Competition agency challenges Rogers-Shaw merger

The announced merger of Shaw and Rogers would lead to higher prices, reduced quality of service and a loss of choice, especially in wireless services, the Competition Bureau ruled, which formally opposed it.

Updated at 11:45 PM yesterday.

Richard Dufour

Richard Dufour
The press

The agency said eliminating Shaw as a competitor would jeopardize the “significant” progress the company has made in increasing competition in an already concentrated market. Its subsidiary Freedom Mobile is currently the fourth largest wireless provider in Canada, with more than 2 million subscribers, primarily in Ontario, Alberta and British Columbia.

Rogers had announced a $26 billion deal (including debt) in March last year to acquire Shaw. Since then, several companies, including Quebecor, have been approached or have announced their intention to acquire Freedom Mobile.

According to the Bureau, competition between Rogers and Shaw has already waned since the announcement, and if the proposed merger goes through, the damage could continue and could worsen.

The organization says the investigation revealed that before announcing the proposed merger, Shaw planned to enter new wireless markets, launch its 5G network and expand its wireless service offerings to businesses. “Since then, investments in its network have declined,” it says.

Shaw’s decline in marketing and promotional activities has resulted in a general loss of competition in the market, it said.

against the big three

The Bureau’s investigation found that Shaw has established itself as a “strong” and “disruptive” regional competitor since its 2016 acquisition of Wind (later renamed Freedom Mobile).

The Bureau states that Shaw has consistently challenged the Big Three flag carriers by improving the quality of its network and attracting customers through “aggressive pricing”, larger data blocks and service innovations.

The organization considers wireless an “essential service” and formally challenged the merger on Monday, requesting an order from the Competition Tribunal to prevent it.

A court order is also being filed to prevent Rogers and Shaw from closing the deal until the Competition Bureau’s request is heard.

“Shaw’s disappearance would eliminate an independent and robust competitor in Canada’s wireless market — one that has lowered prices, made data more accessible and offered innovative services to its customers,” said competition commissioner Matthew Boswell. .

“We are trying to block this merger to preserve competition and the choice of an essential service that Canadians expect to be affordable and of high quality,” he added.

In order to block the transaction, the Office’s claims must be proven in court.

Sell ​​freedom to Quebecor?

Informed on Friday of the competition commissioner’s intention to challenge their proposed merger, Rogers and Shaw had indicated over the weekend that they remained committed to the transaction and that they intended to oppose the Competition’s request. Desk.

Thus, the two companies are offering a “whole” sale of the assets of Freedom Mobile, Shaw’s wireless subsidiary.

“Rogers and Shaw enter lawsuit to sell Freedom Mobile to address Commissioner of Competition and ISED concerns [Innovation, Sciences et Développement économique Canada] The two companies said on Saturday.

The Canadian Radio-Television and Telecommunications Commission (CRTC) — the other regulatory agency whose approval is required for the merger to go through — gave its approval in March.

Last month, the daily Globe and Mail alleged that Rogers had submitted an agreement to the federal government to sell Freedom to Xplornet in order to obtain regulatory approval for the proposed merger with Shaw. The newspaper previously reported that Globalive had made an offer for Freedom before revealing last Friday that Quebecor had finally been asked to participate in the Freedom sale process.

This information could indicate that authorities wanted a major telecommunications operator to acquire Freedom in order to create a player that could compete with BCE, Telus and Rogers.

Reached by phone, Desjardins Securities analyst Jérôme Dubreuil said he was surprised that the Competition Bureau documents published Monday made no mention of the commitment to sell Freedom Mobile Rogers had made over the weekend.

“That surprised me in the dispatch from the Competition Office,” says Jérôme Dubreuil.

“The Bureau determines that the main problem with the transaction is the elimination of a fourth player and makes no mention of concerns about the identity of a potential buyer. †

This expert thinks we could learn a little more if the Competition Bureau submits documents to the Competition Tribunal.

“There are several ways to make the transaction more pleasant if necessary,” he says, referring in particular to signing roaming agreements. “At the moment it is not exactly clear what the Competition Office wants. At least not in my view. †

As for Quebecor, we’ll have to see how eager the company is to have a presence in wireless outside of Quebec. The company paid $830 million last summer to buy spectrum blocks in the country (Ontario, Manitoba, Alberta, etc.). However, resale of these licenses for profit remains a possibility if Quebecor deems the costs associated with an expansion outside of Quebec into mobile telephony to be prohibitive.

Blocking the merger is the right choice for the country’s economy and consumers, according to Ben Klass, advisor and observer to Canada’s telecommunications industry.

“The Competition Office is to be applauded. I do not believe the transaction is acceptable. We need more competition, not more consolidation,” he says.

Shares of Quebecor fell 3% on Monday to $28.57 in Toronto. Rogers’s lost 4% to $64.19, while Shaw’s shares fell 7% to $34.87, closing nearly 15% below the buy price of 40, $50 courtesy of Rogers.

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