Competition Bureau Challenges Shaw’s Claims of Having No ‘Path Forward,’ Points Out Profitability

Canada’s Competition Bureau on Tuesday refuted Shaw’s claims of not having “a viable path forward” if its proposed $26 billion takeover by Rogers fails — reports BNN Bloomberg.

While cross-examining Shaw CFO Trevor English in a hearing before the Competition Tribunal, the Bureau argued that the telco is in a pretty comfortable spot financially. The competition watchdog brought up Shaw’s fiscal 2020 results, which included about $750 million in free cash flow and capital expenditures of around $1.1 billion.

During cross-examination, English responded by noting that Shaw may not be in financial distress, but it is concerned that it doesn’t have the capital to compete in both the wireline and wireless segments long-term.

Furthermore, the Shaw CFO said that the company’s share price has underperformed and dividend growth has been stagnant in recent years, which is important for a public company — even more so for a company in the telecom industry.

Appearing before the Tribunal on Monday, English said Shaw wouldn’t be able to compete effectively if the Rogers deal falls through. He added that the company has struggled to compete with Telus, its primary competitor in Western Canada, for years now.

On Tuesday, English told the Tribunal that Shaw’s most important constituent is its customers. According to the Shaw exec, the Rogers-Shaw deal is good for consumers even without the divestiture of Shaw-owned Freedom Mobile.

The Competition Bureau is seeking to block the union because it will allegedly lead to higher prices and lower competition, and Rogers-Shaw proposed selling Freedom to Quebecor’s Vidéotron as a potential remedy to the Competition Commissioner’s concerns.

Quebecor CEO Pierre Karl Péladeau joined Monday’s hearing and claimed that the Vidéotron-Freedom deal would help lower wireless and internet prices across Canada.

Meanwhile, expert witnesses who testified before the Tribunal last week said that the Rogers-Shaw merger would raise prices for low-income Canadians and eliminate Canada’s fourth wireless competitor.

Tribunal hearings into the proposed Rogers-Shaw merger will last four weeks, with oral arguments scheduled for mid-December. A decision on the fate of the high-stakes deal is expected in January.

Rogers and Shaw previously extended their mutual merger deadline to December 31, 2022, hoping to close the deal by that time. However, the merger hopefuls have room for a further extension up to January 31, 2023.