Rogers and Shaw are aiming to close their merger by the end of the year, with the possibility of extending their deadline to Jan. 31.Sean Kilpatrick/The Canadian Press
Lawyers representing Rogers Communications Inc. RCI-B-T and Shaw Communications Inc. SJR-B-T touted the potential benefits of their contested $26-billion merger for consumers during the final day of hearings in front of the Competition Tribunal.
The Competition Bureau is asking the tribunal to block the deal in its entirety, arguing that it would result in higher cellphone bills and poorer wireless service, particularly in Western Canada.
At issue is whether the divestiture of Shaw’s Freedom Mobile to Quebecor Inc.’s Videotron Ltd. for $2.85-billion would weaken Canada’s fourth-largest wireless carrier, which serves customers in Ontario, Alberta and British Columbia. The competition watchdog asserts that Videotron has no track record of operating in Western Canada, and that separating Freedom from assets such as Shaw’s cable network and brand would hamper its competitiveness.
Kent Thomson, a lawyer representing Calgary-based Shaw, told the tribunal Wednesday that the Competition Bureau’s attempts to criticize Videotron’s ability to compete in Western Canada, where it doesn’t own cable infrastructure, are “entirely without merit, and troubling.”
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The merger of Canada’s two largest cable companies would benefit “millions of Canadians” by creating a “new, formidable and aggressive” competitor for Shaw’s chief rival Telus Corp. in Western Canada’s internet and television markets, Mr. Thomson argued.
“If this transaction is allowed to proceed, Rogers will bring to bear its enormous experience, expertise, scale and resources to compete aggressively and successfully against Telus in the wireline industry throughout Western Canada,” Mr. Thomson said Wednesday.
“Of course, that is precisely why Telus has made every conceivable effort to attack and to undermine and to derail this transaction over a period of almost two years,” he later added.
The closing arguments from the cable company lawyers conclude roughly four weeks of hearings that included evidence from 45 witnesses. The tribunal is aiming to release a decision by the end of the year or early January if possible, although that timeline is not guaranteed.
The hearings have centred largely around whether Shaw’s wireless businesses, including Freedom Mobile and Shaw Mobile, have been financially successful and competitively disruptive, and whether Videotron’s acquisition of Freedom would maintain the current level of competition. Under the terms of the proposed merger, Rogers is set to acquire Shaw Mobile’s 450,000 customers in Western Canada, who receive steeply discounted wireless services that are sold in bundles with cable and internet services.
Shaw’s lawyers have argued, on the basis of the testimony provided by several company executives, that the Competition Bureau has exaggerated Freedom Mobile’s success and competitive significance. Shaw representatives have told the tribunal that Freedom has not been profitable and that Shaw has yet to recoup the $4.5-billion it has invested in wireless since 2016.
On Tuesday, lawyers for the Competition Bureau argued that if Videotron were to acquire Freedom, the new combined entity might stave off bankruptcy but it would remain at the bottom of the market, unable to compete vigorously. John Rook, a lawyer representing Videotron, called the assertion “remarkable” and “paternalism at his highest.”
Federal Court Chief Justice Paul Crampton, who is overseeing the hearing, has asked the cable companies to address why Videotron could succeed in operating Freedom if Shaw could not.
Mr. Rook said that Videotron has negotiated a “very attractive price” for the business, as well as favourable terms with regards to roaming, cable network access and other agreements.
Mr. Rook said Quebecor made two unsolicited offers to acquire Freedom – first in April, 2021, then in April, 2022 – before Rogers eventually let the company into the sale process. The $2.85-billion deal it ultimately agreed to pay is “significantly” lower than what the company had previously offered, Mr. Rook said.
The Competition Bureau has argued that a “complex web” of 13 commercial agreements between Videotron and Rogers would leave the Montreal-based telecom vulnerable to anti-competitive behaviour by its larger rival.
Jonathan Lisus, a lawyer representing Rogers, said Wednesday that the argument “makes no sense,” adding that there is already a regulatory regime in place to respond to allegations of anti-competitive behaviour.
He urged the tribunal to approve the merger, describing it as pro-competitive.
“If the [Competition Bureau’s] draconian remedy is granted, the industry and competition will regress, to the detriment of the public interest, consumer choice and telecom policy,” Mr. Lisus said.
Rogers and Shaw are aiming to close their merger by the end of the year, with the possibility of extending their deadline to Jan. 31. Rogers will have to pay millions to bondholders if the deadline is extended.
The merger also requires the approval of Industry Minister François-Philippe Champagne, whose department is reviewing the transfer of Shaw’s spectrum licences to Videotron.
In October, before the hearing began, Mr. Champagne laid out the conditions under which he would approve the transfer, including that Quebecor agree not to sell Shaw’s wireless spectrum licences for at least 10 years, and that it commit to bringing down cellphone bills. Quebecor has already agreed to those conditions.