The Rogers logo is photographed in Toronto on Monday, September 30, 2019. Rogers Communications Inc. has signed a deal to buy Shaw Communications Inc. in a deal valued at $26 billion, including debt. THE CANADIAN PRESS/Tijana Martin

The Rogers logo is photographed in Toronto on Monday, September 30, 2019. Rogers Communications Inc. has signed a deal to buy Shaw Communications Inc. in a deal valued at $26 billion, including debt. THE CANADIAN PRESS/Tijana Martin

Rogers plan to buy Shaw raises red flags about competition, especially in wireless

Shaw and Rogers aren’t direct competitors in cable, internet because their networks are in different places

Rogers Communications Inc. said Monday it will buy Shaw Communications Inc. in a deal that would combine Canada’s two largest cable operations even as it’s expected to face regulatory scrutiny over competition concerns in the wireless industry.

Valued at $26 billion including debt, the proposed deal comes at a pivotal time for cable and phone companies.

Although Shaw and Rogers aren’t direct competitors in cable and internet because their networks are in different parts of the country, they have been fierce combatants in the wireless sector since Shaw bought the former Wind Mobile in 2016.

“As is the case in all telecom combinations, we expect there to be some pushback from the regulatory bodies given the potential impact this transaction would have on competition and wireless pricing,” wrote Canaccord Genuity analyst Aravinda Galappatthige in a note to clients.

Rogers chief executive Joe Natale told analysts in a morning conference call that it’s too early to speculate on whether the competitors will be required to divest any of their operations before approval is granted from federal regulators, including the Competition Bureau.

“But we feel confident this transaction will be approved,” Natale said.

“This transaction does not get done without regulatory approval. It’s our responsibility to make that happen. And we’re going to sit down with regulators and just work through the pieces.”

Competition lawyer Michael Binetti said the companies may have to be willing to make divestments with surgical precision, on a street-by-street or market-by-market basis.

“As opposed to wielding a sledgehammer to try to break it apart completely,” said Binetti, a partner at Affleck Greene McMurtry LLP.

Rogers owns a national wireless network that operates under the Rogers, Fido and Chatr brands. Shaw owns Freedom Mobile and Shaw Mobile in Alberta, B.C. and Ontario.

They both compete against the other national wireless companies owned by Canada’s biggest phone companies: Bell (including Virgin Mobile and Lucky Mobile) and Telus (along with its Koodo and Public Mobile brands). Rogers, Bell and Telus make up the so-called Big Three national carriers.

According to the Canadian Wireless Technology Association, which represents most of the carriers, there were about 33.8 million subscribers in Canada as of Sept. 30, 2020. Rogers had the most, with about 10.9 million, while Freedom had about 1.8 million subscribers.

“If the transaction can go through without a divestiture of wireless, it would be a key positive for all three (national) wireless names (especially Rogers of course),” Galappatthige said.

If Shaw is forced by regulators to sell Freedom, which has little presence east of Ontario, he said Videotron owner Quebecor Inc. would likely be at the front of the line.

Laura Tribe, executive director of consumer advocacy group OpenMedia, said in a statement that the government shouldn’t approve the deal.

“We need more competition in Canada — not less,” Tribe said in a statement.

“Over the years, we’ve seen competitor after competitor swallowed up by the Big Three. The result is always the same — more profits for the Big Three, worse plans and less choice for Canadians. We can’t afford this deal.”

READ MORE: Rogers Communications signs deal to buy Shaw Communications in deal valued at $26B

Francois-Philippe Champagne, the federal minister of Innovation, Science and Industry, issued a brief statement that said he wouldn’t predict the outcome of the regulatory reviews — but repeated the Liberal government’s promises of greater affordability, competition and innovation in the telecom sector.

“These goals will be front and centre in analyzing the implications of today’s news,” Champagne said.

Conservative MP Pierre Poilievre issued a similar statement saying his party “will be reviewing this deal to ensure it helps create competition, affordability for Canadians, and jobs.”

Executives from the two companies revealed few details regarding how they expect to achieve $1 billion of synergies in within two years of closing the deal, mostly from cost savings.

However, they did say on a joint conference call with analysts that savings in operating expenses will likely be more significant than savings from capital spending.

As part of the transaction, the companies said Rogers will invest $2.5 billion in 5G networks over the next five years across Western Canada.

Rogers also says it will create a new $1-billion fund dedicated to connecting rural, remote and Indigenous communities across Western Canada to high-speed internet service.

The combined company plans to maintain a regional headquarters in Calgary, where the president of Western operations and other senior executives will be based.

During a conference call Monday, Alberta Premier Jason Kenney said the Rogers-Shaw deal has “significant implications for Alberta’s economy.”

Kenney said he would hold Rogers to its commitments about employment and investment in Western Canada if the deal goes through, and would like to see regulatory approval contingent on the company making good on those promises.

Rogers chief financial officer Tony Staffieri said that, with the regulatory approvals still at least a year away, there are too many variables to make predictions on cost cutting.

The acquisition would see Rogers pay holders of Shaw’s class A and B shares $40.50 in cash per share, while the Shaw family will receive some of their payment in Rogers shares.

