Industry Minister François-Philippe Champagne holds up a contract between the telecoms and the federal government as he speaks at a news conference about the Rogers-Shaw deal in Ottawa on March 31.PATRICK DOYLE/The Canadian Press
Ottawa is allowing Rogers Communications Inc. RCI-B-T to complete its $20-billion takeover of Shaw Communications Inc. SJR-B-T by approving the transfer of Shaw’s wireless licences to Videotron Ltd. with a number of conditions aimed at lowering cellphone bills.
The approval from federal Industry Minister François-Philippe Champagne concludes a two-year saga that has included numerous delays and regulatory snags. The deal will combine the country’s two largest cable networks and allow Quebecor Inc.’s QBR-B-T Videotron to expand outside of its home province of Quebec by acquiring Shaw’s Freedom Mobile, Canada’s fourth-largest wireless carrier, for $2.85-billion.
Mr. Champagne announced during a news conference Friday morning that Rogers and Videotron have signed written undertakings agreeing to 21 conditions relating to the affordability and accessibility of wireless services. Mr. Champagne said he will watch “like a hawk” to ensure that the companies uphold their commitments.
“If Canadians do not begin to see clear and meaningful reductions in price, within a reasonable amount of time, I will have no choice but to seek further legislative and regulatory powers to drive down prices in Canada,” he said.
The largest takeover in Canadian telecom history was announced in March, 2021, after Rogers beat out BCE Inc. in a bidding war for Shaw, the Calgary-based cable company founded in the late 1960s by telecom entrepreneur JR Shaw.
Integrating Calgary-based Shaw will be the next major challenge for Tony Staffieri, who took over as chief executive of Rogers in November, 2021, after a fractious boardroom and family battle that began with a plan to oust his predecessor, Joe Natale. Mr. Staffieri, the company’s chief financial officer, was fired instead, before being reinstated several months later in the top job after Edward Rogers, the chair of the family trust that controls the telecom giant, replaced five of the company’s independent directors amid opposition from his mother and two of his sisters.
Meanwhile, Rogers, Shaw and Videotron said that they plan to close their three-way deal “expeditiously” after receiving the minister’s approval. The companies announced that they have extended their deadline from Friday to April 7 and expect to consummate the transaction by then.
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Shaw saw its stock price rise 3.2 per cent to $40.43 in midday trading on the Toronto Stock Exchange. Shares of Rogers, meanwhile, slipped 2.6 per cent to $62.81 as the free cash flow in the telecom’s updated financial guidance fell short of some analysts’ expectations.
To secure Mr. Champagne’s approval, Videotron has pledged that over a period of 10 years, it will offer wireless plans 20 per cent less expensive than those offered by the major wireless carriers on Feb. 10, 2023. The company has agreed to pay the government $25-million for each year where it does not meet that promise, starting in the third year, up to a maximum of $200-million.
The Montreal-based telecom has also agreed to spend more than $150-million upgrading Freedom Mobile’s network and to enable 90 per cent of its customers to access fifth-generation wireless services within two years, among other commitments.
Rogers has also made a number of promises to the federal government, including that it will spend $1-billion within five years to expand high-speed internet and 5G in areas where that connectivity is not currently available, create 3,000 new jobs in Western Canada within five years and maintain a Calgary headquarters for at least 10 years. It has also pledged to invest $2.5-billion to expand 5G coverage in Western Canada and $3-billion in other network service expansion projects. The Toronto-based telecom giant has agreed to pay $100-million for every year in which it fails to meet any of its commitments, up to $1-billion.
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“I’m a lawyer, and it’s a contract. I know how to read contracts and enforce them, and it’s subject to arbitration,” Mr. Champagne said when asked by a reporter about the enforceability of the conditions. “I would not mess with the regulator,” he added.
Mr. Champagne also announced a moratorium on large-scale transfers of spectrum – the airwaves used to transmit wireless services – while his department completes a “comprehensive review” of the framework that allows for such transfers between companies.
Acquiring Freedom will double the size of Videotron’s customer base, give it a larger portfolio of spectrum and create “the fourth national mobile carrier that Canadians have been waiting for,” according to Pierre Karl Péladeau, Quebecor’s president, CEO and controlling shareholder. It will also thrust Mr. Péladeau back into the national spotlight.
Quebecor was once an empire of publishing, media and telecom assets that stretched across North America to Europe. But after the failed refinancing of printer Quebecor World and the sale in 2015 of the Sun Media newspaper chain, Mr. Péladeau beat a retreat into Quebec’s borders – and turned Quebecor into highly profitable business anchored by its cable and wireless operations.
Quebecor executives estimated in late 2018 that the company had roughly four more years of revenue and market share gains ahead in wireless before it had to hatch a new strategy for growth. Chairman Brian Mulroney said at the time that once the company had finished buying back stock and cleaned up its balance sheet, Mr. Péladeau would look for an encore, either internationally or in the rest of Canada. That time has come.
“This is a transformational moment for Quebecor” and a significant moment of achievement for Mr. Péladeau personally, Mr. Mulroney told The Globe and Mail in an interview Friday. “This is really going to double the size of Videotron in terms of the number clients and, in one fell swoop, extend us across Canada.”
Quebecor previously harboured ambitions to expand its wireless operations nationally but abandoned the effort in 2015, saying the federal government had moved too slowly on wholesale roaming rates and tower-sharing rules. Now, the company is taking over another player with an existing client base and network.
Mr. Péladeau has been looking for such favourable circumstances for years, said Luc Lavoie, a former Quebecor executive turned political commentator. “Every company needs growth,” Mr. Lavoie said in an interview. “The opportunity presented itself and he jumped on it.”
In a statement, Mr. Péladeau vowed to compete aggressively and bring down wireless prices.
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Rogers had originally planned to acquire Freedom, which serves roughly 1.7 million customers in Ontario, Alberta and British Columbia, as part of its takeover of Shaw. But it agreed to divest the carrier to win the blessing of federal regulators. Videotron was initially excluded from that sale process, which critics derided as opaque and uncompetitive, but was eventually invited to bid for the carrier, reaching a deal last June.
Rogers’s takeover of Shaw obtained the first of three regulatory approvals when it won the blessing of the Canadian Radio-television and Telecommunications Commission in March of 2022.
Despite the divestiture of Freedom to Quebecor, Canada’s Competition Bureau sought to block the takeover. The bureau, which is an independent law enforcement agency, argued that the deal would result in poorer service and higher cellphone bills, particularly in Western Canada.
The Competition Tribunal, a quasi-judicial body that adjudicates cases brought by the bureau, dismissed the watchdog’s application late last year after a month-long hearing, concluding that the sale of Freedom to Videotron would create a “more aggressive and effective” wireless competitor. That decision was later upheld by the Federal Court of Appeal.
The companies have extended their self-imposed deadline several times, resulting in higher financing costs for Rogers, which has had to pay its bondholders more than $800-million in fees. Mr. Staffieri has said that he remains confident in the deal’s underlying economics despite the additional financing costs.
On Friday, Mr. Staffieri said the company is “very pleased” to move forward with the deal, which will improve connectivity to underserved communities.
“Building on a shared legacy with Shaw, we will invest substantially to bring more choice, more value, and more connectivity to Canadians across the country,” he said in a statement.
Brad Shaw, CEO and executive chair of Calgary-based based Shaw, said the minister’s approval marks “an exciting new chapter for the future of connectivity in Canada.”