Rogers in Talks With Potential Buyers for Shaw’s Freedom Mobile: Report

Rogers Communications Inc. (RCI) has initiated talks with several potential buyers who have expressed interest in buying Shaw Communications Inc.’s wireless unit, Freedom Mobile — reports The Globe and Mail, citing two sources familiar with the matter.

The sources did not name who any of these potential buyers are.

Telecom industry experts said last year that Rogers’ proposed $16 billion CAD acquisition of Shaw Communications should not include Freedom Mobile, and it is starting to look like the merger won’t receive regulatory approval unless Rogers sells off Shaw’s wireless business.

Innovation, Science, and Industry Minister François-Philippe Champagne said earlier this month that the government will not allow the “wholesale transfer” of Shaw’s wireless business to Rogers as that could endanger competition in the industry.

Rogers absorbing Freedom Mobile would reduce the number of wireless players from four to three in Ontario, Alberta, and British Columbia, and likely lead to higher phone bills for consumers.

Freedom Mobile had already drummed up interest from prospective buyers even before Rogers started seeking suitors. Montreal-based Quebecor Media Inc. publicly expressed interest in buying Freedom Mobile and even demonstrated that it can afford the acquisition. Freedom Mobile’s original founder also said he is willing to buy the mobile carrier back.

However, another source told The Globe and Mail that Quebecor Inc.’s Videotron Ltd. is notably absent from the talks at this time. The conversation is continuing, but discussions are at an early stage and it is too soon to tell how serious any of the prospective buyers Rogers is talking to are about acquiring Freedom Mobile.

Experts have said that forcing Rogers to divest Freedom Mobile will keep “the dream of four wireless options alive in Canada.” However, selling Freedom Mobile will require Rogers and Shaw to demonstrate that the carrier will be able to effectively compete with  Canada’s ‘Big 3’ telcos under the buyer’s ownership.

Bell Canada Enterprises (BCE) Inc.’s chief financial officer, Glen LeBlanc, said last week that Freedom Mobile will struggle to compete with Rogers, Bell Canada, and Telus Corp. on a national level without Shaw’s support.

“I think that a new fourth player will be weaker than what Shaw has been. It will be a wireless-only player and likely have a weaker balance sheet, competing against national integrated players,” Mr. LeBlanc said at Scotiabank’s telecom, media and technology conference last week.

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 responsible for reviewing the transfer of Shaw’s spectrum licences to Rogers.

Earlier this month, the House of Commons’ industry and technology committee tabled a report recommending that the federal government deny the Rogers-Shaw merger. Rogers, however, still expects the deal to close sometime during the second quarter of this year.