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Shoppers walk past a Cogeco location in LimeRidge Mall in Hamilton on Sept. 2, 2020.

The Globe and Mail

A senior executive at Cogeco says a hostile takeover bid by Rogers Communications Inc. was designed to remove a potential wireless competitor from the market and could damage Rogers' reputation with its Quebec customers and other potential acquisition targets.

Rogers and a major U.S. cable company went public on Sept. 2 with an unsolicited $10.3-billion offer for Cogeco Inc. and subsidiary Cogeco Communications Inc. The proposed takeover would see Rogers snap up Cogeco’s Canadian business while New York-based Altice USA Inc. would acquire Cogeco’s U.S. cable network, Atlantic Broadband.

Patrice Ouimet, Cogeco’s chief financial officer, said that shutting the cable provider out of the wireless business is “probably part of the equation” for Rogers. “As you know we are attempting to get into the wireless space,” Mr. Ouimet said during the Bank of Montreal’s virtual media and telecom conference on Tuesday.

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But earlier at the same conference, Rogers CEO Joe Natale said the plan to acquire Cogeco has been in the works for a long time. Rogers – which has been an investor in Cogeco for 20 years and currently has a 33-per-cent stake in the two companies – decided the timing was right for a bid because it needs to make investment decisions for its 5G wireless rollout, Mr. Natale said.

The telecommunications industry is at a “critical juncture” in its history, with companies planning to invest billions over the next five to 10 years to build out fifth-generation wireless networks, Mr. Natale said.

As the company makes capital plans for the medium and the long term, “we’re asking a very fundamental question: Do our plans include Cogeco territory or not?” Mr. Natale said, adding, “It’s been a question 20 years in the making.”

The takeover bid was immediately rejected by the Audet family, which controls the business through multiple voting shares. Quebec Premier François Legault also opposed the deal, citing concerns about losing Cogeco’s Montreal headquarters.

Although the Audets have final say, Rogers and Altice have been undeterred. There are a variety of tactics the would-be buyers could employ in a bid to convince the family to sell, such as competing more aggressively against Cogeco. At a conference last week, Altice CEO Dexter Goei described the takeover attempt as a “marathon, not a sprint.” Mr. Natale said on Tuesday that Rogers will be patient. In an effort to alleviate Mr. Legault’s concerns, Rogers has vowed to keep Cogeco’s headquarters and management team in Quebec if the bid is successful.

Mr. Ouimet said Cogeco was surprised that Rogers and Altice decided to go public with their offer, particularly since the Audets had indicated the night before that they weren’t looking to sell. Going hostile with a bid for a family-controlled business could hurt Rogers' reputation with its Quebec customers or with other family businesses it may want to buy in the future, Mr. Ouimet said. (Other than Cogeco, the most prominent family-run telecom businesses in Canada are Shaw Communications Inc. and Bragg Communications Inc., which operates as EastLink.)

Cogeco has purchased spectrum - the airwaves used to transmit wireless signals - and is waiting on a decision from the Canadian Radio-television and Telecommunications Commission (CRTC). The regulator is mulling whether the country’s large national carriers should be required to open up their wireless networks to resellers, known in the industry as mobile virtual network operators, or MVNOs. The national carriers are opposed to such a policy, saying it would discourage network investments. (Cogeco has proposed a hybrid model where only companies willing to invest in infrastructure would be given access to national wireless networks.)

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Since Cogeco is not currently in the wireless business, TD analyst Vince Valentini says there would no reason for the CRTC or the Competition Bureau to oppose the takeover.

“Even if they look forward, these regulators would be aware that MVNO competition, if desired as a public policy, could come from many players other than Cogeco, so it is not a legitimate reason to block a deal,” Mr. Valentini said in a note to clients.

A spokesperson for the Competition Bureau could not confirm whether it is reviewing the proposed deal or not.

“It would be inappropriate for the bureau to speculate on whether the proposed transaction would raise concerns under the Competition Act, as this can only be determined following a thorough and complete review of the facts,” Jayme Albert said in an e-mail.

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