Rogers, Shaw and Quebecor say conciliation talks with Canada’s competition watchdog failed to resolve merger objections

The proposed $26 billion merger of Rogers Communications Inc. and Shaw Communications Inc. is headed for a court hearing after mediation talks failed to resolve the competition agency’s objections to the deal.

The federal competition watchdog is trying to block a merger between Canada’s two biggest cable companies, arguing the deal would reduce competition and lead to higher cellphone bills, worse service and less consumer choice.

Rogers, Shaw and Quebecor Inc. said in a joint statement Thursday that they are “disappointed with this outcome.” Quebecor will buy Shaw’s wireless operator Freedom Mobile if the takeover is successful.

The companies argued that the competition agency was unwilling to “significantly engage” during talks in Ottawa on Thursday.

“We remain committed to completing this series of pro-competitive transactions and remain confident in the strength and merits of the case before the Competition Tribunal, including the many benefits these transactions will bring to Canadians,” the companies said in a statement.

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The spokesperson of the Finnish Competition Authority, Jayme Albert, confirmed that the mediation talks did not lead to a solution.

“We are aware of the press release issued by Rogers, Shaw and Quebecor and strongly disagree with its content, except that no negotiated settlement was reached,” Albert said in an email.

“Since by law the bureau has to do its work confidentially, I cannot comment further.”

The competition court hearing is scheduled to begin on November 7 and may last until December 8. Mediation could still be reached before or even during the sessions.

Earlier this year, Quebecor struck a deal to buy Freedom Mobile for $2.85 billion. Rogers and Shaw have agreed to sell Freedom to address concerns about the merger of their companies would eliminate Canada’s fourth-largest wireless carrier, which has been said to have lowered wireless rates in recent years.

The Globe has reported that prior to the settlement, Rogers submitted a settlement proposal that would have seen Quebecor also acquire some fiber-optic infrastructure as part of the deal. The move was intended to address the competition agency’s concerns that Videotron, a Montreal-based telecommunications company owned by Quebecor, does not own enough infrastructure outside Quebec to support Freedom’s wireless business.

The acquisition also requires the approval of Industry Minister François-Philippe Champagne. On Tuesday night, Mr. Champagne outlined the terms under which his department — Innovation, Science and Economic Development Canada — will approve the transfer of Shaw’s wireless spectrum licenses to Videotron. Those terms include Quebecor committing to lower wireless prices and agreeing not to sell Shaw’s spectrum for 10 years. (Spectrum refers to the airwaves used to transmit wireless signals.)

Pierre Karl Péladeau, Quebecor’s president and CEO, has already accepted Mr. Champagne’s terms, saying they are in line with his company’s “business philosophy” and that Quebecor, Rogers and Shaw will include the criteria in a new version of their contract.

Some industry analysts and investors were hopeful that Mr. Champagne’s comments would help the companies negotiate a settlement with the competition agency, and shares in both Rogers and Shaw rose sharply on Wednesday morning. But shares fell slightly Wednesday afternoon after the agency issued a statement saying it still plans to challenge the merger.

Rogers, Shaw and Quebecor highlighted the benefits of the merger in a statement Thursday, claiming it will “positively transform Canada’s telecommunications industry.”

“The combined Videotron-Freedom business has everything it needs to compete as a stronger fourth carrier over the long term, including critical 5G spectrum. Quebecor’s commitment to lower wireless prices for Canadians across the country is another example of the many benefits the proposed deals will bring if approved “, the companies said.

“At the same time, Shaw-Rogers’ combined wireline business makes the national network competitive [Bell and Telus] in the long run.”

Keldon Bester, a fellow at the Center for International Governance Innovation, said he wasn’t surprised the two sides couldn’t reach an agreement. He pointed out that the last mediation attempt in June had ended in the same way. Even so, he said he was encouraged that the competition agency followed through on a message it repeated after Mr. Champagne’s news conference on Tuesday.

“It’s another confirmation that the agency is willing to fight for Canadians rather than settle,” said Mr. Bester, who researches the monopoly position for a Waterloo, Canada-based think tank.

“I hope the court agrees with the agency’s argument that blocking the merger entirely is the right solution.”