the rogers-shaw merger saga 2022 continued its bumpy road, after pushback from more than one competition watchdog, a few short-lived victories, new ventures, and disillusionment from one failed arbitration process after another.
Rogers investors were hoping for some relief before Christmas, but competition tribunal Two weeks after the two telecom giants, there is no decision on the deal. Rogers And shawfiled its final arguments in a court battle with the Competition Bureau.
Here is a summary of the major events:
In March 2021, Rogers Proposed The $26 billion acquisition of Shaw Communications, a move that would reduce the number of Canadian wireless operators from four to three. The deal was approved by the Competition Bureau, the Canadian Radio-television and Telecommunications Commission (CRC).CRTC) And this Ministry of Innovation, Science and Economic Development (ISED).
One year later, after CRTC Approved After its own five-day hearing, the Competition Bureau blocked the merger, arguing that the deal would harm competition.
following a Mediation process failed for two days With the Bureau in July, Rogers and Shaw in August 2022 announced the $2.85 billion sale of Shaw’s wireless carrier company, Freedom Mobileto quebecoris a subsidiary of videotronin hopes of allaying concerns regarding Rogers’ market dominance.
The move also failed to convince rival regulators, leading the two telecom giants to face the Competition Bureau in a court battle that began in November that is expected to seal a 20-month-long M&A (mergers and acquisitions) battle. was doing.
Here are some of the arguments filed during the six-week long court hearing:
The Competition Bureau’s main arguments revolve around the risk of increased cell phone bills and poor service, which is set to affect millions of people.
,The merged entity will have the ability and incentive to raise prices and lower quality immediately following the consummation of the proposed merger. The terms of service allow carriers to change any terms of their contracts, including fees, by simply giving 30 days “notice”. Prices can escalate quickly. This means that consumers are likely to suffer welfare losses even before they return to the market to select a new wireless plan.
The bureau also took advantage of the July 8 Rogers outage to demonstrate the telco’s already poor network reliability.
Counsel for the competition watchdog confirmed that the number of separate networks in Western Canada would also be reduced from three to two, resulting in less competition and less investment.
In addition, the commissioner argued that Telecom’s defense of intent to help Canadian companies achieve the economies of scale needed to combat foreign competition is unfounded. “Rogers is buying a domestic rival, not to compete internationally, but to strengthen its domestic position by removing a dominant regional competitor.”
The bureau’s counsel also argued that Freedom Mobile’s sale to Quebecor would put Videotron in ‘serious vulnerability’, creating an “unprecedented relationship of dependence between a Big Three competitor and Videotron, a much smaller, regional player and Shaw”. Small enough.” He argued that Videotron had previously accused Rogers of sabotaging their Quebec network-sharing agreement.
Shaw Mobile was a disruptive force as a standalone wireless company, the bureau argued, because it “promoted vigorous competition” by providing bundled service options at low prices to a growing number of new customers. The Big 3 (Rogers, Bell, Telus) responded with price discounts of their own and big data packages beneficial to consumers.
In response, Rogers’ lawyers confirmed that Shaw, in fact, faced a bleak outlook without the Rogers acquisition and argued that the deal was “pro-competitive”, allowing the combined entity of Rogers and Shaw to compete in Canada’s concentrated telecommunications market. compete better.
The role of competing carrier Telus was particularly dissected during the hearing, as the telcos argued how both Rogers and Shaw were steadily losing market share to Telus, leading to price hikes. Telecom lawyers argued, “Everyone accepts that Rogers will face competitive pressures exerted by Telus as it is by far the dominant player in British Columbia and Alberta.”
In addition, Quebecor’s testimony revealed that it could launch 5G wireless services outside Quebec within three months of gaining independence, and that it would be entitled to four years of free backhaul (infrastructure that allows gear from the core of a network to its edges). connects to) will get the network. Access from Rogers.
During the closing arguments, the telcos emphasized that the bureau has been unable to prove that the alleged harm of reduced competition outweighs the potential of the deal. Referring to competition law as the “intellectualization of common sense”, the lawyers questioned whether the “draconian” measures pushed for competition policy were “faithful to the industry’s commercial realities and regulatory policy”, and whether the deal would Blocking is in the interest of the consumers.
On the other hand, the Competition Bureau insisted that Rogers-Shaw-Quebecor’s claimed efficiency is not cognizable from the proposed divestment.
If there is no decision before the end of this year, Rogers will face owes his lenders hundreds of millions of dollars in fees, and risks a lawsuit against Shaw if things don’t go according to plan.
Chief Justice Paul Crampton said the competition tribunal recognized the financial risks faced by Rogers, but would take the time necessary to make a “concrete, robust decision”.