Shaw’s class B shares, which are traded on the Toronto Stock Exchange, were up $9.95 or 41.6 per cent to end the day at $33.85. Earlier in the day they traded as high as $35 each, setting a new 52-week high.

Rogers gained about 3.4 per cent to close at $61.57, up $2.02 from Friday’s close.

Rogers said it has secured committed financing to cover the cash portion of the deal, while about 60 per cent of the Shaw family shares will be exchanged for 23.6 million Rogers B-class shares.

Brad Shaw, and another director to be nominated by the Shaw family — which will become one of the largest Rogers shareholders — will be named to the Rogers board.

David Paddon, The Canadian Press


Like us on Facebook and follow us on Twitter.

Want to support local journalism during the pandemic? Make a donation here.

Internet and Telecom

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

COVID019 cases number have dropped dramatically according to the BC CDC epidemiology mapping for the week of April 11 to 17 . Nurse Angie Z. gets a thumbs up from Delores Campbell, one of the first of 9,008 residents to be vaccinated in the Prince Rupert community vaccination clinics in March. (Photo: K-J Millar/The Northern View.
COVID-19 Case number plummet in Prince Rupert

BCCDC mapping shows a dramatic decrease in pandemic case number in the Prince Rupert region

Dreamfish are hung on the fence at Annunication School in Prince Rupert on April 17 as part of the Stream of Dream eco-education program teaching about local watersheds and salmon habitats. (Photo: K-J Millar/The Northern View)
Stream of Dreams fish swim the fence at Prince Rupert School

Students at Annunciation school learned about watershed protection and salmon habitat

B.C. Finance Minister Selina Robinson outlines the province’s three-year budget in Victoria, April 20, 2021. (B.C. government video)
B.C. deficit to grow by $19 billion for COVID-19 recovery spending

Pandemic-year deficit $5 billion lower than forecast

Registered Nurse, Teresa Friesen immunizes Dunrovin resident, Richard Brophy. Resident’s at the home were the first in Quesnel to receive COVID-19 vaccines. (Submitted Photo)
COLUMN: Vaccine floodgates should be opened

This editor’s column first appeared in the April 14 edition of the Quesnel Cariboo Observer

Canadian Prime Minister Justin Trudeau and United States President Joe Biden smile as they say farewell following a virtual joint statement in Ottawa, Tuesday, February 23, 2021. THE CANADIAN PRESS/Adrian Wyld
Trudeau pledges to cut emissions by 40% to 45% by 2030, short of U.S. goal

Trudeau announced target during a virtual climate summit convened by U.S. President Joe Biden

MLA Shirley Bond, right, answers questions during a press conference at Legislature in Victoria, B.C., on February 19, 2019. THE CANADIAN PRESS/Chad Hipolito
Former B.C. gaming minister says she wasn’t told directly about dirty cash flowing to casinos

Shirley Bond said Thursday civil forfeiture, gang violence and gambling addiction were also major concerns in 2011

RCMP Constable Etsell speaks to tourists leaving the area at a police roadblock on Westside Road south of Fintry, B.C., Thursday, July 23, 2009. THE CANADIAN PRESS/ Yvonne Berg
B.C. police say they take ‘exception’ to conducting roadblocks limiting travel

Asking the police to enforce roadblocks exposes officers to further risk and possible COVID-19 infections, says federation president Brian Sauve

As part of the province’s strategy to combat the opioid overdose crisis, take-home naloxone kits have been distributed throughout the province. (Courtesy of Gaëlle Nicolussi)
Vancouver Island could be at its worst point of overdose crises yet: medical health officer

Island Health issued overdose advisories for Victoria, various communities in the last two weeks

BC Hydro released a survey Thursday, April 22. It found that many British Columbians are unintentionally contributing to climate change with their yard maintenance choices. (Pixabay)
Spend a lot of time doing yard work? It might be contributing to climate change

Recent BC Hydro survey finds 60% of homeowners still use gas-powered lawnmowers and yard equipment

Journal de Montreal is seen in Montreal, on Thursday, April 22, 2021. The daily newspaper uses a file picture of Prime Minister Justin Trudeau dressed in traditional Indian clothing during his trip to India to illustrate a story on the Indian variant of the coronavirus. Paul Chiasson/The Canadian Press
Montreal newspaper blasted for front-page photo of Trudeau in India

Trudeau is wearing traditional Indian clothes and holding his hands together in prayer beside a caption that reads, ‘The Indian variant has arrived’

Nanaimo RCMP say a man was injured while pouring gunpowder on a backyard fire in Harewood on Wednesday, April 21. (File photo)
Nanaimo man hospitalized after pouring gunpowder onto backyard fire

RCMP investigating explosion in Harewood also came across a still for making alcohol on property

Provincial health officer Dr. Bonnie Henry arrives for briefing on the COVID-19 situation, B.C. legislature, Oct. 26, 2020 (B.C. government)
B.C. sees 1,006 COVID-19 cases Thursday, ‘alarming’ 502 in hospital

Vaccine bookings for people aged 60 and older set to start

Most Read