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Mediation talks with Canada’s competition watchdog on the contested $26-billion merger of Rogers Communications Inc. RCI-B-T and Shaw Communications Inc. SJR-B-T were unsuccessful, the telecoms said on Wednesday.

The two companies’ aim in the talks, which took place on Monday and Tuesday, was to reach a settlement that would resolve the Competition Bureau’s objections to Rogers’ takeover of Shaw and allow the parties to avoid a lengthy hearing at the Competition Tribunal.

The failure to reach a resolution means further delays for the deal, which the companies announced in March, 2021, and had expected to complete in the first half of this year. Rogers and Shaw have agreed not to close their merger until they either reach an agreement with Matthew Boswell, the Commissioner of Competition, or win a challenge in front of the tribunal – a process that could take until early next year.

Rogers and Shaw said in a statement that they can continue discussions with the commissioner at any time, and intend to “work constructively ... to highlight the many benefits of the merger.”

The Commissioner of Competition is attempting to block the merger of Canada’s two largest cable companies, arguing that it would result in higher prices, poorer service and fewer choices for consumers, particularly for wireless services.

Attempting to address those concerns, Rogers struck a deal last month to sell Shaw’s wireless carrier Freedom Mobile to Quebecor Inc. QBR-B-T, which owns Montreal-based cable company Videotron Ltd., for $2.85-billion. Freedom is Canada’s fourth-largest carrier, with 1.7 million customers in Ontario, Alberta and B.C., and has been credited with reducing wireless prices in recent years.

However, the sale would not include 450,000 Shaw Mobile customers in Western Canada, who receive discounted wireless services bundled with their cable and internet. Rogers plans to hold onto those customers.

The two companies did not indicate why the mediation was not successful.

The mediation had already been scheduled before the Quebecor deal was reached.

Scotiabank analyst Maher Yaghi said the Competition Bureau had only two weeks to review the proposed sale, which may not have been long enough. Rogers, Shaw and Quebecor have also yet to finalize the terms of a definitive agreement, which they plan to do on or before July 15.

“While the bureau is opposing this transaction fiercely, we don’t see at the current time, a better Canadian-made option than the proposed acquisition by Quebecor of Freedom Mobile to establish a credible new wireless competitor,” Mr. Yaghi said in a research note.

Rogers, Shaw and the Competition Bureau can engage in a second round of mediation in October, before the tribunal hearing, Mr. Yaghi added.

“If the bureau decides to play hardball and not budge on its prerogatives, Rogers will likely have no choice but to go to the Competition Tribunal and plead its case,” Mr. Yaghi said, noting that this would likely mean the merger would not close until the fourth quarter of this year or the first quarter of 2023.

“Pushing the final decision into next year opens up Rogers to the possibility of having to refinance the debt that it’s raised earlier this year, causing some changes in the assumed interest cost to fund the deal,” Mr. Yaghi said, referring to $13-billion worth of bonds Rogers sold last March to finance the merger.

Globalive Capital chairman Anthony Lacavera, who founded Freedom in 2008 and has been vying to buy it back, called the development positive.

“I’m optimistic that the government is going to ensure there’s a real competitor,” said Mr. Lacavera, who has not been invited into the sale process, but has offered Rogers $3.75-billion for the wireless carrier. “They’re not going to roll over, they’re not going to be pushed around.”

The takeover still requires approval from the Ministry of Innovation, Science and Economic Development, which oversees the transfer of wireless licences. The deadline for the deal to close is July 31.

If Rogers doesn’t complete the takeover, it will have to pay Shaw a $1.2-billion break fee, as well as $120-million for redeeming its preferred shares.

Earlier this week, the Alberta government filed a notice indicating that it plans to intervene in the competition review, in light of the telecoms’ significant presence in the province and the deal’s potential impact on Alberta’s consumers, workers and economy.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 3:59pm EDT.

SymbolName% changeLast
RCI-B-T
Rogers Communications Inc Cl B NV
-0.47%55.64
QBR-B-T
Quebecor Inc Cl B Sv
-0.8%29.9
QBR-A-T
Quebecor Inc Cl A Mv
0%30.41

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