Rogers and Shaw applications are pictured on a cellphone in Ottawa on Monday, May 9, 2022. THE CANADIAN PRESS/Sean Kilpatrick
OTTAWA – Rogers Communications Inc. is pushing back against Canada’s competition watchdog in the first day of a weeks-long hearing on its $26-billion proposed takeover of Shaw Communications Inc., arguing that the deal is “pro-competitive.”
Earlier in the day, the regulator reinforced its opposition to the takeover and intention to fully block it.
In the Competition Bureau’s opening arguments Monday, it reiterated its position that the planned sale of Shaw-owned wireless carrier Freedom Mobile to Quebecor Inc.’s Videotron Ltd. is not enough to eliminate its concerns that the broader merger would lead to worse services and higher prices for consumers.
The sale of Freedom Mobile to Videotron would see Quebecor buy all of Freedom’s branded wireless and internet customers as well as all of Freedom’s infrastructure, spectrum and retail locations in a move that would expand Quebecor’s wireless operations nationally. Quebecor agreed to buy Freedom in a $2.85 billion deal earlier this year.
The regulator said separating Freedom from Shaw would make it a diminished competitor because it would remove Freedom’s access to certain shared human resources and synergies the company “has enjoyed” as part of Shaw.
It said the divestiture would not replace the “vigorous” competitive presence offered by Shaw.
The Competition Bureau said the sale would create a situation where Videotron is likely to be more “aligned” with Rogers and more vulnerable to anti-competitive actions by Rogers.
Rogers disputed this claim in its opening arguments, saying that dependence on Rogers is “very far from reality.”
Rogers said the Competition Bureau’s view of Videotron is “problematic.” It said the regulator is underestimating Videotron’s “capacities and abilities” and discounting its success in Quebec.
Rogers added that the planned sale of Freedom to Videotron would create an “invigorated” competitor in the wireless market, and rhetorically asked why Quebecor would choose to spend almost $3 billion to acquire a business that is doomed to fail.
Additionally, the Competition Bureau said that barriers for Videotron to enter a new market are high. Videotron only operates in Quebec and a small part of Ontario.
The barriers include the challenge of acquiring spectrum, which is scarce and expensive, building infrastructure, retail distribution, and getting customers on board, the Competition Bureau said.
It also noted that even with the sale of Freedom, Rogers will still be acquiring customers from Shaw Mobile.
In its opening arguments, Shaw called the Competition Bureau’s desire to prevent the deal from happening a “dramatic overreach,” adding that blocking the deal would set the telecom industry back a generation.
Shaw said Rogers would never own or operate Freedom, explaining that Videotron would acquire Freedom before Rogers and Shaw merge.
Shaw added that it has operated Freedom as a standalone company that can “easily” and “cleanly” be separated and sold.
The company also said that Videotron would become a more viable competitor than Freedom is now, especially because the sale would allow Freedom to offer 5G services, which it hasn’t been able to do.
In a separate decision last month, Minister François-Philippe Champagne put new conditions on the Rogers-Shaw deal, specifically targeting the sale of Freedom to Videotron.
Champagne ““ who as minister of innovation, science and industry must approve any spectrum licence transfer ““ left the door open to a revised agreement, saying he had two major stipulations.
He said Videotron would have to agree to keep Freedom’s wireless licences for at least 10 years.
He also said he would “expect to see” wireless prices in Ontario and Western Canada lowered by about 20 per cent, putting them in line with Videotron’s current Quebec offerings.
In response, Quebecor said it would accept the conditions, agreeing to incorporate them in a revised deal.
In its opening arguments, Shaw also argued that the Rogers-Shaw deal would boost competition not lessen it, particularly in western Canada, due to Rogers’ size, scale and resources being substantially greater than Shaw’s but relatively equal to Telus, which dominates that part of the country, consequently putting Telus and Rogers on equal footing.
The Competition Bureau is one of three regulatory agencies that must approve the deal before it can close, in addition to the CRTC and Innovation, Science and Economic Development Canada.
The hearing is expected to last four weeks with oral arguments scheduled for mid-December.
Rogers is hoping to close the Shaw deal by the end of the year, with a possible further extension to Jan. 31, 2023.
This report by The Canadian Press was first published Nov. 7, 2022.
Companies in this story: (TSX:RBI.B, TSX:SJR.B, TSX:QBR.B)
