Freedom Mobile is Canada’s fourth-largest wireless carrier, with about two million customers in Ontario, Alberta and B.C.Spencer Colby/The Globe and Mail
Forcing the Shaw family to keep Freedom Mobile won’t guarantee it will remain competitive, telecom industry experts say, adding that the mobile phone carrier might be better off in new hands as the Competition Bureau moves to block a proposed merger with Rogers.
The competition watchdog is asking the Competition Tribunal to reject Rogers Communications Inc.’s RCI-B-T $26-billion takeover of Shaw Communications Inc. SJR-B-T, which would combine two of the country’s largest cable networks. The regulator said in documents filed with the tribunal that the merger has already reduced wireless competition and would result in higher cellphone bills.
Although Rogers has made it clear it’s willing to part with Freedom Mobile to address the bureau’s concerns, Commissioner of Competition Matthew Boswell said in the documents, which were made public on Tuesday, that none of the proposed deals to sell Freedom that Rogers has put forward are sufficient to maintain competition in the wireless industry. Freedom is Canada’s fourth-largest wireless carrier, with about two million customers in Ontario, Alberta and B.C.
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National Bank analyst Adam Shine said the Shaw family, which owns the Calgary-based telecom, has made it clear it wants to “call it quits” and that there is no guarantee the company would return to its previous level of network investments or launch 5G services if the takeover were blocked.
The telecom pared back its investments in its wireless network in the most recent quarter.
In a note to clients, Mr. Shine wondered how forcing the family to stay in operation would make any sense or be in the best interests of Freedom.
“Surely, the best solution now is for it to be in new hands,” he said.
Brad Shaw, chief executive officer of Shaw, has said the company would need deep-pocketed Rogers to help it deliver 5G wireless services. Rolling out the latest iteration of wireless technology will cost the telecom industry billions.
“Simply put, Shaw cannot do it alone. We need the scale, strength and resources of the combined Shaw and Rogers assets,” Mr. Shaw told the Canadian Radio-television and Telecommunications Commission late last year.
Consumer advocate John Lawford, executive director of the Public Interest Advocacy Centre, said that if the family wants to get out of the sector, it could do so without creating competitive concerns, by selling its controlling shares on the public markets.
“The fact that they may reap less benefit in a public equity market than a private sale with competition issues is not relevant,” Mr. Lawford said in an e-mail.
Details of Rogers’ proposed agreements to sell Freedom Mobile are redacted in the public documents. However, Mr. Boswell said in the filings that the potential buyers Rogers has put forward are unlikely to provide the wireless carrier with the same level of financial, managerial or technical support as Shaw.
The Globe has previously reported that Xplornet Communications Inc. owner Stonepeak Infrastructure Partners and a consortium that includes the Aquilini family, which owns the Vancouver Canucks, are among the bidders Rogers has presented to regulators.
The competition watchdog also argued that Freedom was gaining significant market share before the merger was announced, and that separating it from Shaw’s network infrastructure would hurt its competitiveness by removing its ability to offer bundled services.
Mr. Shine said Freedom’s market share gains were “disproportionately occurring in Ontario, where Shaw wasn’t doing any bundling.”
Telecom consultant Mark Goldberg said the competition watchdog appears to have taken a “hard-line stance.”
“Implicit in the Competition Bureau’s position is that Shaw would never be allowed to sell Freedom Mobile, even though it wasn’t originally integrated with a [cable] company when Shaw bought it, which seems pretty extreme,” Mr. Goldberg said.
“Hopefully, calmer minds will find a way to keep Freedom in the marketplace, with owners willing to invest in the company’s future,” he added.
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