Quebecor Acquisition of Freedom Mobile Could Lower Wireless Prices: Analyst
Rogers and Shaw Communications have proposed selling Shaw-owned Freedom Mobile to Quebecor for $2.85 billion as a remedy to competition concerns over their planned $26 billion merger that awaits approval from both the Competition Bureau and Innovation, Science and Economic Development Canada.
The Competition Bureau continues to oppose the Rogers-Shaw deal and has petitioned the federal competition tribunal to block it entirely. It also doesn’t see the Freedom sale as an effective remedy, arguing back in July that it does not ensure a competitive future for the wireless space.
However, one Scotiabank analyst believes selling Freedom to an already established wireless player like Quebecor’s Vidéotron subsidiary could lower prices across Canada, reports the Financial Post.
Vidéotron has managed to bring wireless prices in its home market of Quebec down to some of the lowest in the country.
“We believe that, if QBR (Quebecor) is allowed to buy Freedom Mobile, this price discrepancy could close with prices across Canada heading towards the lowest common denominator,” Maher Yaghi wrote in a note to clients.
In addition, Yaghi believes Quebecor will be able to take on Shaw’s role as a “maverick” player in the space.
According to the Scotiabank analyst, if Quebecor buys Freedom, it will likely outpace the progress Shaw has made since acquiring Freedom’s network assets in 2016. Quebecor is a veteran market player and has extensive experience with creating market share.
Shaw currently commands a 5% market share in Alberta and British Columbia, and about 10% in Ontario, the analyst said. Quebecor, meanwhile, has managed to capture 22% of the wireless market in Quebec thanks to its aggressive campaign to lower prices.
“We don’t see why QBR could not, long term, achieve a 15 percent market share in those provinces given the company’s strong experience in customer service, discounting and marketing insights,” Yaghi wrote.
Yaghi said Quebec could strategically deploy both Freedom and its own Fizz brand in regions, “attacking the middle and lower end” of the market. The company could also get into a re-selling arrangement to offer an internet product, giving it a compelling “bundle” to better compete with the Big Three (Rogers, Telus, and Bell).
Rogers and the Competition Bureau are slated to meet in a hearing before the Competition Tribunal on November 7. The telecom giant, however, is hoping the two sides will be able to settle their differences in a second bout of mediation later this month.
A previous attempt at negotiations was unsuccessful, but Rogers CEO Tony Staffieri believes the deal could still close this year.
If the Quebecor-Freedom deal goes through, it’ll be interesting to see if Quebecor could use the same tactics it did in its home province to claw market share away from incumbents.
“We view QBR (Quebecor) as an already well-established competitor and with the means to induce strong competition,” Yaghi added.
He also said that combining the wireless assets of Quebecor and Shaw “should allow for better economies of scale for a fourth player.”