[Federal Register Volume 63, Number 249 (Tuesday, December 29, 1998)]
[Notices]
[Pages 71660-71662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34401]
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SECURITIES AND EXCHANGE COMMISION
[Rel. No. IC--23618; International Series Release No. 1175; File No.
812-10772]
Telesystem International Wireless Inc.; Notice of Application
December 22, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application under section 6(c) of the Investment
Company Act of 1940 (the ``Act'').
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SUMMARY OF APPLICATION: Applicant requests an order that would permit
it and its controlled companies to engage in certain foreign
telecommunications infrastructure projects without being subject to the
provisions of the Act.
FILING DATES: The application was filed on September 8, 1997. Applicant
has agreed to file an amendment to the application during the notice
period, the substance of which is included in this notice.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on January 19,
1999, and should be accompanied by proof of service on applicant, in
the form of an affidavit or, for lawyers, a certificate of service.
Hearing requests should state the nature of the writer's interest, the
reason for the request, and the issues contested. Persons who wish to
be notified of a hearing may request notification by writing to the
SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicant, 1000 de La Gauchetiere Street West, 16th Floor,
Montreal, Quebec, H3B 4W5 Canada.
FOR FURTHER INFORMATION CONTACT: David W. Grim, Senior Counsel, at
(202) 942-0571, or Nadya B. Roytblat, Assistant Director, at (202) 942-
0564 (Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch [450 Fifth Street, N.W., Washington, D.C.
20549; (202) 942-8090].
Applicant's Representations
1. Applicant, a Canadian corporation, was formed in 1996 in
connection with the corporate reorganization of Telesystem
International Wireless Corporation, N.V. (``TIWC''), a Netherlands
corporation. TIWC was founded in 1992 to pursue international
opportunities in the wireless telecommunications services market.
Pursuant to the reorganization of TIWC, which was completed
concurrently with applicant's initial public offering in Canada in May
1997, TIWC became a direct and indirect wholly-owned subsidiary of
applicant. Applicant's subordinated voting shares are traded on the
Montreal and Toronto stock exchanges and, since June 1998, on the
NASDAQ National Market.
2. Substantially all of applicant's operations are conducted
through its subsidiaries and affiliates, which are principally engaged
in the development, acquisition, ownership, and operation of wireless
telecommunications networks in both developing and developed markets
throughout the world. Applicant's operations currently include cellular
operations in Romania, China, India, and Brazil, specialized mobile
radio operations in the United Kingdom, France, Germany, Spain,
Portugal, and Belgium, and paging operations in Mexico and the
Netherlands.
3. Applicant and its subsidiaries have benefited historically from
the expertise and experience of applicant's shareholders and their
affiliates, particularly Telesystem Ltd. (``Telesystem''), in
identifying international wireless Telecommunications opportunities and
providing critical support in forming, developing, and implementing
their operations. Telesystem is a privately-owned Canadian holding
company engaged in the telecommunications business. Wholly-owned
subsidiaries of Telesystem currently own common shares of applicant
constituting an approximately 18% economic interest and 39% voting
interest in the equity of applicant.
4. Applicant requests relief to permit applicant and each entity
now or in the future controlled by, or under common control with,
applicant (each, including applicant, a ``Covered Entity'') to engage,
either directly or indirectly through subsidiaries, in certain foreign
telecommunications infrastructure projects without being subject to the
provisions of the Act. For purposes of the application, applicant
represents that ``foreign telecommunications infrastructure projects''
means
[[Page 71661]]
telecommunications facilities, or similar or related facilities or
operations.
