Canadian Telecom Rivals May Merge, Tribunal Says

Following months of uncertainty, Canada’s antitrust tribunal cleared the way in late December for the $14.77 billion merger of Rogers Communications Inc. and rival Shaw Communications Inc., according to Reuters.

The Commissioner of Competition had issued a plea to stop the transaction. Before the merger closes, the companies must wait for approval from Industry Minister François-Philippe Champagne to transfer Freedom Mobile Inc.’s spectrum license to Quebecor Inc.’s Videotron unit.

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Champagne signaled in October that he would grant approval as long as Videotron held Freedom Mobile’s assets for 10 years or more and kept prices in Quebec around current levels. Prices in Ontario and Western Canada are 20% higher. Wireless bills in Canada are the highest in the world, according to Finnish research firm Rewheel, Reuters reported.

The tribunal had originally rejected Shaw’s proposal to sell Freedom Mobile to Videotron for $2.85 billion, to get the deal going. But the ruling to allow the merger indicated that Videotron would expand into new markets and ensure competition with the purchase of Freedom Mobile. After the sale, the merger may not prevent or lessen competition, or cause “materially higher” prices or negatively impact the quality of services, the tribunal said in its ruling.

The Competition Bureau said it was appealing the tribunal’s decision.

"I am very disappointed that the Tribunal is dismissing our application to block the merger between Rogers and Shaw,” Commissioner of Competition Matthew Boswell told Reuters. “We are carefully considering our next steps.”

However, most analysts believe the Competition Bureau will be unsuccessful in its appeal. "The deal will receive all necessary approvals,” Cormark Securities analyst David McFadgen said. “The objection by the Competition Bureau was the main hurdle to overcome,"

McFadgen added that there are "significant" revenue synergies for Rogers from bundling services, while Quebecor has better growth prospects from the Freedom Mobile deal.

While the final decision lies with Champagne, on January 24 the Federal Court of Appeal will hear the Competition Bureau’s appeal, and the House of Commons industry and technology committee is planning to initiate another study of the proposed Rogers-Shaw merger, with Conservative MP Rick Perkins and New Democrat MP Brian Masse confirming to The Canadian Press that the committee plans to meet on January 25 to review the proposed transaction.