[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