The announced merger of Shaw and Rogers would lead to higher prices, reduced quality of service and a loss of choice, particularly in wireless services, judges the Competition Bureau, which therefore formally opposes it.
Updated yesterday at 11:45 p.m.
According to the body, eliminating Shaw as a competitor would jeopardize the “considerable” progress the company has made in increasing competition in an already concentrated market. Its Freedom Mobile subsidiary is currently the fourth largest wireless provider in Canada, with more than 2 million subscribers, primarily in Ontario, Alberta and British Columbia.
Rogers had revealed in March last year an agreement valued at 26 billion (including debt) to acquire Shaw. Since then, various companies, including Quebecor, have been approached or have signaled their intention to acquire Freedom Mobile.
Competition between Rogers and Shaw has already diminished since the announcement, according to the Bureau, and if the proposed merger goes ahead, this harm would continue and could worsen.
The organization says its investigation found that before the announcement of 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 decreased,” it says.
Shaw’s decline in marketing and promotional activities has resulted in an overall loss of competition in the marketplace, it said.
against the big three
The Bureau’s investigation found that since acquiring Wind in 2016 (subsequently renamed Freedom Mobile), Shaw has established itself as a “strong” and “disruptive” regional competitor.
The Bureau argues that Shaw has consistently challenged the Big Three national 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, seeking an order from the Competition Tribunal to stop it from happening.
An injunction is also sought to prevent Rogers and Shaw from closing the deal until the Competition Bureau’s request is heard.
“The disappearance of Shaw would eliminate an independent and robust competitor in the wireless market in Canada – a competitor that has lowered prices, made data more accessible and offered innovative services to its customers”, comments the Commissioner of the competition, Matthew Boswell.
“We are acting to block this merger in order to preserve competition and choice for an essential service that Canadians expect to be affordable and of high quality,” he added.
For the transaction to be blocked, the Bureau’s allegations will have to 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 application filed by the Competition Bureau.
The two companies are thus offering a “complete” sale of the assets of Freedom Mobile, Shaw’s wireless subsidiary.
“Rogers and Shaw engage in process to sell Freedom Mobile to address concerns raised by Commissioner of Competition and ISED [Innovation, Sciences et Développement économique Canada] “Said the two companies on Saturday.
The Canadian Radio-television and Telecommunications Commission (CRTC) – the other regulatory body whose approval is needed for the merger to go ahead – gave its approval in March.
Last month, the daily Globe and Mail claimed that Rogers had submitted an agreement to the federal government surrounding the sale of Freedom to Xplornet in order to obtain approval from the authorities for its proposed merger with Shaw. The daily previously reported that Globalive had made an offer for Freedom before revealing last Friday that Quebecor had finally been asked to participate in the sale process surrounding Freedom.
This information could suggest that the authorities wanted a major telecommunications operator to acquire Freedom in order to ensure the creation of a player that could compete with BCE, Telus and Rogers.
Reached by telephone, analyst Jérôme Dubreuil, of Desjardins Securities, said he was surprised that the documents published Monday by the Competition Bureau made no mention of the commitment to sell Freedom Mobile made by Rogers during the weekend.
“That’s what surprised me in the dispatch from the Competition Bureau,” says Jérôme Dubreuil.
“The Bureau identifies that its main problem with the transaction is the elimination of a fourth player and does not mention a concern surrounding the identity of a potential buyer. »
This expert thinks that we could learn a little more when the Competition Bureau files documents before the Competition Tribunal.
“There are several ways to make the transaction more acceptable if necessary,” he says, referring in particular to the signing of roaming agreements. “It’s not clear exactly what the Competition Bureau wants at this time. Not in my eyes, anyway. »
As for Quebecor, we will have to see how much the company wants to have a presence in wireless outside Quebec. The company paid 830 million last summer to buy blocks of spectrum in the country (Ontario, Manitoba, Alberta, etc.). However, the resale of these licenses for profit remains a possibility if Quebecor deems the costs associated with an expansion outside Quebec in mobile telephony to be too onerous.
Blocking the merger is the right thing to do for the country’s economy and consumers, according to Ben Klass, consultant and observer of the Canadian telecommunications industry.
“The Competition Bureau should be applauded. I don’t believe the transaction is acceptable. We need more competition, not more consolidation,” he says.
Quebecor shares fell 3% on Monday to $28.57 in Toronto. That of Rogers lost 4%, to $64.19, while Shaw shares fell 7%, to $34.87, to close nearly 15% below the acquisition price of 40, $50 courtesy of Rogers.