Canada’s Competition Tribunal has dismissed a challenge to Rogers Communications Inc.’s $26-billion takeover of Shaw Communications Inc., paving the way for the deal’s approval from the federal government.
The decision is a victory for the telecommunications giants and comes after a month-long hearing that included evidence from 45 witnesses and tens of thousands of pages of documents.
The Competition Bureau had asked the tribunal to block the merger in its entirety, arguing that it would result in higher prices, poorer service and less choice for mobile-phone customers.
However, the tribunal determined that the deal, which would see Quebecor Inc.’s QBR-B-T Videotron acquire Shaw’s SJR-B-T Freedom Mobile, is unlikely to substantially reduce competition in Alberta and British Columbia’s wireless markets.
“In other words, the merger and divestiture are not likely to result in materially higher prices, relative to those that would likely prevail in the absence of the arrangement,” the tribunal wrote.
The merger still requires approval from Industry Minister François-Philippe Champagne, whose department is reviewing the transfer of wireless licences from Shaw to Quebecor’s Videotron unit.
“We are aware that the Competition Tribunal has decided not to block the merger between Shaw and Rogers we will review the decision in detail and will have more to say in due course,” Laurie Bouchard, a spokesperson for Mr. Champagne, said in a statement.
Because Rogers RCI-B-T and Shaw’s cable networks do not overlap, the case focused on the deal’s impact on Freedom Mobile, which is Canada’s fourth-largest wireless carrier with 1.7 million customers in Ontario, Alberta and B.C.
The only geographic markets that the tribunal considered were Alberta and B.C. The Competition Bureau confirmed on the first day of the trial that the divestiture of Freedom to Videotron would maintain competition in Ontario, where the majority of Freedom’s customers are located.
In reaching its decision, the tribunal rejected the Competition Bureau’s arguments that Freedom would be a weakened competitor in Videotron’s hands.
“Videotron is an experienced market disrupter that has achieved substantial success in Quebec. It has drawn upon that experience to develop very detailed and fully costed plans for its entry into and expansion within the relevant markets in Alberta and British Columbia, as well as in Ontario,” the tribunal wrote.
Commissioner of Competition Matthew Boswell said in a statement that he is “very disappointed” that the tribunal has rejected the bureau’s application.
“We are carefully considering our next steps,” Mr. Boswell said.
If the Competition Bureau chooses to appeal the decision, it could seek a stay that would prevent the merger from closing until the appeal is heard.
The tribunal said it will issue its full decision within 48 hours. The panel was composed of Federal Court Chief Justice Paul Crampton and two lay members, Wiktor Askanas and Ramaz Samrout.
OpenMedia, an organization advocating for widespread inexpensive internet access, called the decision “the last nail in the coffin of telecom affordability.”
“Experts, MPs and ordinary Canadians all know it: this buyout means higher prices and fewer choices, in a telecom market that’s already far too concentrated,” Matt Hatfield, the organization’s campaigns director said in a statement. “Canadians pay some of the highest prices in the world for Internet and wireless services, and the fruits of the government’s half hearted attempts to provide competition are rapidly disappearing.”
Rogers and Shaw first announced their plan to merge in March, 2021. The companies said at the time that they expected the deal to close in the first half of 2022.
The telecoms have since extended their deadline several times owing to delays in obtaining the necessary approvals.
The deal cleared the first of three regulatory hurdles in March, when the Canadian Radio-television and Telecommunications Commission approved Rogers’s plan to acquire Shaw’s broadcasting services. The CRTC attached a number of conditions to its approval, including that Rogers pay more than $27-million to funds aimed at supporting Canadian content and local news.
Rogers started looking for a buyer for Freedom earlier this year, after Mr. Champagne expressed concerns about the deal eliminating Canada’s fourth-largest wireless carrier. By then, several prospective buyers were already circling the carrier, including Quebecor, which was vocal about wanting to expand its Montreal-based telecom subsidiary beyond Quebec.
Rogers did not let Quebecor into the sale process at first. Instead, it quietly put forward a number of private equity buyers, including Stonepeak Infrastructure Partners, the New York-headquartered firm that owns rural internet provider Xplornet Communications Inc.
But in the end, Rogers and Shaw agreed to sell Freedom to Videotron for $2.85-billion, announcing the deal a month after the Competition Bureau had filed an application to block the cable merger.
The divestiture of Freedom to Videotron did not alleviate the Competition Bureau’s concerns. The watchdog continued to oppose the merger, taking its battle all the way to the Competition Tribunal. The bureau’s position is that separating the wireless carrier from Shaw’s cable network and other assets would weaken it.
The cable companies, meanwhile, have argued that Freedom would be a stronger competitor under Videotron’s ownership.
The wireless upstart, which was launched in 2008 and acquired by Shaw eight years later, has been credited with driving down cellphone bills.
In October, Mr. Champagne laid out the conditions under which Innovation, Science and Economic Development Canada would approve the transfer of Shaw’s spectrum licences to Videotron. (Spectrum refers to the airwaves used to transmit wireless signals.)
Quebecor has already agreed to those conditions, which include holding onto the licences for at least 10 years and offering wireless prices comparable to those in Quebec.
Rogers and Shaw are aiming to close their merger by the end of the year, with the possibility of extending their deadline to Jan. 31. Rogers will have to pay roughly $250-million to bondholders if the deadline is extended.