Federal competition authorities have thrown a wrench in the proposed $26-billion merger of Rogers Communications Inc. and its Calgary-based rival Shaw Communications Inc., pledging to challenge the blockbuster telecom tie-up.
The companies were notified Friday, after the close of trading, that Commissioner of Competition intends to file applications to the Competition Tribunal “opposing” the merger.
In a joint statement, Rogers and Shaw said they have offered to address concerns regarding competition in Canada’s wireless market and are engaged in a process to fully divest Shaw’s wireless business, Freedom Mobile, “to maintain (a) strong fourth carrier” after their proposed combination.
The transaction was expected to close by the end of June, but the companies have now extended the “outside date” for closing to July 31.
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It has been understood for weeks that the divestiture of at least some of the wireless assets would be required to satisfy the Ministry of Innovation, Science and Economic Development Canada (ISED), which must also approve the merger.
The telcos said they remain committed to doing what’s necessary to join forces, and will oppose the competition commissioner’s application to prevent the transaction “while continuing to engage constructively with the Competition Bureau in an effort to bring this matter to a resolution.”
Rogers and Shaw said joining forces would benefit Canadians because the combined company would have the capabilities to invest in digital infrastructure, create jobs, drive innovation, and increase choice.
“In addition, the transaction will foster greater competition by creating Canada’s most robust wholly-owned national network, and generating more choice for businesses and consumers so they may realize the full economic and social benefits of next generation networks,” they said in the joint statement.
The telcos pledged to invest $2.5 billion to build 5G networks across Western Canada over the next five years, as well as establish a $1-billion “connectivity fund” dedicated to getting services to rural, remote, and Indigenous communities across Western Canada.
An additional $3 billion would be earmarked to support further network, services, and technology investments, and up to 3,000 new jobs would be created in Western Canada.
“Rogers and Shaw remain committed to the transaction, which is in the best interests of Canada and Canadians because of the significant long-term benefits it will bring for consumers, businesses and the economy,” the companies said in their joint statement Friday.
The proposed combination has been approved by Shaw shareholders, the Court of Queen’s Bench of Alberta, and the Canadian Radio-television and Telecommunications Commission (CRTC), which was primarily concerned with the combined companies’ broadcasting assets.
Shaw’s wireless assets, which analysts have said could fetch up to $4 billion, are understood to have generated interest from rival telcos, rural wireless providers, and private equity players.
Anthony Lacavera, founder of Wind Mobile whose assets were ultimately sold to Shaw and renamed Freedom Mobile, has been public about his interest in re-acquiring the wireless operations alongside financial backers.
Shaw’s Freedom Mobile assets have also reportedly drawn an offer from New Brunswick-based rural internet service provider and mobile network operator Xplornet Communications Inc., which is owned by private equity firm Stonepeak Infrastructure Partners.
Montreal-based Quebecor Inc., too, is understood to be interested in purchasing Freedom to expand beyond its stronghold in Quebec. Quebecor chief executive Pierre Karl Péladeau has publicly criticized the national wireless landscape dominated by Rogers, BCE Inc.’s Bell, and Telus Corp., calling it an “oligopoly” that makes wireless services unnecessarily expensive for consumers.