Rogers Communications Inc. says its rivals, BCE Inc. and Telus Corp. , are opposing its proposed takeover of Shaw Communications Inc. in order to avoid competing with a stronger broadcasting distributor.
In a document filed with the Canadian Radio-television and Telecommunications Commission late Thursday, Rogers says that acquiring Shaw would allow it to compete more effectively with Telus and BCE’s Bell Canada, as well with foreign streaming giants such as Netflix, Amazon Prime and Disney Plus.
In addition to the CRTC, two other regulators – the Competition Bureau and the Ministry of Innovation, Science and Economic Development (ISED) – are reviewing the deal, valued at $26-billion including debt. The telecom regulator’s role is to examine the transfer of broadcasting assets, while the Competition Bureau is reviewing whether the merger is likely to result in a substantial lessening of competition. The transfer of spectrum – licences to the airwaves used to transmit wireless services – must be approved by ISED.
The filing from Rogers is a response to requests made by Bell and Telus earlier this month that the CRTC deny Rogers’s application over concerns that its share of the broadcasting distribution market would be too large.
The rival telecoms argue that if Rogers is permitted to acquire Shaw’s broadcasting distribution business – which includes a satellite TV service called Shaw Direct and cable networks in British Columbia, Alberta, Saskatchewan, Manitoba and Northern Ontario – it would control 47 per cent of the English-language broadcasting distribution market. (Broadcasting distribution refers to the delivery of television channels through cable, satellite or internet protocol networks.)
Such scale would give Rogers control over the availability of programming services, Bell and Telus claim.
Rogers counters that its rivals are merely worried about Rogers challenging the subscribers they have enjoyed in the IPTV market in recent years. Bell is the country’s largest broadcasting distributor and operator of programming services, and has a greater market capitalization than Rogers and Shaw combined, Rogers says in its submission.
“It is, therefore, ironic that Bell is opposing our application based on the size and scale of the combined company,” the submission reads.
Additionally, Rogers cites Bell’s own failed bid for Shaw, noting that if its offer had been successful, the Montreal-based telecom would have been advocating for the approval of a deal that would have created an even larger broadcasting distributor than the combination of Rogers and Shaw. (The Globe and Mail previously reported that Bell had also made an offer to buy Shaw but, according to sources, was unwilling to take on as much regulatory risk as Rogers.)
“Bell’s opposition to our application is an attempt to leverage the regulatory system to gain a competitive advantage,” Rogers’s submission reads.
Speaking at BMO Capital Markets’ virtual Media and Telecom Conference earlier this month, Mirko Bibic, Bell’s chief executive officer, defended his company’s opposition of the merger, given that Bell itself had bid for Shaw.
“If you go back and read the public commentary around the existence of our bid and why we didn’t ultimately continue to bid, it was in part because of an assessment around regulatory risk, so I’m not sure that I would view it as ironic,” Mr. Bibic said. “I would view it as, we’re quite mindful of the regulatory risks that a transaction of this nature would present.”
Several other companies and organizations, including Cogeco Communications Inc. and the Canadian Communication Systems Alliance – which represents Canada’s independent internet, television and telephone providers – have also filed interventions, calling for more regulatory safeguards. In its response, Rogers argues that the existing safeguards aimed at levelling the negotiating power between broadcasting distributors and programming services are effective.
“Rogers further notes that none of the unregulated digital streaming services are subject to any such safeguards, even though they present a much larger risk to the health and future viability of the Canadian broadcasting system. The merger of Rogers and Shaw will be instrumental in countering this risk by ensuring a Canadian-owned broadcasting system continues to flourish in the future,” the submission reads.
The CRTC will hold a public hearing on the matter on Nov. 22.
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