Rogers Communications Inc.’s RCI-B-T $20-billion takeover of Shaw Communications Inc. SJR-B-T is at risk of running past the companies’ self-imposed Jan. 31 deadline, raising questions about when a deal that has been in the works for close to two years will cross the finish line.
The takeover, which would see Quebecor Inc.’s Videotron Ltd. expand into new markets by acquiring Shaw’s Freedom Mobile wireless carrier, has overcome legal challenges but still requires signoff from federal Industry Minister François-Philippe Champagne.
Mr. Champagne has asked Videotron for commitments to bring down cellphone prices outside of its home market of Quebec and to not sell Freedom’s wireless licences for at least a decade.
Although Quebecor has already agreed to those conditions, Mr. Champagne told the Toronto Star on Thursday that he wants to ensure they are enforceable. He has also indicated that he is in no rush to approve the deal, noting that as a regulator, he is not bound by the companies’ deadline. In order to approve the takeover, Mr. Champagne has to allow the transfer of Shaw’s wireless licences to Videotron.
Freedom is Canada’s fourth-largest wireless carrier, with roughly 1.7 million customers in Ontario, Alberta and British Columbia.
Representatives from Rogers, Shaw and Videotron all said that their companies remain committed to the deal.
Mr. Champagne has also said he is closely examining the reasoning behind the Federal Court of Appeal’s Jan. 24 decision to uphold the Competition Tribunal’s ruling in favour of the takeover. The Competition Bureau had petitioned the court to overturn the ruling, which found that the deal was unlikely to materially increase Canadians’ cellphone bills.
Lawyers for Rogers and Shaw cautioned during the legal proceedings that there is a significant risk that the deal could fall apart if it does not close by the end of the month.
The agreements dictating the transactions – which would first see Videotron acquire Freedom for $2.85-billion before Rogers purchases Shaw – expire on Jan. 31, unless they are extended by the companies.
The minister is facing political pressure not to rush his approval, with several Conservative members of Parliament publishing an open letter urging Mr. Champagne to wait for the outcome of an investigation by Canada’s telecom regulator. The Canadian Radio-television and Telecommunications Commission has already approved the takeover and it’s unclear what bearing, if any, the new probe would have on the deal closing.
This CRTC review will consider whether a series of agreements between Rogers and Videotron, which underpin the Montreal-based telecom’s ability to offer wireless and internet bundles in Western Canada, are so favourable toward Videotron that they give the telecom an unreasonable advantage over its competitors.
Scotiabank analyst Maher Yaghi said in a recent research note that although the regulator has a responsibility to probe the issue, that investigation “should not block a multibillion-dollar transaction, especially if this transaction was found not to cause, on a big-picture basis, competitive harm to consumers as per the Competition Tribunal.”
The letter from MPs Rick Perkins, Ryan Williams, Brad Vis and Bernard Généreux also requests that a new sale process be held for Freedom Mobile. All four MPs sit on the House of Commons industry and technology committee, which convened a public hearing on the deal Jan. 25.
“In testimony at the committee, it has become obvious that the divestiture of Freedom Mobile was not a free and open process, and the result is that the largest market share holder for telecommunications in Canada was able to pick its competitor without the approval of the Competition Bureau,” the letter reads.
During the hearing, Rogers chief executive officer Tony Staffieri faced questions about the process through which the Toronto-based telecom chose the buyer for Freedom.
Mr. Staffieri said the telecom went through an iterative process with the federal government to select the most credible buyer that met the criteria set by Mr. Champagne. Videotron was chosen because its proven track record, its scale and its credible path toward rolling out 5G wireless services made it the most viable competitor, Mr. Staffieri said.
Alexandra Posadzki