5. Applicant represents that there are numerous steps that must be
pursued by a developer/owner of a foreign telecommunications
infrastructure project. Project development involves analyzing tender
conditions, identifying license and permitting requirements, and
preparing license applications; preparing demand analyses and
developing business and marketing strategies and plans; developing
financial systems and controls; selecting network equipment
manufacturers and suppliers; designing, planning, and constructing
networks; selecting and implementing maintenance, billing, and customer
management systems; providing ongoing training to management,
technical, operational, and customer service personnel; and negotiating
interconnection contracts with other telecommunications providers. The
management of operating projects involves responsibilities such as
employee and customer relations; contract administration; continuing
compliance with legal requirements; community and governmental
relations; and financial and accounting issues.
6. The physical assets comprising a foreign telecommunications
infrastructure project are or will be owned or leased by an entity (a
``foreign telecommunications infrastructure project company'') in which
a Covered Entity has or will have a direct or indirect beneficial
economic interest. In most cases, the foreign telecommunications
infrastructure project company is or will be a special entity set up
for the principal purpose of owning or leasing and operating the assets
attributable to one or more foreign telecommunications infrastructure
projects.
7. In addition, applicant has organized entities for the purpose of
providing development, construction, operational or maintenance
services to one or more foreign telecommunications infrastructure
project companies (``foreign telecommunications infrastructure service
companies''). Such entities are distinguishable from foreign
telecommunications infrastructure project companies in that the former
do not own or lease the assets directly but rather engage in the
business of providing services.
8. For purposes of the application, applicant represents that
foreign telecommunications infrastructure project companies and foreign
telecommunications infrastructure service companies are included within
the term ``foreign telecommunications infrastructure company,'' which
is any company (a) substantially all of whose operations are conducted
outside of the United States; and (b) whose business (which may include
the ownership of either capital assets or stock of operating companies)
primarily relates to or whose operations consist primarily of the
development, acquisition, ownership and operation of, or the provision
of management, operational, advisory, or maintenance service relating
to, foreign telecommunications infrastructure projects. Applicant,
directly or through one or more Covered Entities, participates and will
participate in foreign telecommunications infrastructure companies by
owning or holding a substantial interest in the company (directly or
through intermediate entities) and providing active developmental
assistance to the company.
9. For purposes of the application, applicant represents that
``substantial interest'' means any ownership interest that represents
at least a 10% economic or voting interest. Applicant further
represents that ``active developmental assistance'' means material
involvement in the development, construction, or operation, of, or the
provision of management, operational, advisory, or maintenance services
relating to, foreign telecommunications infrastructure projects. An
entity will be deemed to furnish such assistance if it is or has been
materially involved in providing such assistance. Thus, if an entity
was materially involved in the development of a foreign
telecommunications infrastructure company, such entity will be deemed
to be providing active developmental assistance to the foreign
telecommunications infrastructure company even after such company has
moved past the development stage. The requirement of material
involvement will not be satisfied, however, by arrangements that are
immaterial to the overall development of a foreign telecommunications
infrastructure project or overall success of the foreign
telecommunications infrastructure company's operations, such as a
short-term contract or a non-substantive contract (e.g., a consulting
arrangement that is sometimes entered into as part of an executive
employee's severance arrangement, pursuant to which the ex-employee is
paid but does little in the way of actual consulting).
10. Applicant and the other Covered Entities do not hold their
assets as passive or portfolio investments and do not trade their
assets as passive or portfolio investments and do not trade their
assets for short-term profit. Applicant and the other Covered Entities
have never been registered investment companies (or subject to any
analogous regulatory scheme in another jurisdiction) and have never
been engaged in the business of investing, reinvesting, or trading in
securities.
11. Applicant represents that as the operations of it and the other
Covered Entities have expanded, it has become increasingly difficult
for them to structure their interests in foreign telecommunications
infrastructure companies in a manner that avoids the definition of
investment company under the Act. Applicant believes that, in the
absence of the requested exemptive order, it will become even more
difficult for them to do so in the future.
