Competition Bureau opposing Rogers-Shaw merger; completion target moved to 31 July; Videotron joins Freedom suitors

9 May 2022

Canada’s Rogers Communications and Shaw Communications gave a joint statement on Saturday disclosing that they were notified of the Commissioner of Competition’s intention to file applications to the Competition Tribunal opposing Rogers’ proposed merger with Shaw. Rogers and Shaw stated that they remain committed to the merger, while moving their deal completion target date from June to 31 July this year.

In March 2021 Rogers – Canada’s largest cellco and second-largest fixed broadband provider by subscriptions – agreed to buy 100% of fellow cableco Shaw for around CAD26 billion (USD20 billion) including CAD6 billion debt, subject to regulatory approvals from Innovation, Science & Economic Development Canada (ISED), the Canadian Radio-television & Telecommunications Commission (CRTC) and the Competition Bureau. On 24 March 2022 the CRTC conditionally approved the broadcasting sector elements of the Rogers-Shaw merger, but earlier that month ISED confirmed that significant divestment of Shaw’s mobile assets would be required to gain federal approval, prompting Rogers to enter talks with prospective buyers for Shaw’s Freedom Mobile division, Canada’s fourth largest mobile operator. Former owner Globalive Capital was said to have offered CAD3.75 billion, although it was reported in April that Rogers favoured a bid from Xplornet, Canada’s largest specialist rural broadband provider, backed by US-based private equity firm Stonepeak Infrastructure Partners.

The companies’ latest joint statement said that ‘Rogers and Shaw are engaged in a process to sell Freedom Mobile, with a view to addressing concerns raised by the Commissioner of Competition and ISED’, while adding: ‘Rogers and Shaw will oppose the application to prevent the Transaction to be made by the Commissioner of Competition, while continuing to engage constructively with the Competition Bureau in an effort to bring this matter to a resolution and ensure that the Transaction’s benefits can be realised by all Canadians.’

The Globe & Mail newspaper reports that Rogers has now begun negotiations on a potential sale of Freedom Mobile to Quebecor, the sole owner of Quebec-based cableco/cellco Videotron, which currently sits in fifth place in Canada’s mobile market and has previously declared its interest in acquiring Freedom as one of its options for national expansion. Negotiations could be complicated after Videotron sued Rogers for CAD850 million last October, alleging breach of contract on the companies’ shared mobile network in Quebec and Ottawa, but analysts suggested that Videotron/Quebecor fits the Bureau’s criteria better than Xplornet/Stonepeak in terms of the buyer making a long-term commitment to ensuring national mobile competition. Analysts at CIBC quoted by the Globe & Mail said: ‘Given the history between the companies, we do not believe that Rogers would have reached out if it had not been mandated by the Bureau. In a scenario that Rogers is required to sell to Quebecor, we expect that Quebecor could negotiate an attractive deal for the assets, which we value at CAD3.74 billion.’

Canada, Freedom Mobile (part of Shaw), Rogers Communications, Shaw Communications, Videotron