Rogers `remedy' for deal fails to alleviate concerns
Divestiture of Shaw unit not effective in stopping `competitive harm': watchdog
A “remedy” proposed by Rogers Communications Inc. to alleviate concerns about reduced wireless competition resulting from its planned $26-billion takeover of telecom rival Shaw Communications Inc. will not be effective, the Competition Bureau said in a filing made public Tuesday with redactions.
“Rogers and Shaw have (redacted) with parties interested in acquiring Shaw's Freedom Mobile wireless business and have claimed that such divestiture would eliminate any substantial lessening or prevention of competition resulting from the proposed transaction,” said the filing with the Competition Tribunal. “However, the divestiture proposed is not an effective remedy for the competitive harm the Proposed Transaction has caused and will likely continue to cause.”
The Competition Bureau said Monday it is seeking a “full block” of the combination of Shaw and Rogers due to concerns about reduced competition and higher prices for consumers, particularly in wireless communications. Both sides must now argue their cases before the tribunal, a process that can take months, unless a suitable arrangement that satisfies the Competition Bureau can be reached.
After the Commissioner of Competition informed Rogers and Shaw last Friday that it planned to file an application opposing their merger, Rogers publicly pledged to sell Shaw's entire wireless operation and assets, which operate under the banner Freedom Mobile.
Details about the remedy proposed privately in March to alleviate wireless competition concerns, as well as the names of parties that were part of that remedy, were blacked out in the documents that were made available to the public. However, National Bank telecom analyst Adam Shine said in a report Sunday that there were 12 bidders for Freedom Mobile's assets, which were boiled down to two put forward by Rogers for government approval: New Brunswick-based rural internet service provider and mobile network operator Xplornet Communications Inc., and Aquilini Investment Group.
Xplornet is owned by private equity firm Stonepeak Infrastructure Partners, and the Aquilini family owns the Vancouver Canucks among its varied holdings.
Rogers has not commented on reports of the bidders and terms of any such arrangements have not been made public.
Analysts have suggested that it may not be the buyers that are an issue, but rather the terms of the arrangements. Several have speculated that the Competition Bureau may want Rogers to continue to provide network or other backbone services to the new owners of the Freedom assets to help them compete in a market where Rogers, BCE Inc.'s Bell Canada and Telus Corp. serve about 87 per cent of Canadian subscribers.
In arguments filed with the tribunal, the Competition Bureau alleges that removing Shaw, which entered the wireless market in 2016, as a competitor threatens to undo the “significant progress” made by introducing more competition into the concentrated wireless services market.
In his note to clients, National Bank's Shine said the structure or terms of the remedy proposed by Rogers to alleviate the competition concerns might be an issue for authorities, adding that it's also possible “a fuller and more open auction process would have captured more interest parties and proven more palatable to the regulator.”
The federal government and regulators have been pushing for years to establish a fourth national wireless telecom player to stimulate competition. In the filing made public Tuesday, the Commissioner of Competition noted that incumbents Rogers, Bell and Telus “dominate” wireless service markets in Canada and, until recently, possessed more than 90 per cent of the revenues for such services in the country.
“Persistent intervention by regulatory authorities since 2008 to stimulate competition through measures such as licencing new spectrum acquisitions have finally yielded benefits to Canadians as a result of entry and expansion by … Shaw Communications Inc.,” the filing said, noting that the cable and wireline operator's path into mobile operations came through a 2016 acquisition.
“Leveraging its wireline infrastructure to decrease costs and accelerate deployment of services, Shaw has since made substantial network investments, seen significant wireless subscriber growth, and played the role of competitive disrupter,” the commissioner said in the filing, adding that Shaw has driven down prices and made wireless data more accessible to consumers in the key markets where it operates Ontario, B.C. and Alberta.
The filing noted that Rogers and Shaw are each other's closest competitors and that competition between them is intense, with each gaining and losing more customers to one another than to other wireless carriers. “Shaw has brought to the markets where it competes an increased competitive intensity, to the benefit of Canadian consumers, who have historically paid some of the highest prices for Wireless Services in the developed world paired with one of the lowest rates of wireless data consumption,” the filing said.
Shaw has brought to the markets ... an increased competitive intensity.