The Competition Bureau is under fire for its opposition to the proposed acquisition of Shaw by Rogers.
Posted at 9:00 a.m.
While the Bureau argues that selling Shaw’s wireless subsidiary, Freedom Mobile, will not eliminate the threat of a substantial lessening of competition if Rogers gets its hands on Shaw, analyst Adam Shine of National Bank Financial said is not so certain.
This expert does not hesitate to question several elements of the regulatory body’s argument.
Rogers had revealed in March last year an agreement valued at 26 billion (debt included) to acquire Shaw.
The Competition Bureau formally challenged the transaction on Monday, seeking an order from the Competition Tribunal to stop it from happening.
A marginal “new player”
“The application presents Shaw first and foremost as a wireless operator when throughout its history Shaw has been a cable company that has since acquired Wind about five years ago a small and growing player in the wireless,” Adam Shine said in a note sent to customers on Wednesday.
“Shaw is called a maverick [concurrent franc-tireur, non conformiste]. I’ve never heard of that although the company naturally has to try new things as a new player in wireless. »
Wind – now Freedom Mobile – had a network that lacked subscribers and needed to attract customers with lower prices and larger data blocks, he said.
Shaw Mobile was an attempt to add another product for cable subscribers as Telus gained market share, argues this expert.
Adam Shine finds it odd that the Bureau says eliminating Shaw as a competitor jeopardizes the considerable progress made to increase competition in wireless.
“I don’t believe that’s necessarily the case since the previous owner of the assets didn’t have any bundles to offer and wasn’t aggressively active beyond a few urban centers. »
He recalls that Globalive launched the ancestor of Freedom and was considered a reasonable owner of the company until it was sold to a private investment firm which then quickly sold Wind to Shaw.
Why would Globalive suddenly not be seen as a reasonable acquirer of Freedom and additionally other parties with deep pockets and a commitment to pick up the slack for continued growth in the 5G era? he asks.
About 5G, precisely, Adam Shine recalls that Shaw was not able to bet on spectrum last summer during the auction. Quebecor paid 830 million there to buy blocks of spectrum from across the country (Ontario, Manitoba, Alberta, etc.) in the hope of using them after having the chance to buy Freedom or possibly by becoming a mobile virtual network operator in some markets.
A “beneficial” change
Adam Shine also wonders how it could be in Freedom’s best interests to force the Shaw family to stay in control.
“It was always expected that Shaw would eventually be sold to another major Canadian operator and it was universally expected that it would be Rogers. »
Why, by being owned by Xplornet (Stonepeak), Quebecor or Globalive (with the support of private capital), would Freedom’s progress be automatically halted? he asks.
On the contrary, many people believe that a change of ownership could prove beneficial.
Adam Shine, analyst at National Bank Financial
The best solution is for the moment by a new owner, according to him.
“There is no guarantee that Shaw will continue to invest optimally in wireless or even that the company will launch a standalone 5G network. »
Reading the documents leads him to believe they were drafted while Rogers was defending its right to acquire Freedom as Rogers and Shaw indicated last weekend – after being told the Competition Bureau intended to challenge their proposed merger – that the two companies engage in a process to sell Freedom Mobile in order to address concerns raised by the Commissioner of Competition and ISED (Innovation, Science and Economic Development Canada).
A deep-pocketed acquirer might as well invest and do it faster and more “aggressively” than Shaw, according to Adam Shine.
He adds that it is hard to believe that a consortium led by the Aquilini family and backed by LiUNA Pension Fund and Musqueam Capital – this group has submitted a bid, according to the Globe and Mail – could not fill the shoes of the Shaw family.
“This consortium and other potential buyers should ultimately represent an acceptable alternative to the government,” says Adam Shine.