Edward Rogers and Brad Shaw will appear in front of Canada’s telecom regulator on Monday to make their case for why Rogers Communications Inc.’s $26-billion takeover of Shaw Communications Inc. is vital to the future of both telecom companies.
The five-day Canadian Radio-television and Telecommunications Commission hearing in Gatineau will kick off after weeks of boardroom drama at Rogers, which culminated in the departure of the company’s chief executive, Joe Natale, last week.
Tony Staffieri, the company’s long-standing chief financial officer, was installed as interim CEO, fulfilling a management change first attempted in late September by Mr. Rogers, who is the chair of both the company and the family trust that controls the wireless giant.
Mr. Shaw has previously said the Calgary-based cable provider founded by his late father, JR Shaw, needs to complete the takeover deal because the company isn’t big enough to invest the billions needed to deliver 5G wireless services. Deep-pocketed Rogers has those resources.
Gaining access to Shaw’s cable infrastructure in Western Canada will put Toronto-based Rogers on more equal footing with its rivals BCE Inc. and Telus Corp., who share a wireless network.
The CRTC is one of three federal agencies reviewing the deal, and its focus is on the transfer of Shaw’s broadcasting distribution business to Rogers. Those assets include a satellite TV service called Shaw Direct, and cable networks in British Columbia, Alberta, Saskatchewan, Manitoba and Northern Ontario.
Both BCE and Telus have asked the CRTC to deny Rogers’s application, arguing in public filings that the combined entity’s share of the broadcasting distribution market would be too large. Rogers has countered in its own filings that its rivals simply don’t want to compete with a stronger broadcasting distributor.
The two other regulators reviewing the takeover – the Competition Bureau and the Ministry of Innovation, Science and Economic Development (ISED) – aren’t expected to hold public hearings into the matter. As a result, the CRTC proceeding may be the only glimpse the public will have into the regulatory process surrounding a takeover that could reshape Canada’s telecom and broadcasting landscape.
The hearing has attracted a great deal of attention because of the public battle that has engulfed Rogers and split its founding family. The showdown erupted when Mr. Rogers first attempted to replace Mr. Natale with Mr. Staffieri but met resistance from his mother, Loretta Rogers, and his sisters Martha Rogers and Melinda Rogers-Hixon.
Mr. Rogers then moved to replace five of the independent directors with his own candidates without holding a shareholder meeting. The company challenged the legality of the change, culminating in a two-week period where Rogers appeared to have two boards.
“Most of the attention on the hearing, I think, was perhaps because of the amount of media coverage and all of the excitement around the composition of the board of Rogers,” CRTC chairman Ian Scott said in an interview last week.
The conflict over which board was legitimate was resolved on Nov. 5, when a B.C. judge ruled Mr. Rogers is able to replace the directors through a written resolution.
Despite the surge of interest in the CRTC hearing, members of the public will not be able to attend in person.
“We welcome that normally but under the current health restrictions it’s not advisable,” Mr. Scott said. The hearing will instead be broadcast online.
The battle for control of Rogers prompted requests by two advocacy groups, as well as BCE and Telus, for the CRTC to delay the hearing. Those arguing for a postponement said the chaos had made it unclear which board had the authority to oversee the company.
Even after the board matter was resolved, Telus argued in a letter to the commission that there remained “considerable uncertainty” regarding the company’s leadership because of Mr. Rogers’s earlier plans to oust Mr. Natale and other senior executives.
The CRTC reviewed the matter “to satisfy ourselves that those who would be appearing in front of us do in fact have the authority to do so.” In the end, the regulator decided to continue with the hearing.
Mr. Rogers and Mr. Shaw will be appearing on Monday alongside executives and regulatory experts from both companies. A number of intervenors will appear over the following three days, and Rogers will have an opportunity to respond on Friday.
One of the key issues that the commission is expected to explore is whether the combined entity’s greater scale in the broadcasting distribution market will give it too much control over the availability of programming services. (Broadcasting distribution refers to the delivery of television channels through cable, satellite or internet protocol networks.)
The CRTC has said it will be asking about the calculation of the deal’s value. Rogers has excluded revenues from Shaw’s ground-based video on demand and pay-per-view services in its calculation because it is not planning to operate those services. Some intervenors have questioned the exclusion of those revenues.
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