Globalive chairman urges Ottawa to block sale of Freedom Mobile to Quebecor

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Globalive Capital chairman Anthony Lacavera is urging Ottawa to block the sale of Freedom Mobile to Quebecor Inc., QBR-B-T arguing that Globalive would be a stronger competitor and is the only bidder willing to also pick up 450,000 Shaw customers in Western Canada who receive discounted wireless services.

Rogers Communications Inc. RCI-B-T has struck a deal to sell Freedom to Quebecor for $2.85-billion in order to address competition concerns. Regulators have said that Canada would be deprived of a strong fourth wireless competitor if Rogers were allowed to absorb Freedom as part of its $26-billion takeover of Shaw Communications Inc. For Quebecor, which owns Montreal-based cable company Videotron Ltd., the deal presents the opportunity to expand nationally.

However, Rogers plans to hold onto 450,000 Shaw Mobile subscribers in Alberta and B.C., who receive steeply discounted wireless services bundled with their cable and internet services. Shaw launched the bundle in 2020 in an attempt to retain its cable and internet customers in response to competitive pressure from Telus Corp., which has been eating away at Shaw’s market share.

In a letter sent to Commissioner of Competition Matthew Boswell and Innovation, Science and Industry Minister François-Philippe Champagne on Friday, Mr. Lacavera said Rogers has “consistently refused to engage” with his investment firm, despite the fact that he has offered nearly $1-billion more than Quebecor and is willing to acquire the Shaw Mobile subscribers Quebecor does not want.

“We are (and have always been) prepared to acquire Shaw Mobile and to continue to offer bundled services to its 450,000 customers,” Mr. Lacavera wrote, adding that Globalive is the only prospective buyer of Freedom prepared to acquire those “increasingly valuable” customer contracts.

Rogers chief executive officer Tony Staffieri previously told analysts that Quebecor did not want to bid on the Shaw Mobile customers because it was concerned they would change cellphone providers if threatened with the loss of their cable and internet services as a result of a change in the division’s ownership.

Globalive launched Freedom Mobile, formerly called Wind Mobile, in 2008 and ran it for eight years before selling it to Shaw for $1.6-billion. The wireless carrier, which serves 1.7 million customers in Ontario, Alberta and B.C., has been credited with driving down wireless prices in recent years.

Mr. Lacavera has offered Rogers $3.75-billion to buy back Freedom Mobile, but said the Toronto-based wireless giant has refused to let his investment firm into the data room and is “just pretending that our offer does not exist.”

Mr. Lacavera said in a statement on Saturday that Rogers “will always choose a weaker competitor over a stronger one as this is obviously the best business decision for Rogers.”

“This is why government intervention is needed to ensure the buyer of Freedom is good for Canadians and not just good for Rogers shareholders,” Mr. Lacavera said.

Rogers’ takeover of Shaw requires approval from the Ministry of Innovation, Science and Economic Development and the Competition Bureau, which is attempting to block the merger of Canada’s two largest cable companies. The competition watchdog argues that the deal would lead to higher prices, poorer service and fewer choices for consumers, particularly when it comes to wireless services.

Rogers and Shaw have said that the merger would provide benefits to Canadians, including by enabling a faster roll-out of fifth-generation wireless services. Rogers has pledged to spend $1-billion on connecting rural, remote, and Indigenous communities across Western Canada, among other investments in its telecom networks.

The Competition Tribunal said on Friday that Rogers, Shaw and the Competition Bureau have agreed to participate in mediation, a process in which an individual judicial member of the tribunal will work with the parties toward a settlement. Mediation is scheduled for July 4 and 5.

Mr. Lacavera said he is “not particularly surprised” that Videotron did not bid on the Shaw Mobile business.

“The additional capital that would be required for Videotron to acquire this increasingly important element of the business likely puts it out of their reach, given their current leverage and troubled capital markets,” Mr. Lacavera wrote.

“Furthermore, as a public company, Videotron has to report its average revenue per user (“ARPU”), a key metric affecting their share price, on a blended basis, such that the acquisition of the Shaw Mobile business would actually be a significant blow to Videotron,” he added, noting that Globalive, which is privately held, is “not similarly constrained.”

Globalive has argued that as a wireless-only player, it could compete more aggressively than a communications conglomerate like Videotron parent Quebecor, which has legacy businesses in cable and internet to protect.

Quebecor CEO Pierre Karl Péladeau, meanwhile, has said that his company would be a stronger competitor than Globalive, which currently has no existing telecom operations.

In a recent interview with The Globe, Mr. Péladeau spoke of his desire to challenge the telecom “oligopoly” of Rogers, BCE Inc. and Telus Corp. and highlighted his company’s success in Quebec, where Videotron has 22 per cent of the wireless market and where cellphone plans are less expensive than in the rest of the country.

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