A Freedom Mobile telephone outlet in Ottawa on May 10.Spencer Colby/The Globe and Mail
Quebecor Inc. QBR-B-T is poised to begin a wireless push outside its home market, either by buying Shaw Communications Inc.’s cellphone service or by building out its own network.
The Montreal-based media and telecommunications company is looking at the expansion of its wireless business beyond Quebec “with increasing favour,” it said in comments accompanying its first-quarter results. The company said it has two potential options: acquire Shaw’s Freedom Mobile or launch its own telecom offering in other provinces, where it has bought the necessary wireless spectrum needed to start operations. (Spectrum is a term for the airwaves used to transmit wireless signals.)
Recent moves by government and administrative authorities in Canada show they are serious about establishing the conditions for true competition in the wireless sector, Quebecor chief executive Pierre Karl Péladeau told analysts in an afternoon call on Thursday. Quebecor intends to take advantage of that, he said.
Quebecor a credible bidder for Shaw’s Freedom Mobile business, federal government source says
As an example, he cited decisions by the Canadian Radio-television and Telecommunications Commission on a so-called “seamless hand-off” policy, which mandated that national wireless carriers enable roaming between their networks and those of regional wireless carriers, starting April 15.
“We have many alternatives to expand our business beyond our footprint of Quebec, where our growth prospects are obviously more limited as compared to 10 years ago,” Mr. Péladeau said. “Every day that goes by, I would say that those conditions are even improving.”
Rogers Communications Inc. is attempting to buy Shaw for $26-billion, and must sell Freedom Mobile for the federal Competition Bureau and the government’s Department of Innovation, Science and Economic Development (ISED) to approve the takeover. Last week, the bureau made an application to block the Shaw deal on the grounds that it would reduce competition in the wireless market, which it called an “essential service.”
Freedom is expected to fetch up to $4-billion. There has been significant interest from suitors. A group that includes Musqueam Capital Corp. and the $10-billion LiUNA Pension Fund of Central and Eastern Canada has made an offer and presented it to federal government officials for approval, The Globe and Mail reported earlier this week.
Other potential Freedom owners include New Brunswick-based Xplornet and its backer, New York-based private equity firm Stonepeak Infrastructure Partners. Stonepeak owns U.S. fibre optic networks and telecom towers, and recently raised a US$14-billion fund to acquire new businesses.
Quebecor is also in the mix. Mr. Péladeau has made clear his interest in acquiring Freedom and building a national wireless network since the Shaw takeover was announced in March, 2021. But Rogers had not initiated talks with Quebecor until recent weeks, The Globe reported this week.
Rogers, Shaw and all the potential buyers are trying to determine what the competition watchdog and ISED would like from the next owner of Freedom. The government has said it wants an experienced telecom buyer in any takeover of Freedom, which has 2.1 million customers in B.C., Alberta and Ontario and posted sales of $655-million in the first six months of the fiscal year.
Quebecor would fit the bill. Mr. Péladeau, whose father founded the company, has grown it into a communications powerhouse in Quebec, with assets including internet and cable company Videotron and the popular TVA Network. Quebecor, which has a market capitalization of $6.8-billion with relatively little debt, has also built a cellphone business that now has a market share of about 23 per cent in the province.
Hugues Simard, Quebecor’s chief financial officer, said the company will give serious consideration to offering other communications services as well, if it expands its wireless footprint. The company has used a product bundling strategy to great effect in Quebec over the years.
Quebecor previously harboured ambitions of expanding its wireless operations nationally, but abandoned the effort in 2015, saying the federal government had moved too slowly on wholesale roaming rates and tower-sharing rules. It revived those ambitions last summer, when it spent nearly $830-million to acquire 294 blocks of spectrum, with more than half of that investment in four Canadian provinces outside of its home market: Ontario, Manitoba, Alberta and British Columbia.
In an exchange with reporters and shareholders earlier on Thursday, Mr. Péladeau declined to provide any detail on the talks with Rogers and would not discuss how much Quebecor would be willing to pay. But his comments suggested he is more determined than ever to launch a wireless expansion.
“Our historic market in Quebec has become mature,” Mr. Péladeau said. “Everything is ready for us to participate in going outside of our historical landscape of Quebec. And we look forward, given those opportunities, to be as quickly as possible in the marketplace in the wireless business outside of Quebec.”
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Nicolas Van Praet