A Freedom Mobile telephone outlet is seen in Ottawa on May 10.Spencer Colby/The Globe and Mail
Quebecor Inc. QBR-B-T sure is sitting pretty.
Not only has the Montreal-based communications giant finalized an agreement with Rogers Communications Inc. and Shaw Communications Inc. to buy Freedom Mobile, but the Trudeau government appears to be assisting Quebecor burnish its image as the telecom industry’s golden child.
Although the nitty-gritty of the deal has yet to be made public, it looks like Quebecor is poised to purchase Freedom on the cheap. The previously-disclosed price tag of $2.85-billion is almost $1-billion less than a rival offer from Globalive Capital, which means Rogers is taking a haircut.
Quebecor also seems to have won other significant concessions from Rogers to ensure Freedom’s viability over the coming years. (Rogers, of course, was negotiating from a position of weakness. It needs to divest Freedom in the hopes of finally winning regulatory approval for its takeover of Shaw, the discount carrier’s current owner.)
It’s apparent the proposed Freedom sale is the culmination of Ottawa’s efforts to champion Quebecor. But it remains to be seen if ordinary Canadians will reap the benefits of this manoeuvring by Industry Minister François-Philippe Champagne and his colleagues at Innovation, Science and Economic Development Canada (ISED).
“We are very pleased with this Agreement, and we are determined to continue building on Freedom’s assets,” said Pierre Karl Péladeau, Quebecor’s president and chief executive officer, in a press release last week.
“Quebecor has shown that it is the best player to create real competition and disrupt the market. Our strong track record combined with Freedom’s solid Canadian footprint will allow us to offer consumers in British Columbia, Alberta and Ontario more choice, value, and affordability through discounted multiservice bundles and innovative products.”
The announcement also said that under Quebecor’s ownership, Freedom will launch a competitive national 5G offering. That’s a signal that Quebecor likely managed to score a wireless network-sharing deal with Rogers, especially since the announcement also made mention of Quebecor’s holdings of 3500 MHz spectrum.
Spectrum refers to the invisible radio waves that carry wireless signals. Last year, Quebecor shelled out almost $830-million on 294 wireless licences for 3500 MHz spectrum – airwaves that are ideally suited to support 5G service. More than half of that money was spent on spectrum outside of Quebec, including in parts of Ontario, Manitoba, Alberta and British Columbia.
Additionally, Mr. Péladeau’s reference to “discounted multiservice bundles” suggests that Rogers and Quebecor have signed resale agreements for various telecom services such as wireless and high-speed internet.
Consumers are addicted to the discounts they receive by purchasing multi-service bundles. So securing resale agreements for additional telecom services would certainly help Quebecor’s ability to compete outside of Quebec, its home market, where it provides multiservice bundles.
Still, Quebecor’s ability to provide meaningful discounts to consumers in other provinces over the long term depends on its ability to manage margin compression if wholesale prices trend higher.
Has Ottawa provided Quebecor with assurances that wholesale prices for various telecom services won’t shift down the road?
The federal government’s attempts to create sustainable competition in the wireless market have failed over the years, so the days of blind trust in Ottawa are over. It’s time for some transparency: Mr. Champagne needs to explain how his department influenced the Freedom Mobile sale, and how its final terms and conditions serve the public interest.
ISED’s competition policy for the wireless market hinges on Freedom’s survival as Canada’s fourth-largest carrier. And it’s long been obvious that Quebecor is Ottawa’s preferred buyer for Freedom.
As a discount carrier, Freedom primarily derives its value from its spectrum holdings. Mr. Champagne certainly has broad powers under the Radiocommunication Act to make decisions about spectrum allocation, including the transfer of wireless licences from one company to another.
But he is acting on behalf of Canadians who ultimately own this scarce public resource. They are entitled to know why Quebecor deserves to acquire even more wireless licences through this deal.
The proposed Freedom Mobile sale caps Ottawa’s efforts to thump for Quebecor. But what is Quebecor going to give Canadians in return for all this government help?
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