Rogers-Shaw merger heads to Canada's competition tribunal after mediation talks fail

[November 07, 2022]  By Divya Rajagopal

TORONTO (Reuters) - The fate of Rogers Communications' C$20 billion ($14.8 billion) acquisition of Shaw Communications will be decided at a Canadian Competition Tribunal hearing starting on Monday, after the companies and the antitrust bureau failed to reach a settlement despite repeated attempts.

The deal launched in March 2021 is seen as a test case for the Canadian antitrust bureau's ability to foster competition in a country where customers and advocates have complained about market concentration from industries ranging from telecoms to banks. Recently, the bureau acquired more powers from the federal government to strike on anti-competitive practices.

Canada's competition bureau has sought to block the deal on the grounds that it will lessen competition in a country where wireless rates are among the highest in the world.
 

Rogers offered to sell Shaw's Freedom Mobile business to Quebecor Inc to overcome competition bureau concerns, but the bureau said that was insufficient.

The hearing, which is expected to last for at least four weeks, will have representatives from the Alberta provincial government, Quebecor, BCE Inc and Telus Communications.

Rogers and Shaw did not respond to an email query from Reuters on whether they will look for a settlement. Alberta government, competition bureau did not respond to the email either.

During a Nov. 1 case management conference, the bureau said that it was opposing the deal in its entirety due to the overlapping of Shaw's wireline and wireless assets.

Ethernet cables are seen in front of Rogers and Shaw Communications logos in this illustration taken, July 8, 2022. REUTERS/Dado Ruvic/Illustrations

"The competition bureau sees the Freedom proposal as a behavioural rather than a structural remedy, although it didn't appear to us that the Tribunal necessarily agrees with such semantics," Adam Shine, a telecom analyst with National Bank, said in a note on Nov. 1.

Canada's Industry Minister Francois Philippe Champagne last month outlined the conditions for his department to consider the sale of Freedom Mobile to Quebecor, which the market interpreted as a sign that the government is prepared to approve Rogers' deal for Shaw, that included sale of Freedom to Quebecor.

But the initial rally in shares of Rogers and Shaw reversed after the competition bureau subsequently made clear it will pursue the litigation.

Champagne has the final say on the deal.

Rogers-Shaw and Quebecor are racing against time to close the deal, as a delay poses financial risks, according to arguments made by the lawyers of Rogers-Shaw at the tribunal during a public hearing in late October.

Shaw's lawyers have told the tribunal that there was a “very substantial risk” the transaction will be killed if the deal is extended after Jan 31., 2023, according to transcripts from the court hearings seen by Reuters.

($1 = 1.3530 Canadian dollars)

(Reporting by Divya Rajagopal; Editing by Josie Kao)

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