Rogers-Shaw Deal: Experts Appreciate New Terms

Spread the love

Rogers-Shaw Deal: Experts Take a Good Look at New Terms

The agreement between the 2 companies amounts to 26 billion dollars.

The new conditions announced on Tuesday by Industry Minister Francois-Philippe Champagne demonstrate a willingness to push the finish line to the proposed $26 billion deal between Rogers Communications and Shaw Communications , analysts said on Wednesday.

The stipulations relate to the sale of wireless service provider Freedom Mobile, owned by Shaw, to Videotron, owned by Quebecor, a key element of the proposed transaction between the two telecommunications groups.

In a note to clients, Desjardins analyst Jérôme Dubreuil said Mr. Champagne's terms suggested he supported the merger and signaled that the deal would be acceptable if Quebecor had the ability to compete well over the long term.

Maher Yaghi of Scotiabank, for his part, observed that Minister Champagne's pragmatic vision could provide good common ground on which companies could build and calculates that the probability of seeing the conclusion of the Rogers-Shaw agreement is now at 90%.

Investors seemed pleased with the news, as shares of Rogers and Shaw were up late morning with gains of 7% and 9.7%, respectively.

Mr. Champagne, whose approval is required for any spectrum license transfer, left the door open on Tuesday for a revised deal, saying he had two major conditions before approving the purchase of Freedom Mobile by Quebecor.

Minister François-Philippe Champagne at a press briefing in Ottawa on the merger of the two companies

First, he indicated that Videotron should agree to retain Freedom's wireless licenses for at least 10 years. Then he said he also expects wireless prices in Ontario and Western Canada to come down by about 20%, so that they comply with Videotron's current Québec offers.

Quebecor agreed earlier this year to buy Freedom Mobile for $2.85 billion.

The sale of Freedom Mobile to Videotron would see Quebecor purchase all Freedom-branded wireless and internet customers, as well as all of Freedom's infrastructure, spectrum and outlets as part of the x27;a deal that would expand Quebecor's wireless business nationwide.

It would also remove one of the biggest hurdles to Rogers buying Shaw, because retaining Freedom, the fourth-largest wireless carrier, would give the group too much power in the wireless market, thereby reducing competition.

In a statement released Tuesday evening, Quebecor CEO Pierre Karl Péladeau said he intended to accept the Minister of Industry's terms and pledged to integrate them into a new version of the transaction.

Pierre Karl Péladeau, President and CEO of Quebecor

These [conditions] are in line with our successful business philosophy in Quebec as it has allowed us to capture a significant market share in a very short time, the statement said.

We intend to work to ensure that Canadians in other regions also benefit from better prices that will put an end to the reign of the ''Big 3' ' promoting competition, the public interest and Canada's digital economy.

Mr. Champagne told reporters on Wednesday that he was satisfied with Quebecor's response.

It's a good thing they listened to me because it's me who, in the end, will have to decide if we transfer the license or not, he claimed.

Some still have concerns about Mr. Champagne's decision. Telecommunications researcher Ben Klass said the Minister of Industry could have gone further.

The minister is trying to have it both ways, wanting to be seen as acting in the interests of consumers, but also to appease an industry made up of a corporate oligopoly powerful, he said.

I think the minister who is supposed to protect the interests of Canadians needs to be more ambitious.

He pointed to one of Mr. Champagne's conditions, that of his expectation of lower wireless prices in Ontario and Western Canada.

When setting these price targets, they should leave less wiggle room. So if they really want to set a price target that will help consumers, they need to make a sustained commitment to lower prices, he added.

In addition to Mr. Champagne's approval, the Rogers-Shaw deal requires the green light from the Competition Bureau and the Canadian Radio-television and Telecommunications Commission (CRTC).

Edward Rogers, Chairman of the Board of Rogers Communications, and Brad Shaw, President and Chief Shaw Communications management discuss at a CRTC hearing on the merger of the two companies.

The CRTC in March offered conditional approval for the broadcasting portion of the deal.

Mediation is scheduled for later this week between the Commissioner of Competition and Rogers and Shaw. The Competition Bureau is trying to block the merger, saying the sale of Freedom Mobile doesn't go far enough to allay its fears that telecom bills will rise amid reduced competition.

Analyst Aravinda Galappatthige of Canaccord Genuity said in a memo that Mr. Champagne's new terms would indirectly put some pressure on the competition commissioner to #x27;he is negotiating a solution when mediation begins on Thursday.

Mr. Klass added that he doesn't believe the latest developments will have any effect on the Competition Bureau's decision and November hearings.

Previous Article
Next Article