Federal Industry Minister François-Philippe Champagne said on Thursday that the federal government will not allow the “wholesale transfer” of Shaw’s wireless business to Rogers Communications Inc. (RCI) in the latter’s proposed $16 billion CAD acquisition of the former.
This might mean that the two companies will be forced to sell off Shaw-owned wireless service provider Freedom Mobile in order to push the merger through.
According to experts, the decision not only keeps “the dream of four wireless options alive in Canada” but also shows that the federal government is concerned about the prices Canadians have to pay for cellular, already some of the highest in the world, and wants to encourage competition in the space — reports The Canadian Press.
“It’s a good sign in the sense that the government is — at least in theory — keeping the dream of four wireless options alive in Canada,” John Lawford, executive director and general counsel of the Public Interest Advocacy Centre, said on Friday.
However, even the experts aren’t sure if a fourth player would be able to survive or have an actual impact on prices. “But whether the fourth player will be stable and still around in 10 years and how big they’ll be is unclear,” Lawford added.
Quebecor Inc., Eastlink Inc., and Xplornet Communications Inc. could all potentially play a role, he said.
“I don’t think there’s an obvious fourth player that’s going to be quasi-national,” said Lawford. “They might give a chunk to Quebecor and then a little piece to Eastlink out east and maybe some to Xplornet for the north and rural areas.”
Rogers proposed takeover of Shaw has faced opposition from consumer groups, academics, customers, and politicians alike over the possibility of the deal reducing the number of wireless players from four to three in Ontario, Alberta, and British Columbia, and leading to higher phone bills.
Industry experts say Ottawa’s decision to block the proposed takeover in its current state did not come as a surprise.
“Rogers and Shaw have always recognized this was a very likely a possibility and were prepared to deal with that,” said Carleton University communication professor Dwayne Winseck.
“The real crown jewel in this deal is all of the fibre backhaul in Western Canada that Shaw owns as well as the local wireline networks, which are also fibre that connect all of the cell towers.”
Rogers and Shaw will likely have to sell off some of the latter’s wireless business, and suitors are already lining up. Montreal-based Quebecor Media Inc. has not only expressed interest in buying Freedom Mobile but has also demonstrated that it can afford the acquisition.
Even Freedom Mobile’s original founder is willing to buy the telco back.
Quebecor called the government’s opposition to the deal “a step in the right direction.”
“As it stands, the proposed Rogers-Shaw transaction is contrary to the public interest,” Pierre Karl Péladeau, president and CEO of Quebecor, said in a statement.”
“As Bell, Rogers and Telus already control 90 per cent of Canada’s wireless market, it is imperative that we create the necessary conditions for real competition in order to give consumers more choice, better prices, better services and more innovation.”
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.
Despite mounting resistance, Rogers has said it expects the deal to close sometime during the second quarter of this year.