ISED sets new rules for Rogers and Shaw merger, the Competition Bureau isn’t budging just yet

While Innovations, Science and Economic Development (ISED) Canada has laid out new conditions for the Rogers and Shaw merger, the Competition Bureau holds steadfast to its stance to block the deal.

On Tuesday, Minister François-Philippe Champagne, Minister of Innovation, Science and Industry, announced that he has officially denied the original proposed transaction between Rogers and Shaw, through which Rogers would acquire Freedom Mobile from Shaw.

However, Minister Champagne has now agreed to allow Quebecor’s Videotron to purchase Freedom Mobile from Shaw under new conditions.

As a part of the ongoing effort to appease regulators, Rogers and Shaw had agreed to sell Freedom Mobile, Shaw’s carrier business, to Quebecor for C$2.85 billion. Quebecor is a key telecommunication and media service provider in Quebec, owning brands such as Videotron, Fibrenoire, and several media brands.

To gain Freedom Mobile’s wireless spectrum licenses (the right to use the radio wave frequencies to deliver information), Quebecor must first obtain approval from ISED.

In a public statement, the Minister highlighted that as a part of the ongoing merger, Videotron must retain any new licenses it acquires for at least 10 years.

Additionally, Minister Champagne used Videtron’s pricing in Quebec as the revised expectation for the rest of Canada, noting that comparable services cost 20 per cent less in Quebec than in other provinces.

Quebecor chief executive officer Pierre Karl Péladeau said in a statement that the Minister’s statement is in line with the company’s business philosophy, emphasizing Quebecor’s commitment to “end the reign of the ‘Big 3’” telecommunication companies.

“We intend to accept the conditions stipulated by the Minister and incorporate them into the new version of the Rogers-Shaw/Quebecor-Freedom Mobile transaction, which has already been negotiated,” said Péladeau in the statement.

With ISED potentially allowing passage of the merger on its amended terms, Rogers and Shaw must now gain approval from the Competition Bureau, which thus far has been adamant about blocking the deal.

In May, Canada’s competition watchdog sought to fully block the deal in an effort to “protect Canadians from higher prices, poorer service quality and fewer choices” in wireless services.

In a filing to the Competition Tribunal, the Bureau alleged that allowing the merger would remove a strong competitor and significantly increase Rogers’ national market share.

It appears that its stance hasn’t changed, as Shaw and Rogers have again failed to reach an agreement with the Competition Bureau during their mediation talks on Oct. 27.

This has been their second failed mediation effort this year.

In response, Shaw, Quebecor and Rogers released a joint letter, in which the three telecom service providers said the deal would positively transform the industry. They expressed confidence in Quebecor’s position to become a powerful fourth competitor once it completes the acquisition of Freedom Mobile.

“The mediation did not yield a negotiated settlement,” the letter reads. “We are disappointed with this outcome and believe that litigation is both unnecessary and harmful to competition. The Bureau’s unwillingness to meaningfully engage unduly delays lower wireless prices for Canadian consumers.”

The telecommunication companies now must make their case in the hearing with the Competition Tribunal, which is scheduled to begin on Nov. 7.

Rogers has pushed back the expected closing date for its acquisition of Shaw Communications to Dec. 31, 2022 with the possibility of extending it to next year.

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Tom Li
Tom Li
Telecommunication and consumer hardware are Tom's main beats at IT World Canada. He loves to talk about Canada's network infrastructure, semiconductor products, and of course, anything hot and new in the consumer technology space. You'll also occasionally see his name appended to articles on cloud, security, and SaaS-related news. If you're ever up for a lengthy discussion about the nuances of each of the above sectors or have an upcoming product that people will love, feel free to drop him a line at [email protected].

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