Rogers Communications Inc.’s proposed takeover of Shaw Communications Inc. will further consolidate market power among Canada’s Big Three telecoms, and should prompt regulators to develop a new framework to support competition, the CEO of Cogeco said Tuesday.
Philippe Jetté, chief executive officer of Cogeco and its subsidiary, Cogeco Communications Inc., called the deal between Rogers and Shaw – which is valued at $26-billion, including debt – concerning because it will “consolidate even further the market power that the Big Three [telecoms], not only Rogers, actually have.”
“The first and foremost thing that we need is a regulatory framework that will support everyone, that will help the smaller [carriers] to grow ... but also to introduce and preserve competition,” Mr. Jetté said during a virtual conference hosted by Desjardins Capital Markets on Tuesday.
Cogeco, which turned down an $11.1-billion takeover offer from Rogers last year, has expressed interest in getting into the wireless business. Cogeco operates in Ontario and Quebec and provides internet, television and home phone service. The company has said it could only enter the wireless sector if the Canadian Radio-television and Telecommunications Commission (CRTC) forces the national carriers to sell network access to smaller competitors.
The regulator is mulling such a move, with a decision expected in the coming weeks. Cogeco and the Competition Bureau have both proposed a hybrid model, where only companies that are willing to invest in infrastructure would be given access to national wireless networks.
“Mobile is a market where barriers to entry are very, very high. You need spectrum, or frequencies, to build,” Mr. Jetté said Tuesday, referring to the airwaves used to transmit wireless signals. “You need a lot of capital. The access to a portion of the national incumbents’ networks is fundamental to help the smaller players grow.”
Rogers’s acquisition of Shaw, which was announced last week, is expected to face intense regulatory scrutiny because it would eliminate Canada’s fourth-largest wireless carrier, Shaw-owned Freedom Mobile. Analysts have predicted Rogers may have to sell off Shaw’s wireless assets, such as customers and spectrum, to gain approval from a government that has been pushing for greater wireless competition and lower cellphone bills.
When BCE Inc. struck a deal to acquire Manitoba Telecom Services Inc. (MTS) in 2016, it was forced to divest spectrum licences, a portion of its wireless subscribers and a number of retail outlets to rural internet provider Xplornet Communications Inc. (It also sold some wireless subscribers to Telus.)
The Shaw acquisition is subject to approval by the Competition Bureau, the Ministry of Innovation, Science and Economic Development and the CRTC.
“We’re confident that we can reach an agreement with those three governing bodies and come out the other side,” Rogers CEO Joe Natale said during the same conference Tuesday.
Rogers chief financial officer Anthony Staffieri said the $1-billion in synergies that Rogers expects to gain from the acquisition are not contingent on acquiring Shaw’s wireless business. “This deal pays for itself largely on back of the cable synergies, which are significant,” Mr. Staffieri said.
Rogers has vowed to make significant investments if its acquisition of Shaw succeeds, including creating up to 3,000 new jobs in Alberta, British Columbia, Manitoba and Saskatchewan. Toronto-based Rogers has also committed to spending $2.5-billion to roll out 5G networks in those provinces and creating a new $1-billion fund to connect rural, remote and Indigenous communities in Western Canada to high-speed internet.
Speaking earlier in the day at the Desjardins conference, the chief financial officer of Telus Corp. said the Vancouver-based telecom examines potential scenarios involving industry consolidation as part of its annual risk-planning process.
“It could change competition a little bit ... but we will be prepared one way or the other,” Doug French told investors.
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