higher costs for internet users.
“The government has effectively told the CRTC that they expect the rates to go up because they’re worried about investment. But these increases will most certainly be passed along to customers,” Laura Tribe, executive director of OpenMedia, an organization advocating for widespread inexpensive internet access, said in a statement.
Matt Stein, CEO of Distributel and chairman of the Competitive Network Operators of Canada (CNOC), an industry group for independent ISPs, called it a bad day for internet consumers.
“This is the kind of thing that causes rates to go up,” Mr. Stein said. “This creates new delay and new uncertainty, which unfortunately are the tried-and-true weapons of the big phone and big cable companies.”
Large telecoms are required to sell wholesale access to third-party operators such as TekSavvy Solutions Inc. and Distributel Communications Ltd., who then sell internet services to their own customers. The system is meant to increase competition in the internet market.
Last summer, the CRTC lowered the rates that the larger players are permitted to charge third-party operators and ordered them to make retroactive payments to compensate for the higher prices that have been charged since the commission set interim rates in 2016. The phone and cable companies said at the time that the retroactive payments would total $325-million, according to court documents.
The decision was stayed on appeals to the federal court by BCE Inc. and a group of five cable operators: Rogers Communications Inc., Shaw Communications Inc., Quebecor Inc.‘s Videotron Ltd., Cogeco Communications Inc. and Eastlink Inc.‘s owner Bragg Communications Inc. That case was heard in June and a decision is pending.
BCE and the cable companies, along with Telus Corp., also appealed to the CRTC, asking it to review its decision, and petitioned the federal cabinet. BCE wanted Ottawa to overturn the decision and reinstate the previous rates, while Telus and the cable companies requested that the decision be sent back to the CRTC for reconsideration.
Mr. Bains said the Governor in Council is concerned that the new rates could undermine network investments, especially in rural and remote areas, where it is needed most.
“Incentives for ongoing investment, particularly to foster enhanced connectivity for those who are unserved or underserved, are a critical objective of the overall policies governing telecommunications, including these wholesale rates,” Mr. Bains said.
“Given that the CRTC is already reviewing its decision, it is unnecessary to refer the decision back to the CRTC for reconsideration at this time,” he added.
However, Ms. Tribe said that if the government is really concerned about network investment, it should get going on its plan to dole out funding for projects aimed at bringing high-speed internet to rural and remote areas.
Maryam Monsef, Canada’s Minister of Rural Economic Development, said in June that the Universal Broadband Fund, which is expected to pay out up to $1-billion over 10 years, would start taking applications “in the coming days.”
The phone and cable companies, meanwhile, welcomed the decision, saying they were pleased that the government has acknowledged their role in keeping Canadians connected during the COVID-19 pandemic.
Rogers spokesperson Andrew Garas said the rates set by the CRTC last summer do not reflect the cost of building and expanding broadband networks and would have an impact investments, particularly in rural and remote areas, where the costs of building telecom infrastructure are higher.
BCE called it a “welcome recognition” that the rates set by the CRTC in August were too low.
“We trust the CRTC’s review will reflect the government’s objective to drive network investment, especially in rural and remote regions, with wholesale rates that are fair and reasonable,” BCE spokesperson Marc Choma said in an email.
Chethan Lakshman, vice-president of external affairs at Shaw Communications, said the company looks forward to working with the CRTC to create a new wholesale framework that “more appropriately balances” objectives such as network investment and affordability.
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Spotify founder backs gigafactory as first deeptech investment
Late last week, the founder of Spotify Daniel Ek announced that he was committing €1bn, one third of his wealth, to investing in European moonshots.
Today it was announced that first moonshot to get part of his money is the Swedish battery gigafactory Northvolt.
Northvolt said it had $600m in a new finance round backed by institutional investors Baillie Gifford, Baron Capital Group, Bridford Investments Limited, Norrsken VC and PCS Holding.
Private investors Cristina Stenbeck and Daniel Ek also participate in the raise together with existing Northvolt shareholders.
