Freedom Mobile Will Struggle to Compete If Sold by Rogers, Says Bell

Bell Canada Enterprises (BCE) Inc.’s chief financial officer, Glen LeBlanc, warns that Freedom Mobile will have a hard time competing against national, integrated telecoms on its own if it is sold in Rogers Communications Inc. (RCI)’s proposed $16 billion CAD acquisition of the wireless provider’s parent company, Shaw Communications — reports The Globe and Mail.

Mr. LeBlanc said he believes there is a “high probability” that Rogers will be forced to sell off Shaw’s wireless business, which includes Freedom Mobile, to appease regulators and push the merger through — a view he shares with many industry experts.

Innovation, Science, and Industry Minister François-Philippe Champagne said last week that Ottawa 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. Considering Mr. Champagne’s comments, Rogers will likely be forced to divest Shaw’s wireless business to gain regulatory approval for the acquisition.

Experts said the move will keep “the dream of four wireless options alive in Canada,” but Mr. LeBlanc doesn’t think Freedom Mobile will be able to effectively compete against Canada’s ‘Big 3’ telcos without Shaw’s support.

Integrated telecoms are able to win customers by bundling multiple services together and offering much more attractive value propositions, Mr. LeBlanc said.

“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 on Tuesday during Scotiabank’s telecom, media and technology conference.

Freedom Mobile has already drummed up interest from potential buyers. 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 wireless unit back.

Mr. LeBlanc said that although Quebecor’s Videotron Ltd. has done “extraordinarily well” in its home market of Quebec, competing out west where it has no cable network “will be very different” and could distract the company from its primary market.

“It’s going to take their attention away from their core market in Quebec,” Mr. LeBlanc said, adding, “I think we actually have an opportunity here.”

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.

On Friday, the House of Commons’ industry and technology committee tabled a report recommending that the federal government deny the Rogers-Shaw merger.

Despite mounting resistance from regulators and the Canadian people, Rogers has said it expects the deal to close sometime during the second quarter of this year.