Applicant's Legal Analysis
1. Section 3(a)(1)(C) of the Act defines an ``investment company''
as including any issuer that is engaged in the business of investing,
reinvesting, owning, holding, or trading in securities, and owns
investment securities having a value exceeding 40% of the value of such
issuer's total assets (exclusive of Government securities and cash
items). Section 3(a)(2) defines ``investment securities'' to include
all securities except, in pertinent part, securities issued by
majority-owned subsidiaries of the owner which are not investment
companies and which are not excepted from the definition of investment
company by section 3(c)(1) or section 3(c)(7). Section 2(a)(24) defines
a ``majority-owned subsidiary'' of a person as a company 50% or more of
the outstanding voting securities of which are owned by such person, or
by a company which, within the meaning of section 2(a)(24), is a
majority-owned subsidiary of such person.
2. Applicant states that some foreign governments are committed to
retaining control over foreign telecommunications infrastructure
projects. Moreover, applicant represents that, under the laws currently
in effect in many host countries, there are limitations on the
percentage equity interest in host country entities that can be owned
by companies such as the Covered Entities that are organized in
jurisdictions other than the host country. Applicant states that, as a
result, a company desiring to participate in a project will often to
choose between becoming a minority project participant with other
companies or not participating at all. Because sections 3(a) and
2(a)(24), taken together, impose limits on the percentage of assets of
the Covered Entities that may be attributable to securities
representing minority interests in other companies, the Act may, in the
absence of the requested
[[Page 71662]]
relief, prevent these entities from participating in foreign
telecommunications infrastructure projects on desirable terms.
3. Section 6(c) provides that the SEC may exempt any person,
security, or transaction from any provision of the Act or any rule or
regulation under the Act, if and to the extent that such exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act. Applicant requests an order under section
6(c) to permit applicant and the other Covered Entities to engage,
directly or through subsidiaries, in foreign telecommunications
infrastructure projects without being subject to the provisions of the
Act.
4. Applicant believes that the requested relief is necessary and
appropriate in the public interest. Applicant's business does not
entail the types of risk to public investors that the Act was designed
to eliminate or mitigate. Applicant's assets cannot be characterized as
liquid, mobile, and readily negotiable, or as large liquid pools of
funds. Applicant represents that its assets, as well as the assets of
the other Covered Entities, are not held as passive or portfolio
investments and are not traded for short-term profit. In addition,
applicant asserts that the requirement that applicant or another
Covered Entity provide active developmental assistance to the foreign
telecommunications infrastructure projects is inconsistent with the
notion that its assets are liquid, mobile, and readily negotiable.
Applicant also states that investment companies of the type intended to
be regulated under the Act could not engage in the activities that
would be covered by the exemptive order because, unlike the Covered
Entities, they lack the expertise and resources to provide active
developmental assistance to foreign telecommunications infrastructure
projects.
5. Applicant believes that the requested relief is consistent with
the protection of investors and the purposes fairly intended by the
policy and provisions of the Act. Applicant states that the Act was not
intended to regulate the kind of industrial activity in which the
Covered Entities engage. Applicant historically has developed as an
operating industrial company rather than an investment pool, engaging
principally in the telecommunications business. In addition, its
proposed participation in foreign telecommunications infrastructure
projects through the provision of active developmental assistance is
consistent with the type of activities typically associated with an
operating industrial company. Finally, applicant does not hold itself
out as engaged in the business of investing, reinvesting, or trading in
securities or otherwise as an investment pool of the type intended to
be regulated by the Act, and the exemptive order would not be available
to any Covered Entity that holds itself out as engaged in the business
of investing, reinvesting, or trading in securities.
Applicant's Conditions
Applicant agrees that the order granting the requested relief shall
be subject to the following conditions:
1. No Covered Entity that proposes to rely on the requested relief
will hold itself out as being engaged in the business of investing,
reinvesting, or trading in securities.
2. A Covered Entity may rely on the order granting the requested
relief only to the extent that the manner in which it is involved in
foreign telecommunications infrastructure projects does not differ
materially from that described in the application.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-34401 Filed 12-28-98; 8:45 am]
BILLING CODE 8010-01-M
