Rogers Communications Inc. is pushing back against Canada’s competition watchdog on the first day of a weeks-long hearing on its $26 billion proposal to buy Shaw Communications Inc., arguing the deal is “pro-competitive.” The price tag includes $6 billion in debt.
Earlier in the day, the regulator confirmed its opposition to the acquisition and its intention to block it completely.
In its opening statement on Monday, the FCA reiterated its position that the planned sale of Shaw-owned wireless carrier Freedom Mobile to Quebecor Inc.’s Videotron Ltd. is not enough to allay its concerns that a wider merger would lead to worse services and higher prices for consumers.
The sale of Freedom Mobile to Videotron would mean that Quebecor would acquire all of Freedom’s wireless and internet brand customers, as well as all of Freedom’s infrastructure, spectrum and retail locations. The move would expand Quebecor’s wireless operations nationally. Quebecor agreed to buy Freedom in a $2.85 billion deal earlier this year.
The regulator said that separating Freedom from Shaw would make it a weakened competitor because it would deprive Freedom of access to certain shared human resources and synergies that the company “has enjoyed” as part of Shaw.
It said the sale would not replace the “strong” competition provided by Shaw.
The FCA said the sale would create a situation where Videotron was likely to be “more aligned” with Rogers and more vulnerable to anti-competitive actions by Rogers.
Rogers disputed this claim in his opening arguments, saying that reliance on Rogers is “very far from reality”.
Rogers said the competition agency’s view of Videotron is “problematic”. It said the regulator underestimated Videotron’s “capacity and capabilities” and downplayed its success in Quebec.
Rogers added that Freedom’s planned sale to Videotron would create a “refreshed” competitor in the wireless market and asked rhetorically why Quebecor would choose to spend nearly $3 billion to acquire a doomed company.
In addition, the Finnish Competition Authority stated that the barriers to Videotron’s entry into new markets are high. Videotron only operates in Quebec and a small part of Ontario.
Obstacles include acquiring scarce and expensive frequencies, building infrastructure, retail sales and getting customers on board, the Finnish Competition Authority said.
It also noted that even after selling Freedom, Rogers will continue to acquire customers from Shaw Mobile.
In his opening arguments, Shaw called the competition agency’s desire to block the deal from happening a “dramatic overreach” and added that blocking the deal would set the telecoms industry back a generation.
Shaw said that Rogers would never own or operate Freedom, and explained that Videotron would acquire Freedom before Rogers and Shaw merged.
Shaw added that it has been treating Freedom as an independent company that can be “easily” and “cleanly” spun off and sold.
The company also said that Videotron will become a more viable competitor than Freedom is now, especially since the sale would allow Freedom to offer 5G services, something it has been unable to do.
In a separate decision last month, Minister Francois-Philippe Champagne set new conditions for the Rogers-Shaw contract, which were particularly aimed at the sale of Freedom to Videotron.
Champagne – who as innovation, science and industry minister must approve all spectrum license transfers – left the door open to a revised deal, saying he had two important conditions.
He said Videotron must agree to hold Freedom’s wireless licenses for at least 10 years.
He also said he “expects” wireless prices in Ontario and Western Canada to drop about 20 percent, putting them in line with Videotron’s current Quebec offerings.
In response, Quebecor said it accepted the terms and agreed to include them in the revised contract.
In his opening statement, Shaw also argued that the Rogers-Shaw deal would increase, not decrease, competition, particularly in Western Canada because Rogers’ size, scale and resources are significantly greater than Shaw’s but relatively equal to Telus, which dominates that segment . Telus and Rogers are therefore equal.
The Competition Bureau is one of three regulatory agencies that must approve the deal before it closes, along with the CRTC and the Canadian Innovation, Science and Economic Development Agency.
The hearing is expected to last four weeks, with oral arguments scheduled for mid-December.
Rogers hopes to complete the Shaw deal by the end of the year, with a possible extension until January 31, 2023.
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