Peter Carlsson, co-founder and CEO of Northvolt, commented:
“We are in the middle of a race to establish manufacturing capacity in Europe, and I believe the companies that are best at attracting talent and capital, while scaling their blueprints the fastest, will be the most successful. With these world-class partners behind us, we have created a solid foundation to go on and execute our plans to enable large-scale manufacturing of green batteries in Europe.”
For Ek, who just last Thursday said he would invest in deeptech startups in the field of biotech, machine learning and energy, Northvolt is a good fit. He is joined by billionaire and previous Kinnevik chair Cristina Stenbeck, who is also on the board of Spotify.
During Ek’s announcement last week, he said that he wanted to push for more public-private partnerships.
“I will do so by funding so-called moonshots focusing on the deep technology necessary to make a significant positive dent, and work with scientists, entrepreneurs, investors and governments to do so,” he said last week.
Northvolt has so far got millions of grants and loans from both Sweden and EU and also raised €1bn back in June 2019. The company will use the additional half a billion euros to establishing a giga-scale lithium-ion battery recycling facility next to the Northvolt gigafactory.
The facility will become the largest in the world with an initial capacity of 4 GWh, and the only large-scale facility in Europe capable of recycling lithium in addition to cobalt, nickel, manganese and other metals, according to the company.
The environmental protection agency in Sweden (Naturvårdsverket) decided in March to support Northvolt with €15m in the development of recycling cobalt, nickel och lithium from electric car batteries.
“We are in the process of getting a few patents on the process. Instead of melting the batteries, whereby only the cobalt and nickel is recycled, we are developing a new way of dissolving the raw material. In that way, we can also recycle lithium. I believe that we are the first in Europe to do this”, Carlsson told Sifted in August this year.
Northvolt is by no means Ek’s first large investment. He has previously invested €16m in the telemedicine startup Kry as well as smaller investments in the healthtech startup HJN Sverige and the British online housing marketplace, Student.com.
Mimi Billing is Sifted’s Nordic correspondent. She also covers healthtech, and tweets from @MimiBilling
TikTok was just the beginning: Trump administration is stepping up scrutiny of past Chinese tech investments
The letters, which began landing in dozens of companies’ email inboxes in the spring, reflect the broadly held view among U.S. officials and lawmakers that the United States failed in recent years to adequately screen investments pouring in from China and other countries — particularly low-profile venture-capital investments that didn’t make the headlines. The 2018 Foreign Investment Risk Review Modernization Act, or FIRRMA, aimed to address that by boosting CFIUS’s funding and powers.
Tech executives say the inquiries are part of a growing chill in U.S.-China relations that has made Silicon Valley companies more cautious about accepting foreign investments and caused some China-backed venture-capital funds to curb their activity.
The decoupling can be seen in data showing that Chinese venture-capital investment in the United States dropped to a six-year low in the first half of 2020, to $800 million, according to research provider Rhodium Group. VC investment by U.S. firms in China hit its lowest level in four years, at $1.3 billion.
Michael Borrus, the founding general partner of XSeed Capital, said CFIUS scrutiny is causing investors and companies to think twice about deals.
“We’ve had Chinese VCs or Chinese families who have been interested in putting money in” to some companies where XSeed Capital is a shareholder, Borrus said. “In the current environment, we’ve decided it’s too complicated.”
Start-ups decide which investments to accept, but existing shareholders often have a say in the matter, Borrus said. “You have discussions with companies, ‘You need to think about this very seriously, it could open you up to CFIUS investigations … if you have alternatives, you should consider them,’ ” he said. “They usually see the wisdom.”
In addition to boosting CFIUS’s work, the government is also sending national-security officials to visit venture capitalists and other tech leaders in Silicon Valley to advise them to exercise caution about accepting Chinese investments, industry executives say.
Some tech companies have overlooked the CFIUS emails because they are brief and cryptic, requesting a phone call to discuss a confidential matter, tech-industry lawyers said.
