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Rogers corporate head office and headquarters seen from Ted Rogers Way in Toronto on Oct. 25, 2021.Evan Buhler/The Canadian Press

Rural internet provider Xplornet Communications Inc. is in talks with Rogers Communications Inc. RCI-B-T about a possible bid to acquire Freedom Mobile and become Canada’s fourth-largest cellphone company.

Xplornet has been negotiating to acquire Shaw Communications Inc.’s wireless business, according to three sources familiar with the talks. Rogers must sell Freedom Mobile to win regulatory approval for its planned $26-billion takeover of its Calgary-based rival. The Globe and Mail is not naming the sources because they are not authorized to discuss the matter publicly.

Based in Woodstock, N.B., Xplornet has about a million rural internet customers across Canada. Freedom Mobile has roughly two million wireless subscribers in major cities in Ontario, British Columbia and Alberta. Representatives of Rogers and Xplornet declined to comment.

Xplornet is controlled by New York-based private equity firm Stonepeak Infrastructure Partners, which has US$46-billion in assets under management and significant telecom holdings. Stonepeak took over Xplornet in June, 2020, in a transaction valued at about US$2-billion, including debt. At the time, Stonepeak’s head of communications and digital infrastructure, Brian McMullen said: “We look forward to continuing to invest in the company’s network infrastructure and service capabilities.”

Rogers has begun talks with prospective buyers of Shaw’s Freedom Mobile

In 2017, Xplornet acquired 24,700 subscribers, retail stores and wireless spectrum in Manitoba after the federal Competition Bureau demanded BCE Inc. divest those wireless assets as a condition of its purchase of Manitoba Telecom Services. Last year, the Manitoba government helped Xplornet build its business by providing the company with 3,200 kilometres worth of unused fibre optic network cables from Manitoba Hydro. The network serves 125,000 homes and businesses.

Earlier this month, Innovation, Science and Industry Minister François-Philippe Champagne said that to encourage competition in the wireless industry, the government would not let Rogers acquire all of Shaw’s wireless licences. The next week, Rogers chief executive officer Tony Staffieri said his company will “continue to work with the regulatory bodies on a solution that’s going to achieve their objective.”

The Globe has reported that Globalive, led by Freedom Mobile founder Anthony Lacavera, has offered Rogers $3.75-billion to buy the wireless business back. As of early last week, Quebecor Inc., which had previously expressed interest in Freedom, was absent from the talks, according to a source.

Rogers and Shaw executives have said they expect the deal to close by the end of June. If Rogers and Xplornet reach an agreement, it would need to pass muster with Mr. Champagne’s ministry and the Competition Bureau. Separately, the Canadian Radio-television and Telecommunications Commission is reviewing the transfer of Shaw’s broadcasting distribution business to Rogers. Earlier this month, a House of Commons committee recommended Rogers be forced to sell Freedom Mobile as a condition of approving the deal.

If Xplornet acquires Freedom Mobile, analysts and telecom executives say the privately owned company will face challenges expanding the wireless business in competition with deep-pocketed rivals Rogers, Bell and Telus Corp. In a report last week, analyst Jeff Fan at Scotiabank said whoever buys Shaw’s cellphone business might bring on additional partners to build its network.

“Freedom will likely pursue a deal with Quebecor and Cogeco which includes either an outright sale of licences or sale of a minority stake,” Mr. Fan said. “This will provide Quebecor with a path to network expansion outside Quebec, and Cogeco a path to wireless service expansion within its Ontario cable footprint.”

Separately, Rogers announced on Monday that it plans to add two more directors, including a Rogers family member, to its board this year, after a dramatic boardroom battle that culminated in chair Edward Rogers replacing five of the company’s independent directors last year.

David Robinson, the nephew of Rogers family matriarch Loretta Rogers, and Ryerson University president and vice-chancellor Mohamed Lachemi have been nominated to be elected to the Rogers board at the company’s annual general meeting on April 20.

The nominations were disclosed in the company’s most recent proxy circular.

Mr. Robinson is a member of the 10-person advisory committee that oversees the Rogers Control Trust, which controls the telecom through its ownership of 97.5 per cent of the voting class A shares.

He was not among the trust members who voted last year, at the height of the boardroom and family conflict, to block an attempt by Mr. Rogers to overhaul the company’s leadership. The Globe previously reported that only Loretta Rogers, Martha Rogers, Melinda Rogers-Hixon and Toronto Mayor John Tory voted in favour of a motion to restrict Mr. Rogers’s ability to exercise voting control over the company. The motion failed because it needed seven votes to pass.

Mr. Robinson is the chief commercial officer for Canadian payment processor Foghorn Payments Inc. and worked at Rogers for nearly three decades, including as president and CEO of Rogers Bank.

Mr. Lachemi sits on the Ryerson University board with Mr. Staffieri, who is the chair of that board. Jack Cockwell, who was appointed to the Rogers board by Mr. Rogers last year, is vice-chair of the Ryerson board.

The proxy circular also disclosed that Joe Natale, who was ousted as CEO last November amid the battle for control of the wireless giant, made $27.4-million in total compensation in 2021, including $14.1-million in severance. In 2020, Mr. Natale made $11.2-million in total compensation.

According to court documents, the company had previously offered Mr. Natale an exit package worth up to $200-million, including a two-year consulting contract worth $20-million, on top of a $4-million “success fee” after the close of the company’s $26-billion takeover of Shaw.

Mr. Staffieri, who served as chief financial officer before being fired and then rehired as CEO, made $4.6-million in total compensation.

Former Rogers director Robert Dépatie, who stepped down from the board to become president and chief operating officer of Rogers’s home and business division, received $10-million in stock options as a signing bonus.

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