Photo: The Canadian Press
A man enters the store on Freedom Mobile’s new rebranded sign in Toronto on Thursday, November 24, 2016. Carelton University professor Dwayne Winseck says it won’t be easy for Videotron Ltd., which has only operated in Quebec and parts of eastern Ontario bordering Quebec, to expand nationally, making it less challenging for Rogers. THE CANADIAN PRESS / Nathan Denette
The decision of Rogers Communications Inc. to sell Shaw’s wireless operator Freedom Mobile to Videotron Ltd, owned by Quebecor Inc., will only create a “weaker” competitor in the market, a telecommunications observer said Monday.
Carleton University professor Dwayne Winseck said it will not be easy for Quebec-based Videotron to expand nationwide, which will make it less challenging for Rogers.
Winseck said Videotron, which only operates in Quebec and parts of eastern Ontario, has long had national ambitions, but lacks brand recognition and has not been able to reach strong agreements with other domestic operators, despite having quite deep pockets.
Over the weekend, Rogers said he would sell Freedom to Quebecor for $ 2.85 billion as he seeks to take control of Shaw Communications Inc. for $ 26 billion in the goal, arguing that the move would give “competition and choice” to Canadians.
The agreement will allow Quebecor to purchase all Internet and wireless customers of the Freedom brand, as well as its infrastructure, spectrum and retail locations.
Winseck, whose experience is media and communications, points to Shaw’s strong presence in western Canada and the fact that its wireless service, Shaw Mobile, will not be ceded as part of the merger as another which is why it probably won’t be easy. opt for Videotron as it tries to expand across Canada.
The Competition Bureau has been seeking to block the merger out of concern that it would substantially reduce wireless competition, and the sale of Freedom was expected to be a condition for regulatory approval.
In new communications to the Competition Court on Friday, the regulatory agency expanded its opposition to the proposed acquisition, challenging the telecommunications giant’s claims about efficiency and economic benefits, while arguing that consumers are ‘will face higher prices.
Rogers, Shaw and Quebecor said their agreement would effectively address competitive concerns and keep alive a fourth “strong and sustainable” wireless carrier in Canada.
“I don’t think it goes far enough for the Competition Office,” Winseck said.
However, some analysts believe that the sale will advance the deal and allay the office’s competition concerns.
“We believe this deal increases the chances of the transaction closing more than 95 percent,” Canaccord Genuity analyst Aravinda Galappatthige wrote in a note to clients.
“We believe that the strong operating trajectory, balance sheet, experience and combination of assets (of Quebec) will make it more difficult for the regulator to argue that the Canadian wireless competitive landscape will be materially affected by the merger (Rogers- Shaw), ”Desjardins said. analyst Jerome Dubreuil in a note to clients.
Quebecor was not the only contender in the mix that led to this decision.
Anthony Lacavera of Globalive Capital had commented heavily on his company’s interest in buying Freedom, formerly Wind Mobile, which he founded in 2008. Halifax-based telecommunications company Eastlink and Xplornet Communications Inc. a rural internet provider based in New Brunswick, were also said to be interested in freedom.
Winseck doesn’t think there’s another buyer who will create a strong enough fourth-party competitor.
“For me, the only viable alternative would be for someone other than one of the existing players to take over Shaw’s lock, stock and barrel,” he said.
To date, the Rogers-Shaw transaction has received approval from the Telecommunications and Broadcasting Commission of Canada. It still requires the approval of the Canadian Bureau of Competition and Innovation, Science and Economic Development.
Competition court hearings on the matter are scheduled to begin the week of November 7th.
Shares of Rogers and Shaw were among the leading companies trading on the Toronto Stock Exchange, gaining 6.4 percent and 8.3 percent, respectively.