Rogers-Shaw Merger Should Not Happen, Says House of Commons Committee

A report tabled on Friday by the House of Commons’ industry and technology committee recommends against Rogers Communications Inc. (RCI)’s proposed $16 billion CAD acquisition of Shaw Communications Inc. — reports The Globe and Mail.

The report urges Ottawa to prioritize consumer affordability as it evaluates the merger. While the committee’s recommendation is advisory and non-binding, it adds to growing political and public concerns about the proposed takeover and its implications for competition and wireless prices.

If the merger goes through, the number of wireless players will be reduced from four to three in Ontario, Alberta, and British Columbia. The report says that if the deal moves forward, the government must ensure that all of the conditions attached are enforceable.

The report is “both a recommendation against the merger and also an acknowledgement of the reality that if it proceeds, we want to make sure that there are strict conditions attached,” said Nathaniel Erskine-Smith, a Liberal Member of Parliament who sits on the committee.

The committee is composed of MPs from the Liberal, Conservative, and New Democratic parties, as well as the Bloc Québécois.

Federal Industry Minister François-Philippe Champagne said on Thursday that he will not allow the “wholesale transfer” of the entirety of Shaw’s wireless business to RCI.

“The wholesale transfer of Shaw’s wireless licences to Rogers is fundamentally incompatible with our government’s policies for spectrum and mobile service competition, and I will simply not permit it,” said Mr. Champagne.

However, the Industry Minister’s statement leaves the door open for Rogers to acquire some of Shaw’s wireless licences as part of the takeover. The most likely scenario would be RCI being required to sell off Shaw’s wireless business, Freedom Mobile, which the industry and technology committee’s report advocates for.

Earlier this week, the same committee tabled a report advising Mr. Champagne to deny the Rogers-Shaw merger if it includes Freedom Mobile.

Montreal-based Quebecor Media Inc. has already expressed interest in buying Freedom Mobile, even demonstrating that it can afford the acquisition. Freedom Mobile’s original founder is also willing to buy the telco back.

A joint statement from Rogers and Shaw issued on Thursday afternoon said, “We continue to work constructively with the government and regulators to close this transaction and deliver the benefits of the merger to all Canadians.”

“We share the government’s view that affordable, high-quality services should be available to every Canadian and by coming together, Rogers and Shaw will make the generational investments in networks and technology that Canada needs to create new jobs, increase competition, and bridge connectivity gaps in rural and remote areas. We continue to expect the transaction to close in the first half of 2022.”

Rogers and Shaw have argued that the merger would allow them to better compete with rivals Telus Corp. and Bell Canada, in addition to improving service in rural and remote areas.

However, the feds are not entirely convinced by the merits the two telecoms have put forward. “They are effectively telling us that, despite all of the available evidence telling us that strong regional competition is critical … that, in fact, consolidation will benefit consumers,” said Mr. Erskine-Smith.

“We know across sectors that consolidation is contrary to the interests of consumers and what we need is strong competition.”

The Rogers-Shaw merger is pending approval from three regulators: the Competition Bureau, the Canadian Radio-television and Telecommunications Commission (CRTC), and Innovation, Science and Economic Development (ISED) Canada.

The CRTC is focused on evaluating the broadcasting side of the Rogers-Shaw merger, the Competition Bureau is looking at its possible impact on competition across relevant industries, and Innovation, Science and Economic Development Canada is reviewing the transfer of Shaw’s spectrum licences to Rogers.