Rogers Communications Inc.’s $26-billion takeover of Shaw Communications Inc. will give the combined telecoms the scale they need to compete effectively against global streaming giants and to deliver 5G wireless services, Edward Rogers and Brad Shaw told Canada’s telecom regulator on Monday.
The sons of the late founders of Rogers and Shaw kicked off five days of hearings before the Canadian Radio-television and Telecommunications Commission in Gatineau. The regulator is reviewing only the transfer of Shaw’s broadcasting distribution business to Rogers, which does not include 5G; two other regulators are examining separate aspects of the deal.
In his first public appearance since winning a battle for control over the Toronto-based telecom, Mr. Rogers invoked the legacy of his father, Ted, and that of Shaw founder JR Shaw. The two men were “visionaries” who “started their companies from almost nothing, invested and risked everything,” Mr. Rogers said, adding that he and Brad Shaw both grew up in their family businesses.
Now, those businesses are under attack by global giants, said Mr. Rogers, who sat next to Mr. Shaw in the first of five rows of Rogers and Shaw executives who appeared in front of the panel of five commissioners.
“Canada is no longer an island. We participate in a global industry, with global platforms,” said Mr. Rogers, the chair of Rogers Communications and the family trust that controls the company, which is Canada’s largest wireless carrier.
Those global platforms “pose a challenge to Canadian companies and Canadian culture,” Mr. Rogers said, adding that Canadian telecoms require scale “to compete on the world stage.”
BCE Inc., which owns Bell Canada, and Telus Corp. have asked the CRTC to reject Rogers’s application to acquire Shaw’s broadcasting distribution business, which includes a satellite TV service called Shaw Direct, and cable television services in British Columbia, Alberta, Saskatchewan and Manitoba. More than two million Canadians subscribe to Shaw cable and satellite TV.
Those opposing the merger say the combined entity’s greater scale in the broadcasting distribution market would give it too much control over the availability of programming. (Broadcasting distribution refers to the delivery of television channels through cable, satellite or internet protocol networks.)
The hearings come after weeks of turmoil at Rogers that culminated in the departure of the wireless giant’s chief executive officer, Joe Natale, last week. Mr. Natale left after Mr. Rogers reconstituted the company’s board through a written resolution without holding a shareholder meeting – a move that was opposed by his mother, Loretta Rogers, and sisters Melinda Rogers-Hixon and Martha Rogers. The change was sanctioned by a B.C. judge earlier this month.
Mr. Natale was replaced by the company’s former chief financial officer, Tony Staffieri, bringing full circle a shakeup that began in late September, when Mr. Rogers first attempted to make the leadership change. The terms of Mr. Natale’s exit package are still being worked out, Mr. Rogers told the hearing on Monday.
Mr. Staffieri was among about two dozen telecom executives at Monday’s hearing, sitting silently in the second-last row with Phil Lind, a Rogers director who backed Mr. Rogers’s push to overhaul the management team.
Mr. Shaw, the CEO of Shaw Communications, said the Calgary-based telecom needs deep-pocketed Rogers to help it deliver 5G wireless services – an endeavour that will require billions of investment by the industry.
“Simply put, Shaw cannot do it alone. We need the scale, strength and resources of the combined Shaw and Rogers assets,” Mr. Shaw said.
However, CRTC chair Ian Scott said the wireless aspect of the merger is beyond the scope of this review; the commission is looking at only the broadcasting component.
“We understand that the transaction also involves Shaw’s other business lines, including telephone, wireless and internet services. However, we will not be reviewing any telecommunications-related matters during this hearing, as the companies do not require prior approval from the commission,” Mr. Scott said.
The Competition Bureau is examining whether the deal would substantially reduce competition, while the Ministry of Innovation, Science and Economic Development (ISED) is looking at the transfer of spectrum licences. (Spectrum refers to the airwaves used to transmit wireless services.)
The deal could eliminate Canada’s fourth-largest wireless carrier, Shaw-owned Freedom Mobile. Some analysts have predicted Rogers will have to sell the wireless business to get approval of the takeover.
CRTC commissioners peppered the Rogers and Shaw executives with questions about the proposed merger, including about measures that intervenors have suggested should be implemented to address concerns about the increased bargaining strength the combined company would have negotiating for content.
Ted Woodhead, senior vice-president of regulatory affairs at Rogers, said new measures are not needed because the CRTC already has comprehensive rules.
Eric Bruno, Rogers’s senior vice-president of content and residential products, said global streaming giants such as Netflix, Amazon Prime and Disney+ present a threat to the Canadian broadcasting system by allowing consumers to bypass it. The company’s answer has been its internet protocol television (IPTV) service, which allows customers to access those streaming services, as well as Canadian broadcasting content through the same interface.
Mr. Scott pressed the executives on the companies’ claims that the merger would give consumers more choice. “Where is the competition enhanced?” Mr. Scott asked.
Mr. Woodhead said Rogers would offer IPTV to new customers in Western Canada after the merger. The Rogers Ignite TV platform, which is powered by technology created by U.S.-based Comcast, is different than the IPTV services offered by rivals such as Bell, Telus and SaskTel, Mr. Woodhead added.
Asked whether Rogers would increase costs to Shaw customers after the takeover, Dean Prevost, president of connected home, said competition from Shaw’s aggressive Western Canadian rival Telus would prevent that.
The hearing will continue on Tuesday, with Telus among the intervenors scheduled.