CFIUS is particularly focused on companies and apps that collect sensitive personal information on users, such as location or financial data, and on companies involved in technology seen as critical for national security, such as certain types of battery technology and biotechnology, lawyers said, requesting anonymity to discuss sensitive matters. The committee is mostly inquiring about Chinese investment, but on a few occasions has asked about Russian investors.
CFIUS, an interagency committee chaired by the Treasury Department, has several powers to influence foreign investments it sees as risky. The committee can impose conditions, such as limiting a foreign investor’s access to information on the company’s research and development, or mandating that the company’s board members be government-approved. In extreme cases, CFIUS can advise the parties to abandon or unwind a deal, or kick the matter up to the president for a formal ban or divestment order.
The Treasury Department declined to comment for this story.
CFIUS’s more aggressive role stems from the authority FIRRMA gave the committee to scrutinize more types of foreign investment, including minority shareholdings and real estate transactions. The legislation also gave CFIUS funds to set up a new enforcement arm.
The Treasury Department introduced the enforcement arm in a tweet this summer, linking to a Web page that included an email address where the public can send tips about transactions that might carry national-security risks.
The email tip line “has the potential to ratchet up CFIUS enforcement activity by giving commercial competitors a mechanism to create CFIUS troubles for their rivals seeking foreign investment,” the law firm Wilson Sonsini Goodrich & Rosati warned this summer.
The 2018 FIRMMA law made it mandatory for companies to report to CFIUS some investments involving foreign governments or certain technologies. Previously, it had been optional for companies to notify CFIUS of planned transactions. If they did and CFIUS cleared them, it protected the parties from further CFIUS interference. If they didn’t, they ran the risk CFIUS could take an interest in their deal after it closed and demand changes.
“CFIUS is increasingly contacting parties that didn’t make filings,” said Stephen Heifetz, a lawyer at Wilson Sonsini. “We’ve heard about matters going back almost 10 years. Historically, it was unusual for [CFIUS] to reach back more than three years. But there is in theory no time limitation, and we are increasingly hearing about long reach-back periods.”
CFIUS’s scrutiny of TikTok shows how a foreign investment can raise alarms years after the fact.
The committee only late last year began probing the November 2017 acquisition that helped TikTok’s owner build its U.S. presence. In that deal, Beijing-based ByteDance spent about $1 billion on a karaoke app, Musical.ly, that was popular with American tweens, and rebranded the app as TikTok.
TikTok’s quick rise in the U.S. was shadowed by signs that Beijing was influencing the videos that could appear on the app. In September 2019, The Washington Post reported that a search for “#hongkong” on TikTok yielded few images of the city’s pro-democracy protests, while such images were common on Twitter.
The Post also reported that ByteDance imposed strict rules on what could appear on the app, in keeping with China’s restrictive view of acceptable speech, a policy that sparked a backlash from the company’s U.S. employees.
In October 2019, Sen. Marco Rubio (R-Fla.) asked CFIUS to review the 2017 Musical.ly acquisition out of concern that TikTok was “censoring content” around the world to satisfy Beijing’s leaders.
CFIUS opened a review the following month. In keeping with protocol, it did not publicly disclose the probe or the reasons behind it, but when it concluded its review nine months later, it suggested TikTok’s access to user data was a primary concern.
In August, the Treasury Department said CFIUS had advised President Trump to order ByteDance to divest its U.S. business.
“CFIUS conducted an exhaustive review of the case and unanimously recommended this action to the President in order to protect U.S. users from exploitation of their personal data,” Treasury Secretary Steven Mnuchin said in a statement.
A Trump executive order that same day ordered ByteDance to sell within 90 days, a deadline that expires Nov. 12.
Source: – The Washington Post
Silver Lake Launches New 25-Year Investment Strategy Backed by Mubadala
Abu Dhabi sovereign-wealth fund Mubadala Investment Co. is making an investment in Silver Lake and contributing $2 billion to help the technology-focused private-equity firm launch a new long-term strategy, according to people familiar with the matter.
