The government has rejected the proposed remedies initially offered by the two Canadian telcos, suggesting further measures are needed to maintain market competition
Back in March 2021, Rogers Communications agreed to purchase its rival Shaw Communications for $21 billion including debt, a move that would reduce the Canadian mobile market from four players to three.
The deal was immediately controversial, with detractors arguing that the merger would lead to less choice and higher prices for consumers.
Rogers and Shaw, meanwhile, held that the merger would not lead to higher prices for consumers, would create roughly 3,000 jobs in Western Canada, and accelerate the national rollout of 5G technology. They also suggested that the move would generate roughly C$1 billion in synergies.
While the deal quickly received the green light from the Canadian Radio-television and Telecommunications Commission, approval from the national Competition Bureau was less forthcoming. Competition Commissioner Matthew Boswell said that the deal threatened “to under the significant progress [the Commission] has made introducing more competition into an already concentrated wireless services market”.
As such, remedies to this regulatory quagmire have been sought throughout 2021, most of which being centred on the future of Shaw’s mobile unit, Freedom Mobile.
In May, Shaw and Rogers proposed divesting in some of Freedom’s wireless assets, but when this was rejected, the duo pivoted quickly to sell the unit in its entirety. By June, the pair had struck a deal with Quebecor, owner of wireless operator Vidéotron, who had offered to purchase the unit for C$2.85 billion – at a price significantly below analyst estimations.
However, this too has proved insufficient to placate the regulator, with the Minister of Innovation, Science and Industry, François-Philippe Champagne, this week saying that yet more conditions will be needed if approval is to be granted.
In a press conference on Tuesday, Champagne said that Vidéotron must commit to holding the Freedom Mobile unit for a minimum of 10 years, as well as pledging to offer their new customers in Western Canada prices similar to those offered in Quebec.
“I would expect to see prices for wireless service in Ontario and Western Canada comparable to what Videotron is currently offering in Quebec, which are today on average 20% lower than in the rest of Canada,” said Champagne.
In a statement to Bloomberg, Quebecor’s CEO, Pierre Karl Péladeau, said the company would comply with these stipulations, saying they were “in line with our business philosophy”.
The news will come as something of a blow to Shaw and Rogers, who had initially hoped to transfer all of Shaw’s spectrum licences to Rogers as part of the deal. This was always highly optimistic, however, with the government indicating very early on in the regulatory process that it was loathe to allow the new entity such a dominant market position.
“Earlier this year, I stated that I would—under no circumstances—permit the wholesale transfer of wireless spectrum licences from Shaw to Rogers,” said Champagne in a statement this week. “Today, I officially denied that request, which had been pending before me.”
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