Globalive founder urges Shaw to abandon Rogers merger
Lacavera wants telco to collect break fee and sell Freedom wireless unit to him
Frustrated after being shut out of Rogers Communications Inc.'s process to sell Freedom Mobile, Globalive Capital Inc. founder and chairman Anthony Lacavera is urging Shaw Communications to collect a break fee from the Rogers transaction and sell its wireless unit directly to him.
Rogers is trying to win regulatory and government approval for a $26-billion merger with Calgary-based cable and telecommunications firm Shaw, which owns Freedom.
Shaw would then be free to sell the rest of the company including large cable, internet and media operations to a buyer of its choosing, without the regulatory and government complications that have arisen in the Rogers deal as a result of the wireless operations, Lacavera told the Post on Friday.
“Shaw cannot engage (with Globalive) until after July 31 as they agreed to an extension with Rogers but what we have proposed to them is that they don't extend further ... (exercise the break fee and) sell us Freedom,” he said. “Then they are free to sell the cable business to whoever they want with no remedy obstacle in the way.”
If Rogers does not complete the acquisition of Shaw, which requires approval from Innovation, Science and Economic Development Canada as well as the Competition Bureau — which formally opposed it last month — Rogers must pay Shaw a $1.2-billion break fee. However, if Shaw backs out, it will owe Rogers a break fee of $800 million.
Rogers and Shaw had to extend their June closing date until the end of July as they duke it out with the Competition Bureau in legal filings. The Commissioner of Competition
formally rejected a “remedy” involving the Freedom Mobile assets put forward by Rogers, and said the planned merger would reduce wireless competition and result in higher prices for Canadian consumers.
Rogers and Shaw filed responses and counter-arguments to the federal Competition Tribunal late Friday, and Rogers has said it is continuing to negotiate with the Competition Bureau to try to resolve the issues outside the courts.
In the filings, Rogers argued that the Commissioner of Competition “failed to properly assess” the effects on competition of the planned merger, wrongly defined relevant product markets, and presented an analysis that was “flawed and incomplete.”
The effects on competition, Rogers argued in the 19-page filing, will be “minimal to none.”
The Toronto-based telco countered that not only would the merger with Calgary-based Shaw not result in a substantial lessening of competition in wireless services, but “any alleged impact on competition is far outweighed by the transaction's efficiencies.”
Rogers also objected to the rejection of its proposed remedy of the “full divestiture” of Freedom Mobile, which accounts for the “vast majority” of Shaw's wireless subscribers and revenues.
“The Commissioner's position is unreasonable, contrary to both the economic and fact evidence presented to the Bureau, and not supportable at law,” Rogers said in the filing.
Shaw also responded, arguing that the company is being sold to Rogers because of the “generational” scale of investments needed to offer affordable and ubiquitous wireline and wireless “next generation connectivity platforms” to Canadians. The Calgary-based company said there is no basis for the “extraordinary measure” of blocking the transaction over alleged prevention or lessening of competition in wireless services in parts of Alberta, British Columbia and Ontario.
In the 28-page filing, Shaw also contended that the competition commissioner's concerns about being able to separate Shaw's wireline and wireless businesses “are wholly misplaced,” and said the rejected proposal included selling all of Freedom's spectrum licences, customers, infrastructure, retail distribution network and other assets.
Lacavera suggested Friday that “remedy” proposals presented to competition and government authorities — which are understood to include selling Freedom wireless assets to New Brunswick-based rural internet service provider and mobile network operator Xplornet Communications Inc. or Vancouver's Aquilini family — may have been rejected because of concerns the telecom giant could retain access to Freedom's spectrum or buy it back at some point.
That would not be the case with his offer, which includes a contingent
20-year network and spectrum-sharing arrangement with Telus Communications finalized last month.
Lacavera has been public about his desire to purchase Freedom Mobile since it became clear that in the spring the federal government was not going to permit the “wholesale” transfer of Shaw's wireless assets to Rogers, adding that Globalive is positioned to bring U.s.-style “pure-play” competition including lower prices to the Canadian wireless landscape.
He lined up financial backers in March to put forward a reported $3.75-billion bid for Freedom Mobile, which was built on the back of an upstart wireless contender he founded in 2008 under the name Wind Mobile. Wind was sold to Shaw in 2016 for $1.6 billion.
Lacavera told the Post that his consortium of financial backers has been expanded beyond a pair
of U.s.-based private equity players.
“Government has been clear that a full divestiture of Freedom to a true independent and well-capitalized competitor will be required, and it is also clear government will not be fooled into accepting a fake competitor that is friendly to Rogers,” Lacavera said, adding that Globalive has a track record of bringing mobile prices down and service levels up with Wind.
But Globalive isn't the only contender for the Freedom Mobile wireless assets.
Other contenders include Quebecor Inc., whose chief executive Pierre Karl Péladeau has been public about his desire to compete and bring down wireless prices outside the Montreal-based telecom's stronghold in Quebec.
It is ... clear government will not be fooled into accepting a fake competitor that is friendly to Rogers.