The Rogers logo is photographed in Toronto on Monday, September 30, 2019. Rogers Communications Inc. has signed a deal to buy Shaw Communications Inc. in a deal valued at $26 billion, including debt. THE CANADIAN PRESS/Tijana Martin

The Rogers logo is photographed in Toronto on Monday, September 30, 2019. Rogers Communications Inc. has signed a deal to buy Shaw Communications Inc. in a deal valued at $26 billion, including debt. THE CANADIAN PRESS/Tijana Martin

Rogers plan to buy Shaw raises red flags about competition, especially in wireless

Shaw and Rogers aren’t direct competitors in cable, internet because their networks are in different places

Rogers Communications Inc. said Monday it will buy Shaw Communications Inc. in a deal that would combine Canada’s two largest cable operations even as it’s expected to face regulatory scrutiny over competition concerns in the wireless industry.

Valued at $26 billion including debt, the proposed deal comes at a pivotal time for cable and phone companies.

Although Shaw and Rogers aren’t direct competitors in cable and internet because their networks are in different parts of the country, they have been fierce combatants in the wireless sector since Shaw bought the former Wind Mobile in 2016.

“As is the case in all telecom combinations, we expect there to be some pushback from the regulatory bodies given the potential impact this transaction would have on competition and wireless pricing,” wrote Canaccord Genuity analyst Aravinda Galappatthige in a note to clients.

Rogers chief executive Joe Natale told analysts in a morning conference call that it’s too early to speculate on whether the competitors will be required to divest any of their operations before approval is granted from federal regulators, including the Competition Bureau.

“But we feel confident this transaction will be approved,” Natale said.

“This transaction does not get done without regulatory approval. It’s our responsibility to make that happen. And we’re going to sit down with regulators and just work through the pieces.”

Competition lawyer Michael Binetti said the companies may have to be willing to make divestments with surgical precision, on a street-by-street or market-by-market basis.

“As opposed to wielding a sledgehammer to try to break it apart completely,” said Binetti, a partner at Affleck Greene McMurtry LLP.

Rogers owns a national wireless network that operates under the Rogers, Fido and Chatr brands. Shaw owns Freedom Mobile and Shaw Mobile in Alberta, B.C. and Ontario.

They both compete against the other national wireless companies owned by Canada’s biggest phone companies: Bell (including Virgin Mobile and Lucky Mobile) and Telus (along with its Koodo and Public Mobile brands). Rogers, Bell and Telus make up the so-called Big Three national carriers.

According to the Canadian Wireless Technology Association, which represents most of the carriers, there were about 33.8 million subscribers in Canada as of Sept. 30, 2020. Rogers had the most, with about 10.9 million, while Freedom had about 1.8 million subscribers.

“If the transaction can go through without a divestiture of wireless, it would be a key positive for all three (national) wireless names (especially Rogers of course),” Galappatthige said.

If Shaw is forced by regulators to sell Freedom, which has little presence east of Ontario, he said Videotron owner Quebecor Inc. would likely be at the front of the line.

Laura Tribe, executive director of consumer advocacy group OpenMedia, said in a statement that the government shouldn’t approve the deal.

“We need more competition in Canada — not less,” Tribe said in a statement.

“Over the years, we’ve seen competitor after competitor swallowed up by the Big Three. The result is always the same — more profits for the Big Three, worse plans and less choice for Canadians. We can’t afford this deal.”

READ MORE: Rogers Communications signs deal to buy Shaw Communications in deal valued at $26B

Francois-Philippe Champagne, the federal minister of Innovation, Science and Industry, issued a brief statement that said he wouldn’t predict the outcome of the regulatory reviews — but repeated the Liberal government’s promises of greater affordability, competition and innovation in the telecom sector.

“These goals will be front and centre in analyzing the implications of today’s news,” Champagne said.

Conservative MP Pierre Poilievre issued a similar statement saying his party “will be reviewing this deal to ensure it helps create competition, affordability for Canadians, and jobs.”

Executives from the two companies revealed few details regarding how they expect to achieve $1 billion of synergies in within two years of closing the deal, mostly from cost savings.

However, they did say on a joint conference call with analysts that savings in operating expenses will likely be more significant than savings from capital spending.

As part of the transaction, the companies said Rogers will invest $2.5 billion in 5G networks over the next five years across Western Canada.

Rogers also says it will create a new $1-billion fund dedicated to connecting rural, remote and Indigenous communities across Western Canada to high-speed internet service.

The combined company plans to maintain a regional headquarters in Calgary, where the president of Western operations and other senior executives will be based.

During a conference call Monday, Alberta Premier Jason Kenney said the Rogers-Shaw deal has “significant implications for Alberta’s economy.”

