(OTTAWA) Rogers Communications challenged the Competition Bureau’s view on the first day of a week of hearings on its proposed $26 billion takeover of Shaw Communications, arguing the deal is “pro-competitive.”
Updated yesterday at 6:15 p.m.
The Competition Bureau on Monday reinforced its opposition to the takeover and its intention to block it altogether.
In its opening argument before the Competition Tribunal, the federal regulator reiterated its position that the planned sale of Shaw-owned wireless service provider Freedom Mobile to Quebecor’s Videotron would not be sufficient to eliminate its fears that the broader Shaw-Rogers merger will lead to worse services and higher prices for Canadian consumers.
The sale of Freedom Mobile to Videotron would see Quebecor take over all of Freedom’s wireless and internet customers as well as all of Freedom’s infrastructure, wireless spectrum and outlets, in a move that would expand Quebecor’s wireless operations across Canada. Quebecor agreed to buy Freedom in a $2.85 billion deal earlier this year.
The Competition Bureau says that separating Freedom from parent company Shaw would make it a diminished competitor because it would remove Freedom’s access to certain shared human resources and synergies the company “benefited from” within Shaw .
The federal regulator maintains that the transfer to Videotron would not replace the “vigorous” competitive presence offered by Shaw.
The Competition Bureau adds that the sale would create a situation where Videotron would probably be more “aligned” with Rogers and more vulnerable to anti-competitive actions by this company.
Far from reality, says Rogers
Rogers disputed this claim in his opening arguments, saying the reliance on Rogers is “a very far cry from reality.”
Rogers points out that the Competition Bureau’s view of Videotron is “problematic,” adding that the regulator underestimates Videotron’s “capabilities” and downplays its success in Quebec.
Rogers said Freedom’s planned sale to Videotron would create an “invigorated” 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 Competition Bureau specifies that the barriers to Videotron entering a new market are high. Videotron only operates in Quebec and a small part of Ontario.
Obstacles include the challenge of acquiring scarce and expensive wireless spectrum, building infrastructure, distribution and customer participation, argues the Competition Bureau.
He also notes that even with the sale of Freedom, Rogers would continue to acquire customers from Shaw Mobile.
A setback, pleads Shaw
In his opening arguments, Shaw said he believed the Competition Bureau was going way too far in wanting to block the deal, adding that blocking the deal would set the telecom industry back a generation. .
Shaw indicates that Rogers would never own or operate Freedom, explaining that Videotron wanted to acquire Freedom before Rogers and Shaw merged.
Shaw adds that it operated Freedom as a stand-alone business that could “easily” and “cleanly” be separated and sold.
The company also says Videotron would become a more viable competitor than Freedom currently is, not least because the sale would allow Freedom to offer 5G services, which it has been unable to do.
Towards a revised agreement
In a separate decision last month, Minister François-Philippe Champagne imposed new conditions on the Rogers-Shaw deal, specifically targeting the sale of Freedom to Videotron.
Mr Champagne – who, as Minister of Innovation, Science and Industry, must approve any wireless spectrum license transfer – left the door open for a revised deal, saying he had two major stipulations.
He said Videotron should agree to keep Freedom’s wireless licenses for at least 10 years.
He also said he would “expect to see” wireless service prices in Ontario and Western Canada drop by about 20%, bringing them into line with Videotron’s current Quebec offerings.
In response, Quebecor said it would accept the terms, agreeing to incorporate them into a revised agreement.
In its opening arguments, Shaw also argues that the Rogers-Shaw deal would spur competition, not lessen it, particularly in western Canada, since Rogers’ size, scale and resources are vastly superior. to those of Shaw, but relatively equal to Telus, which dominates this part of the country, thus putting Telus and Rogers on an equal footing.
The Competition Bureau is one of three regulators that must approve the deal before it can close. The Canadian Radio-television and Telecommunications Commission (CRTC) and the federal Department of Innovation, Science and Economic Development will also have their say.
The Competition Tribunal hearings are expected to last four weeks, with final arguments scheduled for mid-December. Rogers hopes to complete the transaction with Shaw by the end of the year, with a possible further extension until January 31, 2023.