Quebecor Inc. QBR-B-T did not want Shaw Mobile’s customers included as part of its $2.85-billion deal to acquire Shaw Communications Inc.’s SJR-B-T wireless assets because they did not fit the company’s business model, an executive for Quebecor’s Videotron Ltd. subsidiary told the Competition Tribunal.
Earlier this year, Rogers Communications Inc. RCI-B-T and Shaw agreed to sell Shaw’s Freedom Mobile, Canada’s fourth-largest wireless carrier, in an attempt to win regulatory approval of their $26-billion proposed merger.
Despite an agreement to sell Freedom to Videotron, which would allow the Montreal-based telecom to expand beyond its home province of Quebec, the Competition Bureau is seeking to block the proposed merger of Canada’s two largest cable companies in its entirety. The watchdog argues that the deal will lessen competition and result in higher prices.
Lawyers for the Competition Bureau have argued that the merger would leave Freedom Mobile a weakened competitor because Rogers plans to acquire a number of Shaw’s assets, including 450,000 Shaw Mobile customers in Western Canada. Those customers receive steeply discounted wireless services that are sold in bundles with cable and internet services.
Jean-François Lescadres, vice-president of finance for Videotron, told the Competition Tribunal on Friday that when Videotron did its due diligence, it discovered that Shaw was using the Shaw Mobile brand as a way of retaining their internet and cable customers “more than anything else.”
The low prices that Shaw Mobile customers were paying for their wireless services were “heavily subsidized” by high internet costs, Mr. Lescadres said.
For example, Shaw Mobile customers could get certain wireless plans for free, or for as low as $25 – but only on the condition that they subscribed to an internet plan offering 1.5-gig speed for $129 a month, Mr. Lescadres said. A similar internet package in Quebec would cost $60-$70, he said.
Rather than paying to acquire those wireless customers, who generate low average revenue per user (a key telecom-industry metric known as ARPU), Videotron planned to “fight” to win those very same subscribers by offering them “way lower” bundled prices after the merger, Mr. Lescadres said.
“At first, Rogers was including those Shaw Mobile customers in the deal. It’s really us on the Videotron side that figured that it will be way better for us, and will help us, also, on the pricing of the deal, to have those customers excluded,” Mr. Lescardes said.
During cross-examination, Alexander Gay, a lawyer for the Competition Bureau, noted that the discounted Shaw Mobile plans were available with lower-tier internet plans prior to November, 2021. Mr. Lescardes responded that Videotron used the plans currently available in the market in its evidence.
Videotron has argued that it would be able to match the Shaw Mobile bundled pricing in Western Canada, where it does not own a cable network, because it has reached agreements with Rogers that would allow it to access the infrastructure belonging to the combined Rogers-Shaw entity at favourable rates. Those rates are below the mandated wholesale rates set by the Canadian Radio-television and Telecommunications Commission.
Mr. Gay noted that Videotron has previously struck what it felt was a “sweetheart deal” with Rogers but later turned out to be “a source of litigation and misunderstanding.” Last year, Videotron filed a lawsuit against Rogers seeking $850-million in damages over a joint network operating agreement in Quebec and the Ottawa area.
“We remain extremely confident that we’re going to be able to settle,” Mr. Lescadres said regarding the lawsuit. He also noted that the network sharing pact was a much more complex deal than the agreement that would allow Videotron to access the cable network in Western Canada.
Alexandra Posadzki