Kenney said he would hold Rogers to its commitments about employment and investment in Western Canada if the deal goes through, and would like to see regulatory approval contingent on the company making good on those promises.

Rogers chief financial officer Tony Staffieri said that, with the regulatory approvals still at least a year away, there are too many variables to make predictions on cost cutting.

The acquisition would see Rogers pay holders of Shaw’s class A and B shares $40.50 in cash per share, while the Shaw family will receive some of their payment in Rogers shares.

Shaw’s class B shares, which are traded on the Toronto Stock Exchange, were up $9.95 or 41.6 per cent to end the day at $33.85. Earlier in the day they traded as high as $35 each, setting a new 52-week high.

Rogers gained about 3.4 per cent to close at $61.57, up $2.02 from Friday’s close.

Rogers said it has secured committed financing to cover the cash portion of the deal, while about 60 per cent of the Shaw family shares will be exchanged for 23.6 million Rogers B-class shares.

Brad Shaw, and another director to be nominated by the Shaw family — which will become one of the largest Rogers shareholders — will be named to the Rogers board.

David Paddon, The Canadian Press


Like us on Facebook and follow us on Twitter.

Want to support local journalism during the pandemic? Make a donation here.

Internet and Telecom

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

The Quesnel RCMP Detachment is one of seven northern police buildings which can now connect directly to Prince George for daily bail hearings. (Observer File Photo)
Bail hearings going virtual in B.C.’s north

A court pilot project will see virtual courtroom cameras set up in seven RCMP detatchments

FILE – Wet’suwet’en hereditary chiefs have agreed to sign a memorandum on rights and title with B.C. and Ottawa, but elected chiefs are demanding it be called off over lack of consultation. (Thom Barker photo)
Wet’suwet’en hereditary chiefs, Lake Babine Nation get provincial funding for land, title rights

Government says it’s a new, flexible model for future agreements between Canada, B.C. and First Nations.

The property on which a residential school (pictured) that was torn down years ago in Lower Post is to be the location of a cultural centre. (Indian Residential School History and Dialogue Centre photo)
Lower Post residential school building to be demolished, replaced with cultural centre

Project to be funded by federal and provincial governments, Daylu Dena Council

The Dease Lake Airport is receiving $11-million in upgrades funded by the province, Regional District of Kitimat-Stikine and mining companies. (British Columbia Aviation Council)
Major upgrades coming to Dease Lake Airport

Airport to receive $11-million from the province, regional district and mining companies

FILE – NDP Leader John Horgan, right, and local candidate Mike Farnworth greet one another with an elbow bump during a campaign stop in Coquitlam, B.C., on Friday, September 25, 2020. THE CANADIAN PRESS/Darryl Dyck
B.C. won’t be using random individual road stops to enforce travel rules: Safety Minister

Minister Mike Farnworth says travel checks only being considered at major highway junctions, ferry ports

..
Abbotsford nurse at ‘breaking point’ pleads with public to take COVID-19 seriously

Instagram post urges general population to stay home, wear a mask and get vaccinated

A native-to-B.C. wild queen bee (bombus melanopygus for those in the know) feeds on a periwinkle flower. (Submitted/Sarah Johnson, Native Bee Society of BC)
B.C.’s wild bees need messy gardens to survive

The year-long nesting period makes habitat a primary concern for wild bees

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

FILE – Health-care workers wave to people clapping and yelling thank you to the frontline workers during the 7 p.m.-tribute outside the Lions Gate Hospital in North Vancouver, B.C. Wednesday, April 8, 2020. THE CANADIAN PRESS/Jonathan Hayward
B.C. nurses issue plea for all to follow health orders as hospitalizations spike

Nurses worried about strain COVID-19 is having on hospital capacity, care

University of Victoria rowing coach Barney Williams is photographed in the stands during the Greater Victoria Invitational at CARSA Performance Gym at the University of Victoria in Victoria, B.C., on Friday, November 29, 2019. The University of Victoria says Williams has resigned effective immediately. (THE CANADIAN PRESS/Chad Hipolito)
University of Victoria women’s rowing coach resigns by mutual agreement

Lawsuit filed last summer accused Barney Williams of verbal abuse

Former B.C. premier Christy Clark. (Black Press Media files)
Former B.C. premier to testify at money laundering hearing today

Attorney General David Eby has been added to the witness list as well

Selina Robinson is shown in Coquitlam, B.C., on Friday November 17, 2017. British Columbia’s finance minister says her professional training as a family therapist helped her develop the New Democrat government’s first budget during the COVID-19 pandemic, which she will table Tuesday. THE CANADIAN PRESS/Darryl Dyck
B.C. to table budget that’s expected to deal with COVID-19 pandemic and beyond

Robinson released a fiscal update last December that said the impact of the pandemic on B.C.’s economy was uncertain

Most Read