The Rogers logo is photographed in Toronto on Monday, September 30, 2019. Rogers Communications Inc. has signed a deal to buy Shaw Communications Inc. in a deal valued at $26 billion, including debt. THE CANADIAN PRESS/Tijana Martin

The Rogers logo is photographed in Toronto on Monday, September 30, 2019. Rogers Communications Inc. has signed a deal to buy Shaw Communications Inc. in a deal valued at $26 billion, including debt. THE CANADIAN PRESS/Tijana Martin

Rogers plan to buy Shaw raises red flags about competition, especially in wireless

Shaw and Rogers aren’t direct competitors in cable, internet because their networks are in different places

Rogers Communications Inc. said Monday it will buy Shaw Communications Inc. in a deal that would combine Canada’s two largest cable operations even as it’s expected to face regulatory scrutiny over competition concerns in the wireless industry.

Valued at $26 billion including debt, the proposed deal comes at a pivotal time for cable and phone companies.

Although Shaw and Rogers aren’t direct competitors in cable and internet because their networks are in different parts of the country, they have been fierce combatants in the wireless sector since Shaw bought the former Wind Mobile in 2016.

“As is the case in all telecom combinations, we expect there to be some pushback from the regulatory bodies given the potential impact this transaction would have on competition and wireless pricing,” wrote Canaccord Genuity analyst Aravinda Galappatthige in a note to clients.

Rogers chief executive Joe Natale told analysts in a morning conference call that it’s too early to speculate on whether the competitors will be required to divest any of their operations before approval is granted from federal regulators, including the Competition Bureau.

“But we feel confident this transaction will be approved,” Natale said.

“This transaction does not get done without regulatory approval. It’s our responsibility to make that happen. And we’re going to sit down with regulators and just work through the pieces.”

Competition lawyer Michael Binetti said the companies may have to be willing to make divestments with surgical precision, on a street-by-street or market-by-market basis.

“As opposed to wielding a sledgehammer to try to break it apart completely,” said Binetti, a partner at Affleck Greene McMurtry LLP.

Rogers owns a national wireless network that operates under the Rogers, Fido and Chatr brands. Shaw owns Freedom Mobile and Shaw Mobile in Alberta, B.C. and Ontario.

They both compete against the other national wireless companies owned by Canada’s biggest phone companies: Bell (including Virgin Mobile and Lucky Mobile) and Telus (along with its Koodo and Public Mobile brands). Rogers, Bell and Telus make up the so-called Big Three national carriers.

According to the Canadian Wireless Technology Association, which represents most of the carriers, there were about 33.8 million subscribers in Canada as of Sept. 30, 2020. Rogers had the most, with about 10.9 million, while Freedom had about 1.8 million subscribers.

“If the transaction can go through without a divestiture of wireless, it would be a key positive for all three (national) wireless names (especially Rogers of course),” Galappatthige said.

If Shaw is forced by regulators to sell Freedom, which has little presence east of Ontario, he said Videotron owner Quebecor Inc. would likely be at the front of the line.

Laura Tribe, executive director of consumer advocacy group OpenMedia, said in a statement that the government shouldn’t approve the deal.

“We need more competition in Canada — not less,” Tribe said in a statement.

“Over the years, we’ve seen competitor after competitor swallowed up by the Big Three. The result is always the same — more profits for the Big Three, worse plans and less choice for Canadians. We can’t afford this deal.”

READ MORE: Rogers Communications signs deal to buy Shaw Communications in deal valued at $26B

Francois-Philippe Champagne, the federal minister of Innovation, Science and Industry, issued a brief statement that said he wouldn’t predict the outcome of the regulatory reviews — but repeated the Liberal government’s promises of greater affordability, competition and innovation in the telecom sector.

“These goals will be front and centre in analyzing the implications of today’s news,” Champagne said.

Conservative MP Pierre Poilievre issued a similar statement saying his party “will be reviewing this deal to ensure it helps create competition, affordability for Canadians, and jobs.”

Executives from the two companies revealed few details regarding how they expect to achieve $1 billion of synergies in within two years of closing the deal, mostly from cost savings.

However, they did say on a joint conference call with analysts that savings in operating expenses will likely be more significant than savings from capital spending.

As part of the transaction, the companies said Rogers will invest $2.5 billion in 5G networks over the next five years across Western Canada.

Rogers also says it will create a new $1-billion fund dedicated to connecting rural, remote and Indigenous communities across Western Canada to high-speed internet service.

The combined company plans to maintain a regional headquarters in Calgary, where the president of Western operations and other senior executives will be based.

During a conference call Monday, Alberta Premier Jason Kenney said the Rogers-Shaw deal has “significant implications for Alberta’s economy.”

Kenney said he would hold Rogers to its commitments about employment and investment in Western Canada if the deal goes through, and would like to see regulatory approval contingent on the company making good on those promises.

Rogers chief financial officer Tony Staffieri said that, with the regulatory approvals still at least a year away, there are too many variables to make predictions on cost cutting.

