Rogers Communications faces paying $775-million in financing fees to creditors, mostly U.S. bond funds, if the deal to takeover Shaw doesn’t close this year.Fred Lum/The Globe and Mail
Commissioner of Competition Matthew Boswell is making it clear that when it comes to telecom takeovers, he would rather fight than negotiate.
But the uncompromising approach the head of the Competition Bureau is taking will make a handful of lawyers and U.S. bond fund managers richer, at the expense of the Canadian consumers his agency is supposed to protect.
The bureau wants to block Rogers Communications Inc.’s RCI-B-T planned $26-billion takeover of Shaw Communications Inc. SJR-B-T. The regulator’s argument, unchanged despite Shaw’s agreement in August to sell its two-million-subscriber Freedom Mobile network to Quebecor Inc. QBR-B-T, is that the two deals will result in higher cellphone prices and reduced competition.
In showdowns like these, between government and industry or any two parties that can’t reach an agreement, the proven approach is to get everyone in a room, strive to find common ground and reach a settlement. Resorting to courts should only be a last resort.
That common-sense approach is lacking at the bureau. Mr. Boswell, a former criminal prosecutor, seems intent on setting telecom policy through litigation.
Rogers and Shaw sat down with the bureau for two days of mediation in July. The two sides failed to reach an agreement. In a report, analyst Adam Shine at National Bank Financial said the bureau never engaged in give-and-take negotiations aimed at finding a compromise.
With Quebecor now also at the table, the companies asked for another two days of talks at the end of this month, on Oct. 27 and 28.
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Mediation is a reasonable request, for both sides. The alternative is a lengthy hearing at the Competition Tribunal. The companies would rather settle the terms of their transaction quickly, and move forward. Rogers faces paying $775-million in financing fees to creditors, mostly U.S. bond funds, if the deal doesn’t close this year. That’s money that could otherwise could be spent on upgrading 5G wireless networks, or other consumer-friendly projects.
Mr. Boswell also has a reason to avoid the tribunal, because his team has a terrible track record in cases that go before the quasi-judicial body.
Since 1986, only six takeovers have been contested, including the current Rogers-Shaw merger, according to a report from analyst Maher Yaghi at Bank of Nova Scotia. Of the five deals the tribunal reviewed, the bureau won one case, scored a partial victory in a second and lost three.
On Monday, the bureau announced it agreed to just one day of mediation, not two.
In contrast, earlier this month, the bureau asked to extend the time allocated to tribunal hearings that begin in November, from four weeks to five. Legal bills on these sessions will run to the millions of dollars.
Analysts and lawyers who have read the thousands of pages of filings on this case say Mr. Boswell holds an extremely weak hand. Rogers, Shaw and Quebecor will realize billions of dollars in economic efficiencies from combining their businesses – an argument that trumps consumer concerns in Canada – and create four national cellphone networks, preserving a key federal government policy goal.
“We assume that the Competition Tribunal will render its decision around mid-January” said National Bank’s Mr. Shine. “Having found no ‘smoking gun’ or great arguments to substantiate the Competition Bureau’s steadfast opposition, we believe an approval will come, which then sets the stage for the approval process by the Minister of Innovation, Science and Industry.”
Mr. Boswell has declined to comment publicly on the telecom takeovers, in keeping with tradition around deals under review. However, since being named head of the regulator in 2019, he has taken an activist approach, speaking frequently on the need to modernize competition law, including revisiting the efficiencies argument. To Mr. Boswell’s credit, the government recently launched a review of the rules.
Ahead of a daylong mediation session in late October, the leader of Canada’s competition watchdog needs to recognize he won the day for consumers by bringing in Quebecor as a national player in cellphone markets, and won a policy battle by getting politicians to revisit competition regulations.
Extending the review of this deal, first struck 19 months ago, is likely to mean losing this case at the tribunal and saddling cellphone users with unnecessary costs. It’s time to talk, not fight.