Mubadala will take a stake of less than 5% in Silver Lake, buying roughly half of what Neuberger Berman Group LLC’s Dyal Capital Partners purchased in 2016, the people said.
Under the new strategy, Silver Lake will have 25 years to deploy the capital and harvest any gains, allowing it to hold assets for much longer than the typical 10-year buyout-fund time horizon.
Silver Lake and the P.E. Industry
It couldn’t be learned what Mubadala is paying for the stake, what it values Silver Lake at or how much in total the firm intends to raise for the new strategy.
The twin investments represent a vote of confidence that will give a boost to a big expansion that is under way at Silver Lake as the firm seeks to capitalize on a surge in interest in tech investments. It has been one of the most active investors since the coronavirus pandemic began, striking billions of dollars worth of deals with companies including
Airbnb Inc. and
Expedia Group Inc.
Silver Lake is separately close to completing fundraising on a new flagship fund and had collected more than $18 billion for that vehicle as of Aug. 14, according to a regulatory filing then. It is replacing a $15 billion pool raised in 2017. The Mubadala-backed strategy initially will co-invest alongside the flagship fund to build up a portfolio of investments but also will be able to do its own deals, the people said.
The new business line will offer Silver Lake a broad mandate to invest in debt and equity and across various geographies and industries, the people said. It may make investments in fast-growing upstarts or do traditional leveraged buyouts of more mature companies.
With headquarters in Menlo Park, Calif., and New York and more than $60 billion in assets under management already, Silver Lake has a longstanding playbook of taking large stakes in technology and media companies including computer-maker
Dell Technologies Inc.
and entertainment firm Endeavor Group Holdings Inc. and working closely with their founders or management to help spur growth.
There has been a broader industry shift in favor of what is called perpetual capital—pools of money that firms don’t need to constantly refresh at great effort and expense. At 25 years, the new strategy could last for the entire remaining investment career of Silver Lake’s new co-chief executives, Egon Durban and Greg Mondre, both in their mid-40s.
Private-equity rivals including
Blackstone Group Inc.,
Carlyle Group Inc.
and CVC Capital Partners also have been developing long-term strategies, although most of those funds have a lifespan of around 15 years. They tend to pay up for businesses that are stable and have steady cash flows and aren’t fixer-uppers, giving them annualized return expectations of 12% to 15% versus the 20%-plus touted by traditional buyout funds.
Silver Lake’s 2013 flagship fund—the most recent vehicle with meaningful performance data—had returns net of fees of 23% as of March, according to public pension-fund records. The firm isn’t lowering its return expectations for the new strategy, according to people familiar with the matter.
For Mubadala, which manages $232 billion, the partnership with Silver Lake may represent a strategic shift for its technology investments. Mubadala was a key backer of
SoftBank Group Corp.’s
Vision Fund, committing $15 billion to the $100 billion vehicle. But it privately has complained about the high valuations at which SoftBank made its investments and subsequent losses in the fund.
Mubadala’s relationship with Silver Lake dates back years. The sovereign-wealth fund invested in William Morris Endeavor Entertainment in 2012, the same year Silver Lake took a stake in the company. In 2013, Mubadala said it was investing alongside the private-equity firm in WME’s acquisition of IMG Worldwide, forming what is now known as Endeavor.
In 2019, Silver Lake invested $500 million for a minority stake in City Football Group, the owner of soccer clubs including the English Premier League’s Manchester City. Mr. Durban joined the board of the company, which is chaired by Mubadala CEO Khaldoon Al Mubarak.
Mubadala also participated in the $2.25 billion funding round for
self-driving car unit Waymo LLC that Silver Lake led in March, as well as in the firm’s subsequent investment in Indian tech-and-telecom giant Jio Platforms Ltd.
Write to Miriam Gottfried at Miriam.Gottfried@wsj.com
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