The country’s competition regulator needs to decide if it is working for the benefit of Canadian consumers or a handful of lawyers.
A federal tribunal has said it might rule before the Christmas holidays on the Competition Bureau’s attempt to block Rogers Communications Inc.’s takeover of Shaw Communications Inc., and the sale of Shaw’s two-million-subscriber Freedom Mobile wireless division to Quebecor Inc. Many expect the bureau to lose.
What comes after the tribunal’s decision will determine if the competition watchdog’s priority in this deal is doing the right thing for cellphone customers. Because if Commissioner of Competition Matthew Boswell opts to appeal a ruling that doesn’t go his way, the only winners will be a few litigators billing hundreds of dollars an hour to keeping fighting this battle.
Over four weeks of tribunal hearings on this deal, one thing stood out: Shaw is exiting the cellphone business. Executives at the Calgary-based company explained that Shaw poured $4.5-billion into Freedom since acquiring the network in 2016, has never generated free cash flow and is “net negative” $3.3-billion on the investment.
If the bureau blocks Freedom’s sale to Quebecor, it will qualify as a Pyrrhic victory. Shaw lacks the wireless spectrum needed to support the 5G networks that facilitate the next generation of cellphones, and clearly plans to stop spending on wireless.
There’s no return to the status quo, with Shaw challenging Rogers, Telus Corp. and BCE Inc. by undercutting its larger rivals on cellphone pricing. If the bureau shuts down this deal, Shaw will turn its attention to finding another buyer for Freedom, or shutting it down. Those are bad outcomes for consumers.
Quebecor, on the other hand, has won 22 per cent of wireless customers in its home province and is now determined to inject its Fizz brand into the rest of Canada. Giving chief executive Pierre Karl Péladeau an opportunity to take on the incumbents outside Quebec is a great outcome for consumers.
Federal politicians have already implicitly blessed this transaction, again, through the lens of what’s good for cellphone users. In October, Minister of Innovation, Science and Industry François-Philippe Champagne set down conditions for approving the deals. He demanded Quebecor agree to hold any wireless spectrum it acquires for at least 10 years and offer service at prices comparable to what customers receive in Quebec. Within minutes of the announcement, Mr. Péladeau agreed to the terms.
Mr. Champagne is the minister ultimately responsible for telecom policy, not civil servants at the Competition Bureau.
When tribunal hearings finished up this month, analysts published their scorecards. No one gave the bureau a win. “We continue to be of the view that the case of the Competition Bureau has been a weak one,” said analyst Adam Shine at National Bank Financial in a report. He said lawyers for Rogers, Shaw and Quebecor showed why their transactions are positive for competition.
“The greater mystery to us is if the Competition Bureau automatically appeals or acknowledges that it took its best shot to challenge the deals, but that the time has come to allow these to close and for Canadian telecom to move forward into 2023 with an evolution in the competitive dynamics in Ontario, Alberta, and British Columbia,” said Mr. Shine, referring to the three provinces where Freedom operates.
For Mr. Boswell, there’s no shame in losing this case at the tribunal. The current rules set a low bar for companies trying to get takeovers approved – they simply need to prove there’s a net benefit to the economy. Due in no small part to Mr. Boswell’s efforts, those rules are now being reviewed.
The bureau has been instrumental in pushing Rogers and Shaw into striking a deal to sell Freedom to Quebecor. That’s the best option for consumers. The time for litigation is over.
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