Rogers-Shaw Merger Seen as Good for Investors, Higher Prices for Consumers: Analysts

Last week Rogers announced it had signed a deal to acquire Shaw for $26 billion, news that has resulted in many mourning the loss of a fourth wireless player, in Freedom Mobile.

Depending on who you talk to, the Rogers-Shaw merger is seen as a good move for investors but bad for consumers, according to Morningstar analysts this week.

“We believe approval is more likely than not, and we raise our Shaw fair value estimate substantially to reflect our probability-weighted view. From a broader point of view, we believe this deal would benefit each of the big three national wireless providers, so we think Telus and BCE are winners, as they get the benefit of an improved market structure without taking on the risk that Rogers is,” said Morningstar analyst Matthew Dolgin.

According to Christine Ha Kong, ESG Research Manager, Morningstar Sustainalytics, she believes “the potential impact on consumers might be reduced options for telecom providers and limited innovation within the market (as it can reduce competition).”

Kong went on to say, “It may also result in collusion among such companies to raise prices. These are some of the concerns we’ve seen captured in our incidents, more specifically, it was highlighted during the T-Mobile/Sprint merger.”

Dolgin added he expects “wireless pricing to be less promotional,” with prices increasing over time.

Vancouver-based non-profit OpenMedia also spoke with Morningstar, noting they expect prices to increase for consumers if a Rogers-Shaw merger is approved. The consumer advocacy group recently launched a petition to stop Rogers from buying out Shaw.

“Everyone expects prices will go up sooner or later because of this merger. This entire move is about taking options away from us as consumers,” said the non-profit’s campaigns director, Matthew Hatfield. He said he is a Freedom Mobile customers because he did not want to support the Big 3. If the merger goes through, he says “I will lose that option.”

Hatfield also pointed out rural markets may suffer from the Rogers-Shaw merger. “Rogers is promising some limited rural buildout funding to increase rural service in some areas in the short term, as part of trying to buy some support for this deal. But that locks people into the stagnant single provider service many rural folks already live with,” he said.

Overall, the elimination of Shaw will result in less competition, says Hatfield, echoing sentiments from Morningstar’s Dolgin.

“Shaw is not a fourth major wireless competitor based on customers and is unlikely to ever be, but it has affected the industry as one would. We believe eliminating Shaw could mute wireless competition,” said Dolgin.

According to Rogers, it says the deal is expected to close by the second half of 2022, after it is reviewed by regulators. According to Canada’s Competition Bureau, it has received a surge of online feedback over the Rogers-Shaw merger.