Rogers Communications (NYSE: RCI), Shaw Communications (NYSE: SJR) and Quebecor Inc. announced after markets closed on Friday a deal to sell Freedom Mobile to Montreal-based Quebecor for approximately $2.2 billion. The deal is intended to appease federal regulators opposed to Rogers proposed takeover of Shaw. Quebecor is a diversified media and telecommunications company serving customers in Québec and eastern Canada. The sale to Quebecor covers all of Freedom Mobile’s branded wireless and internet customers, infrastructure, spectrum, and retail sites. More importantly, it expands Quebecor’s reach into key markets in Ontario, and Alberta and British Columbia in western Canada.
Toronto-based Rogers made a $20-billion bid for Calgary-based Shaw on March 15, 2021, as Inside Towers reported. Rogers and Shaw are competitors but as part of the proposed acquisition, Rogers offered to divest Shaw’s Freedom Mobile unit to allay competition concerns. The Freedom Mobile deal comes after Canada’s antitrust regulator reiterated its opposition of Rogers’ plan to purchase Shaw, expressing concerns that the acquisition would result in greater market concentration and less wireless competition in Canada.
The Canadian wireless market is dominated by national carriers, Bell, TELUS, and Rogers, with a handful of smaller regional players serving select parts of the country. The Freedom Mobile deal is subject to approval by Canada’s competition watchdog and the federal department of Innovation, Science and Economic Development, the firms said.
‘Viable and sustainable’ competition
The Competition Bureau claimed the sale would weaken Freedom Mobile’s operations, reducing “competitive discipline” among national carriers and leading to a transfer of wealth from low- and middle-income groups to the wealthy Rogers and Shaw families.
Rogers, Shaw, and Quebecor countered that their agreement would effectively address those concerns and keep alive a “strong and sustainable” fourth wireless carrier in Canada because the deal would expand Quebecor’s Québec-focused wireless operations nationally. The deal also includes commitments by Shaw and Rogers to provide Quebecor with transport (backhaul and backbone) and roaming services.
“The parties strongly believe the agreement effectively addresses the concerns … regarding viable and sustainable wireless competition in Canada,” the companies said in the statement, referring to the reservations of the competition watchdog and the industry minister.
“We look forward to securing the outstanding regulatory approvals for our merger with Shaw so that we can deliver significant long-term benefits to Canadian consumers, businesses and the economy,” said Rogers’ CEO Tony Staffieri.
Competing interests
Quebecor beat out several other parties to reach the deal, according to CBC News. Globalive Capital signed a network- and spectrum-sharing agreement with Rogers’ competitor TELUS in May to boost its bid to purchase Freedom. Established as Wind Mobile by Globalive founder and chairman Anthony Lacavera in 2008, Wind Mobile was acquired by Shaw in 2015, and renamed Freedom Mobile.
Lacavera said in a statement Saturday that Globalive Capital had offered nearly $2.9 billion, $690 million more than Quebecor did to buy Freedom. He said its bid was rejected because Globalive is “a real independent and pureplay national long-term competitor.” He added that “Rogers is afraid to compete.”
Canadian law allows approval of mergers that may diminish competition only if the companies can prove the mergers bring efficiency to the economy.
The Rogers-Shaw transaction already has approval from the Shaw shareholders and the Canadian Radio-television and Telecommunications Commission. However, it remains subject to review by the Competition Bureau and the Minister of Innovation, Science and Economic Development.
The Competition Bureau doubled down on its opposition to Rogers’ proposed takeover of Shaw in new submissions made to the Competition Tribunal on Friday. In legal filings released after markets closed, the agency challenged Rogers’ claims about efficiencies and said acquiring its closest rival is anti-competitive and would harm consumers through higher prices, lower-quality services, and lost innovation.
It also argued the proposed sale of Freedom Mobile is “not an effective remedy,” because it won’t replace the growing competition Shaw Mobile would deliver in Alberta and British Columbia and would make Freedom Mobile “a subsequently weaker competitor.”
By John Celentano, Inside Towers Business Editor
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