Proposed Shaw-Rogers merger | Ottawa imposes conditions on Quebecor, which accepts

The proposed merger between Rogers and Shaw – which will have major repercussions outside Quebec – is still alive as Quebecor complies with the demands of the Trudeau government regarding a side agreement concluded last June between the Quebec conglomerate and two Canadian telecommunications giants.

Julien Arsenault
The Press

A few hours after an exit from the federal Minister of Innovation, Science and Industry, François-Philippe Champagne, the parent company of Videotron responded favorably to the requests. It thus undertakes to hold the telephone network of Shaw (Freedom Mobile) for at least a decade as well as to lower the price of mobile telephone services outside Quebec.

“We intend to accept the conditions set out […] and integrate them into the new version already negotiated in the Rogers-Shaw / Quebecor-Freedom Mobile transaction, said the president and chief executive officer of Quebecor, Pierre Karl Péladeau, in a press release. The latter are part of the same commercial philosophy crowned with success in Quebec. »

The presence of Rogers and Shaw in Quebec is limited. In the rest of the country, the proposed merger is causing concern since it involves the consolidation of two major players in the telecommunications industry.

Hoping to assuage the Trudeau government’s competition concerns, Rogers and Shaw had agreed to sell Freedom Mobile to Quebecor for about $2.9 billion. This transaction allowed the Quebec company to make a breakthrough in the wireless sector to become the fourth largest player in the country.

With conditions

Mr. Champagne came to add his grain of salt, Tuesday, at the end of the afternoon.

In Ottawa, the minister warned that he would not let Quebecor acquire Freedom Mobile without a commitment from the Quebec conglomerate to keep its new wireless frequencies for “at least 10 years”. In Ontario and in Western Canada, prices for wireless services must be comparable to those offered by Videotron in Quebec. In the Quebec market, prices are on average “20% lower” than in the rest of the country, noted Minister Champagne.

“What I’m saying is that these are my expectations and they (Rogers, Shaw and Quebecor) better meet them,” he said. Obviously, there are other elements that we will look at, but those are the two essential things. »

At the same time, the minister officially blocked the transfer of wireless licenses from Shaw to Rogers, a commitment that had been made earlier this year. This is what prompted the two companies to enter into an agreement with Quebecor to get rid of Freedom Mobile.

A planned outing?

This exit from the Minister comes as a new mediation session is to begin Thursday between Rogers, Shaw and the Competition Bureau. The federal body, which must give its opinion on the transaction estimated at 26 billion, challenges the merger. He believes the transaction would hurt consumers through higher prices, lower quality services and lost innovation.

However, according to the Globe and Mail, Rogers is said to have already presented proposals to try to find common ground during the mediation. The Bureau will advise the Trudeau government, which will have the final say on the proposed merger.

Mr. Champagne does not necessarily seem to disagree with the takeover of Shaw by Rogers, said analyst Jérôme Dubreuil of Desjardins Securities.

“He (Mr. Champagne) puts conditions, but these are conditions for the transaction to succeed, he explains, in a telephone interview with The Press. He had the power to say no and block the transaction, but he didn’t. »

As for National Bank Financial, analyst Adam Shine wonders if the Ministry of Innovation, Science and Industry wants to see things go faster with the Competition Bureau.

“Perhaps (the ministry) felt the process had taken long enough,” Mr. Shine wrote in a note. If so, this second mediation may turn out to be more productive than expected. »

Freedom Mobile would allow Videotron to become the fourth largest player in the mobile phone industry, alongside Bell Rogers and Telus. Freedom Mobile has approximately 1.7 million customers in Ontario, Alberta and British Columbia. In Quebec, there is the same proportion of active lines at Videotron.

The transaction between Rogers and Shaw has already received approval from shareholders as well as from the Canadian Radio-television and Telecommunications Commission (CRTC).