The acquisition would see Rogers pay holders of Shaw’s class A and B shares $40.50 in cash per share, while the Shaw family will receive some of their payment in Rogers shares.

Shaw’s class B shares, which are traded on the Toronto Stock Exchange, were up $9.95 or 41.6 per cent to end the day at $33.85. Earlier in the day they traded as high as $35 each, setting a new 52-week high.

Rogers gained about 3.4 per cent to close at $61.57, up $2.02 from Friday’s close.

Rogers said it has secured committed financing to cover the cash portion of the deal, while about 60 per cent of the Shaw family shares will be exchanged for 23.6 million Rogers B-class shares.

Brad Shaw, and another director to be nominated by the Shaw family — which will become one of the largest Rogers shareholders — will be named to the Rogers board.

David Paddon, The Canadian Press


Like us on Facebook and follow us on Twitter.

Want to support local journalism during the pandemic? Make a donation here.

Internet and Telecom

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

web
Mission mayoral candidate – Rhett Nicholson

Candidates answer three questions about issues impacting Mission

Cheam meadows trail near Mt. Cheam by Chilliwack. (Submitted)
Cheam First Nation ‘shocked’ over all-season mountain resort proposal near Chilliwack

For five years the band has been working on a gondola project of their own

web
UPDATE: Fire investigators on scene at Mission Walmart

Fire department has yet to rule out whether it was intentionally set

Patrick Penner photo.
Southbound crash on Abbotsford-Mission Bridge

Crash involves dump truck and at least one other vehicle, emergency crews on scene

web
Mission mayoral candidate – Paul Horn

Candidates answer three questions about issues impacting Mission

A woman wears a protective face covering to help prevent the spread of COVID-19 as she walks past the emergency entrance of Vancouver General Hospital in Vancouver, B.C., Friday, April 9, 2021. COVID-19 cases have been on a steady increase in the province of British Columbia over the past week. THE CANADIAN PRESS/Jonathan Hayward
Top doctor warns B.C.’s daily cases could reach 3,000 as COVID hospitalizations surge

There are more than 400 people in hospital, with 125 of them in ICU

Eight-year-old Piper and her family were raising money to help Guinevere, the bearded dragon, get a gynecological surgery. Sadly, the reptile didn’t survive the procedure. (Jackee Sullivan/Special to Langley Advance Times)
Lizard fails to survive surgery, GoFundMe dollars help Langley family offset medical bills

Guinevere, a pet bearded dragon, underwent an ovariectomy on Tuesday

A driver stopped by Saanich police following a road rage incident on April 15 was found to be impaired, in violation of a license restriction and in a damaged vehicle. They received a 90-day driving prohibition and a 30-day vehicle impound. (Saanich Police Traffic Safety Unit/Twitter)
Road rager fails breathalyzer on busy B.C. highway in vehicle he shouldn’t be driving

Saanich police say man was operating vehicle without required ignition lock

B.C. Premier John Horgan wears a protective face mask to help prevent the spread of COVID-19. THE CANADIAN PRESS/Jonathan Hayward
B.C. Premier John Horgan booked to get AstraZeneca shot Friday

‘Let’s show all British Columbians that the best vaccine is the one that’s available to you now,’ he said

Doses of the Moderna COVID‑19 vaccine in a freezer trailer, to be transported to Canada during the COVID-19 pandemic. THE CANADIAN PRESS/Nathan Denette
Pfizer to increase vaccine deliveries in Canada as Moderna supply slashed

Moderna plans to ship 650,000 doses of its vaccine to Canada by the end of the month, instead of the expected 1.2 million

Dr. Bonnie Henry speaks about the province’s COVID-19 vaccine plans during a news conference at the legislature in Victoria. THE CANADIAN PRESS/Chad Hipolito
P.1 variant likely highest in B.C. due to more testing for it: Dr. Henry

Overall, just under 60% of new daily cases in the province involve variants

The father of Aaliyah Rosa planted a tree and laid a plaque in her memory in 2018. (Langley Advance Times files)
Final witness will extend Langley child murder trial into May or June

Lengthy trial began last autumn with COVID and other factors forcing it to take longer than expected

A crossing guard stops traffic as students wearing face masks to curb the spread of COVID-19 arrive at Ecole Woodward Hill Elementary School, in Surrey, B.C., on Tuesday, February 23, 2021. A number of schools in the Fraser Health region, including Woodward Hill, have reported cases of the B.1.7.7 COVID-19 variant first detected in the U.K. THE CANADIAN PRESS/Darryl Dyck
COVID-infected students in Lower Mainland schools transmitting to 1 to 2 others: data

Eight to 13 per cent of COVID cases among students in the Lower Mainland were acquired in schools, B.C. says

Dr. Bonnie Henry – in a B.C. health order that went into effect April 12 – granted WorkSafe inspectors the power to enforce workplace closures with COVID-19 spread. THE CANADIAN PRESS/Jonathan Hayward
24 workplace closures being enforced in Fraser Health under new COVID-19 order

WorkSafe inspectors the power to enforce closures if COVID-19 has spread to 3 or more employees

Most Read