Rogers, Shaw, Quebecor say mediation talks with Canada’s competition watchdog failed to resolve merger objections

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The proposed $26-billion merger between Rogers Communications Inc. and Shaw Communications Inc. is headed for a lengthy tribunal hearing, after mediation talks failed to resolve the Competition Bureau’s objections to the deal.

The federal competition watchdog is attempting to block the merger of Canada’s two largest cable companies, arguing that the deal would reduce competition and result in higher cellphone bills, poorer service and less choice for consumers.

Rogers, Shaw and Quebecor Inc. said in a joint statement Thursday that they are “disappointed with this outcome.” Quebecor stands to acquire Shaw’s wireless carrier, Freedom Mobile, if the takeover succeeds.

The companies alleged that the Competition Bureau was unwilling to “meaningfully engage” during the negotiations, which took place in Ottawa on Thursday.

“We remain committed to completing this pro-competitive series of transactions and are confident in the strength and merits of our case in front of the Competition Tribunal, including the many benefits of these transactions to Canadians,” the companies said in their statement.

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Jayme Albert, a spokesperson for the Competition Bureau, confirmed that the mediation talks did not result in a settlement.

“We are aware of the press release issued by Rogers, Shaw and Quebecor and disagree with its contents entirely, except for the fact that a negotiated settlement was not reached,” Mr. Albert said in an e-mail.

“As the Bureau is required by law to conduct its work confidentially, I am not in a position to comment further.”

The hearing in front of the Competition Tribunal is scheduled to begin on Nov. 7 and could last until Dec. 8. A settlement could still be reached prior to, or even during, the hearings.

Earlier this year, Quebecor struck a deal to acquire Freedom Mobile for $2.85-billion. Rogers and Shaw have agreed to divest Freedom in order to address concerns that the merger of their companies would eliminate Canada’s fourth-largest wireless carrier, which has been credited with reducing wireless prices in recent years.

The Globe has reported that Rogers put forward a settlement proposal prior to mediation, under which Quebecor would also have acquired some fibre-optic infrastructure as part of the deal. The move was intended to resolve the Competition Bureau’s concerns that Videotron, the Montreal-based telecom owned by Quebecor, doesn’t own enough infrastructure outside of Quebec to support Freedom’s wireless business.

The takeover also requires the approval of Industry Minister François-Philippe Champagne. On Tuesday evening, Mr. Champagne outlined the conditions under which his department – Innovation, Science and Economic Development Canada – would approve the transfer of Shaw’s wireless spectrum licences to Videotron. Those conditions include that Quebecor commit itself to reducing wireless prices and agree not to sell Shaw’s spectrum licences for 10 years. (Spectrum refers to the airwaves used to transmit wireless signals.)

Pierre Karl Péladeau, Quebecor’s president and chief executive, has already agreed to Mr. Champagne’s conditions, saying they are in line with his company’s “business philosophy,” and that Quebecor, Rogers and Shaw will incorporate the criteria into a new version of their agreement.

Some industry analysts and investors were hopeful that Mr. Champagne’s comments would help the companies negotiate a settlement with the Competition Bureau, and shares of both Rogers and Shaw rose sharply in Wednesday morning trading. But the stock prices slipped slightly Wednesday afternoon after the bureau issued a statement that said it was still intent on challenging the merger.

Rogers, Shaw and Quebecor touted the benefits of the merger in their statement on Thursday, arguing that it will “positively transform the Canadian telecommunications industry.”

“The combined Videotron-Freedom business will have everything it needs to compete as a stronger fourth carrier for the long term, including critical 5G spectrum. Quebecor’s commitment to lower wireless prices for Canadians across the country is another illustration of the many benefits that the proposed transactions will create if approved,” the companies said.

“At the same time, the combined Shaw-Rogers wireline business will have a national network positioned to compete against [Bell and Telus] for the long-term.”

Keldon Bester, a fellow at the Centre for International Governance Innovation, said he wasn’t surprised that the parties had not come to an agreement. He noted that the last mediation attempt in June had ended the same way. Even so, he said, he is encouraged that the Competition Bureau followed through on the message it reiterated after Mr. Champagne’s news conference on Tuesday.

“It’s another confirmation that the bureau is ready to fight for Canadians instead of settling,” said Mr. Bester, who researches monopoly power in Canada for the Waterloo-based think tank.

“My hope is that the tribunal agrees with the bureau’s argument that an outright block of the merger is the appropriate remedy.”