Rogers, Shaw finalize agreement to sell Freedom Mobile in bid to win takeover approval

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Rogers Communications Inc. RCI-B-T and Shaw Communications Inc. SJR-B-T finalized an agreement to sell Freedom Mobile Inc. to Videotron, a unit of Quebecor Inc., in a move the companies hope will win regulatory approval for Rogers’s takeover of Shaw.

Rogers and Shaw said the terms of the deal are “substantially consistent” with an initial agreement reached in June, which would see Quebecor QBR-B-T pay $2.85-billion for Freedom’s wireless and internet customers in Ontario, Alberta and B.C., along with the company’s stores and spectrum licences.

“This agreement brings us one step closer to completing our merger with Shaw,” Rogers chief executive officer Tony Staffieri said on Friday.

The sale of Freedom needs approval from the Competition Bureau and the Department of Innovation, Science and Economic Development (ISED), which oversees the transfer of wireless spectrum licences.

The ISED said it is aware of the completed agreement and that Industry Minister François-Philippe Champagne will review the transaction “on its merits.”

“As Minister Champagne has previously stated, our government is first and foremost committed to promoting competition and ensuring affordability in the telecommunications sector,” said ISED spokesperson Laurie Bouchard.

The Competition Bureau said in a statement it has yet to receive a formal agreement for the sale of Freedom to Quebecor, but that it understands Rogers and Shaw believe the sale will address its concerns about the cable company merger.

The Competition Bureau said it will file a reply with the Competition Tribunal, which is hearing the case, on Monday.

“The Bureau remains firm in its decision to challenge the merger of Rogers and Shaw to protect the public interest,” said spokesperson Jayme Albert.

The full terms of the Freedom deal will be filed with securities regulators next week.

Rogers and Shaw said the Freedom sale would only go ahead if their merger is allowed to proceed. Last month, the companies extended their merger deadline to the end of 2022, with the potential for that deadline to be extended to Jan. 31, 2023.

The Competition Bureau has sought to block the merger of Canada’s two largest cable companies on the basis that the deal would lead to higher prices and fewer choices for mobile consumers.

The bureau has also argued in documents filed with the Competition Tribunal that the sale of Freedom would “not replace the significant and growing competition Shaw Mobile was delivering.”

In announcing the finalized Freedom sale, Quebecor CEO Pierre Karl Péladeau said his company is “the best player to create real competition and disrupt the market.”

Earlier this month, Mr. Péladeau said the bureau’s assertion that competition would be stronger if Shaw continued to run Freedom was “incomprehensible,” arguing that Freedom sat out the auction for 5G airwaves last year.

In that federal auction, Quebecor spent more than $800-million for 5G wireless spectrum, with half of that going to Ontario, Alberta, Manitoba and B.C.

If the Freedom sale goes through, Quebecor would close some of the gap with Canada’s big three wireless providers, Rogers, Telus Corp. and BCE Inc., in terms of the number of wireless subscribers. In its most recent quarter, Quebecor’s wireless subscriber base stood at 1.6 million, which would more than double with the addition of 1.7 million Freedom subscribers in Ontario, Alberta and B.C.

However, Globalive Capital chairman Anthony Lacavera, who also submitted a bid to acquire Freedom, criticized the agreement as bad for consumers on Friday and once again called on the government to block the sale to Quebecor.

“This is just the latest in the long series of artificial competition proposals put forward by Rogers to further entrench the oligopoly and keep prices high in wireless at the expense of Canadians already struggling with high inflation,” he said in a statement.

“Fortunately for Canadians our government is already doing a thorough investigation and I am confident will continue to intervene wherever and however necessary to create a truly competitive wireless and telecom industry.”