Rogers Communications Inc. has reached an agreement to sell the wireless operator Freedom Mobile to Quebecor Inc. $ 2.85 billion for regulatory approval of Rogers’ acquisition of Shaw Communications Inc.
The two sides have been in talks for weeks, after Rogers entertained several bidders. Shaw’s Freedom Mobile is the fourth largest wireless carrier in Canada, with 1.7 million customers in Ontario, Alberta and BC, and has been credited with reducing wireless pricing in recent years.
The acquisition still requires the approval of the Competition Bureau and the Ministry of Innovation, Science and Economic Development, which oversees the transfer of wireless licenses.
Rogers, Shaw and Quebecor said in a joint press release on Friday evening that they believe the deal with Quebecor, which includes the sale of all Freedom customer contracts, infrastructure, licenses and wireless stores, addresses the concerns raised. by the Competition Commissioner and the ministry. in terms of the viability of the fourth wireless competitor. Rogers has also agreed to offer Quebecor transportation and roaming services.
The Competition Bureau is trying to block the merger of Canada’s two largest cable companies, arguing that the deal would lead to higher prices, poor service and fewer consumer options, especially for telephone services. Phone.
Rogers chairman and CEO Tony Staffieri called the deal a “critical step” in completing Shaw’s acquisition. “We strongly believe that the divestment will meet the Government of Canada’s goal of a solid and sustainable fourth wireless provider,” he said. Staffieri in a statement.
Pierre Karl Péladeau, President and CEO of Quebecor, described the agreement as “a turning point for the Canadian wireless market”. For Quebecor, which owns Montreal-based cable company Videotron Ltd., the deal offers the opportunity to expand nationwide.
“Quebec’s Videotron subsidiary is the fourth strongest player that, along with Freedom’s strong footprint in Ontario and western Canada, can deliver concrete benefits for all Canadians,” said Mr. Péladeau in a statement.
Brad Shaw, CEO and CEO of Shaw, said the announcement “ensures that Freedom Mobile will remain a strong competitor,” while Rogers President Edward Rogers called it a “truly Canadian-made solution that will benefit to all Canadians by offering greater competition and choice, the next generation of telecommunications services and enabling the transformative benefits of a combination of Rogers and Shaw. “
Rogers, Shaw and Quebecor said they would work quickly “and in good faith” to complete the documentation for the sale, which is “cash-free and debt-free with a business value of $ 2.85 billion.”
Friday’s announcement follows a presentation by the Competition Bureau in which the control body said the economic efficiencies that Rogers claims would result from his takeover of Shaw are speculative, “overly exaggerated” and they are based on unrealistic assumptions and flawed methodologies.
Under Canadian competition law, companies can argue that the cost savings involved in a contested merger, by allowing them to combine resources and downsizing, would be greater than the harm to consumers by reducing competition. .
Rogers has argued that the Competition Bureau was unable to weigh the effects of the agreement on competition, which according to telecommunications would be “minimal to none”, with the economic efficiencies that the agreement would generate.
In a rebuttal to the Competition Court, the watchdog argues that the benefits Rogers promises are insufficient to offset the impact of competition. The office says the deal “will lead to a transfer of wealth from the company’s low- and moderate-income groups to respondents, whose shareholders include ultra-wealthy members of the family groups of these companies.”
“The increase in profits will also be paid to non-Canadian investors. These effects are socially adverse and, otherwise, they must be weighed against the efficiencies that may arise,” the dossier said in a statement released on Friday.
The office’s case focuses on the potential harm to Canada’s wireless industry if Rogers were allowed to acquire Freedom Mobile.
Although Rogers had promised to sell Freedom, the competition agency argued that separating the wireless operator from Shaw’s cable network would reduce the operator’s ability to compete because it could not sell crossovers or offer services. grouped. Shaw has described these concerns as “totally out of place”, arguing that Freedom Mobile’s success did not depend on taking advantage of Shaw’s cable network.
In its rebuttal, the Competition Bureau says the position telecommunications have taken on the importance of the cable network is “contradictory and self-service,” as Rogers has argued that the acquisition of the telecommunications network Shaw cable will allow you to compete more effectively in the wireless industry. with ECB Inc. and Telus Corp.
This “contradicts Rogers’ claim that Freedom Mobile can be separated from Shaw’s wired line business without suffering a substantial competitive disadvantage,” the presentation says.
Rogers and Shaw have said they hope to reach an agreement and avoid a hearing before the Competition Court, but are willing to oppose Competition Commissioner Matthew Boswell’s request if it occurs.
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