Rogers, Shaw Begin Negotiations with Competition Bureau for Merger Approval

Rogers and Shaw Communications are all set to begin mediation talks with the Competition Bureau for their proposed $26 billion CAD merger on Monday — reports Reuters.

Canada’s antitrust authority opposes Rogers’s takeover of the country’s fourth largest telecommunications company over fears it will reduce wireless competition and raise prices. The Competition Bureau last month petitioned the Competition Tribunal to block the deal.

Both parties agreed to come to the table for negotiations last month. The mediation proceedings will serve to see if the two sides can come to an agreement without taking the matter to court.

Rogers and Shaw have agreed to sell the latter’s wireless business, Freedom Mobile, to Quebecor for $2.85 billion in hopes that doing so would relieve regulatory resistance.

However, the Freedom-Quebecor deal may not be enough to fully alleviate the Bureau’s antitrust concerns. Rogers’s chances of satisfying the Bureau with the Freedom Mobile sale alone dip even further when you consider the company is poised to retain 450,000 of Shaw’s wireless subscribers even with Freedom excluded.

These would be the close-to-half-a-million Canadians who are subscribed to Shaw Mobile. The Bureau is likely to call for Rogers-Shaw to divest Shaw Mobile as well. Unfortunately, the problem there is Shaw Mobile’s utter lack of appeal to buyers.

Rogers CEO Tony Staffieri previously said that neither Quebecor nor any other prospective Freedom buyers bid on the division. Even though Shaw Mobile generates about $100 million in annual revenue, buying it doesn’t make much sense for buyers since it relies heavily on bundling cellphone service together with Shaw’s cable and internet offerings.

Rogers’s planned acquisition of Shaw also requires approval from the Ministry of Innovation, Science and Economic Development (ISED) Canada, which shares the Bureau’s reservations for competition.

“We still have not received their formal application,” said Laurie Bouchard, an ISED spokesperson, adding the minister will review the deal on its merits.

As part of the mediation process, both sides will argue their case before a tribunal judge. The judge would then offer possible remedies to any disagreements. If the two sides accept the proposed solutions, they could sign a consent agreement and the Rogers-Shaw deal would gain the Bureau’s seal of approval without ever going to trial.

However, if a settlement cannot be reached, the dispute will proceed to trial. Seeing as the Bureau said last month that it was seeking an expedited process, a trial is expected to start in November. The tribunal could then render its decision by year-end.

In the event the deal falls through, Rogers will have to pay Shaw $1.5 billion in breakup fees.