Ottawa approves the merger of Rogers and Shaw and the parallel agreement reached last year between Quebecor and the two Canadian telecommunications giants by which the Quebec conglomerate acquires Shaw’s wireless subsidiary, Freedom Mobile.
The Canadian Minister of Innovation, Science and Industry, François-Philippe Champagne, however, approves this transfer of wireless licenses from Shaw to Videotron, owned by Quebecor, by attaching conditions and providing for financial penalties that may reach hundreds of millions in the event of non-compliance with these conditions.
“I have obtained unprecedented and legally binding commitments from Rogers and Videotron,” the minister said Friday.
François-Philippe Champagne specifies that the transfer of licenses aims to ensure that Videotron can operate in the long term as the fourth national player, compete with the three big companies, and lead to lower prices across the country.
If Canadians do not begin to see a significant reduction in prices within a reasonable time frame, I will have no choice but to use other legislative and regulatory powers to bring prices down.
François-Philippe Champagne, Minister of Innovation, Science and Industry
With Freedom, Videotron’s parent company can expand its reach in Ontario and Western Canada and become the country’s fourth largest wireless player.
In particular, the Minister expects Videotron to offer packages comparable to those currently in effect in Quebec, and to offer options at least 20% cheaper than those offered by the major players (Rogers, BCE and Telus).
In addition, Videotron is not allowed to transfer Freedom Mobile’s licenses for a period of 10 years, will have to extend its 5G wireless network into Freedom Mobile’s pre-existing territory within two years, and extend mobile service to Manitoba through a Mobile Virtual Network Operator (MVNO) agreement or other means in addition to offering plans comparable to those it offers in Quebec.
Ottawa also expects Videotron to increase the data allocated to Freedom Mobile customers by 10% as a short-term bonus, while investing to lower prices in general.
Roger is also subject to commitments requiring it to make “major” investments to improve connectivity over the next five years (creation of 3,000 jobs in the west of the country, extending access to broadband internet, etc.).
In the event of non-compliance with the conditions, Ottawa provides for penalties of up to $200 million for Videotron, and up to $1 billion in the case of Rogers.
This approval from Ottawa was the final hurdle in completing Rogers’ takeover of Shaw.
The federal green light comes on D-Day for this mega-transaction valued at $26 billion including the debt. The proposed combination of Rogers and Shaw was announced exactly two years ago. Postponed several times, the deadline for proposed transactions had recently been pushed back to March 31.
Due to competition concerns from regulators, Rogers and Shaw agreed last year to sell Freedom Mobile to Quebecor for $3 billion.
The Competition Bureau opposed the merger of Rogers and Shaw, but the Competition Tribunal ruled in late December that the transaction is unlikely to significantly prevent or lessen competition. The Federal Court of Appeal later dismissed the Competition Bureau’s challenge.
The Radio-television and Telecommunications Commission (CRTC) had given the green light to the acquisition of Shaw’s broadcasting services by Rogers in March last year.