Canada’s merger court ruled in favour of Rogers Communications Inc and Shaw Communications Inc in a key antitrust case, clearing one of the final hurdles to the union of two of the nation’s largest telecommunications firms.
The federal antitrust commissioner failed to prove that the deal would cause significant harm to competition in the industry, the Competition Tribunal said in a summary of its ruling, released late Thursday. The merger of Rogers and Shaw is “not likely to result in materially higher prices” or a decline in service or innovation, the court found.
It’s a huge victory for the Canadian companies, concluding a seven-month legal process that has delayed the closing of the C$20bn ($14.8bn) transaction far past its original planned date.
But the saga is not over yet. Competition Commissioner Matthew Boswell could try to appeal the ruling, and even if he doesn’t, the transaction still requires the approval of Prime Minister Justin Trudeau’s government.
“I am very disappointed that the Tribunal is dismissing our application to block the merger between Rogers and Shaw. We are carefully considering our next steps,” Boswell said in a statement.
Rogers and Shaw said they welcomed the decision and have agreed to extend the closing deadline to Jan. 31. The firms had been hoping to close by the end of this year.
Rogers, Canada’s largest wireless company with more than 10mn phone customers, agreed to buy Shaw in March 2021 to bulk up its home internet and cable television businesses and add key network infrastructure in Western Canada. Post-acquisition, Rogers would have some C$20bn in annual revenue, the kind of scale it says it needs to make 5G network investments and compete with rivals BCE Inc and Telus Corp.
Toronto-based Rogers had also been hoping to extend its lead in wireless — its most lucrative line of business — through the acquisition of Shaw’s Freedom Mobile division. However, the government made it clear earlier this year that it wouldn’t allow Rogers to take control of Shaw’s wireless licences.
Then Boswell’s agency sued the companies in May to block the deal, on the grounds that it would hurt consumers by driving up consumer costs or reducing service. That forced Rogers and Shaw into action, and they cut a conditional deal to sell Freedom Mobile to Montreal-based Quebecor Inc, which offers cable and wireless products to customers through its Videotron unit.
The latter transaction, worth C$2.85bn, will only happen if the larger Rogers-Shaw transaction is allowed to close. But it was key to the Rogers court victory.
“Videotron is an experienced market disrupter that has achieved substantial success in Quebec. It has drawn upon that experience to develop very detailed and fully costed plans for its entry into and expansion within the relevant markets in Alberta and British Columbia, as well as in Ontario,” the tribunal said on Thursday.
“It bears underscoring that there will continue to be four strong competitors in the wireless markets in Alberta and British Columbia,” the tribunal added, the two Canadian provinces where Shaw does most of its business. Rogers, Telus and BCE are major wireless providers in the region; Videotron would step into Shaw’s place as the fourth.
Industry Minister Francois-Philippe Champagne, who’s responsible for telecommunications policy, appeared to signal the government’s support for the deals by publicly setting out the conditions under which he’d sign off on Quebecor’s purchase of Freedom. Quebecor has already agreed to those conditions.
Rogers is offering C$40.50 in cash for each share of Shaw, which closed at C$35.77 per share on Thursday in Toronto.
The three-person panel that heard the case, led by Federal Court Chief Justice Paul Crampton, is working to release its full decision within 48 hours.
“Competition Tribunal decisions are often appealed successfully and there are big questions left unanswered in this summary decision,” said Keldon Bester, a fellow at the Center for International Governance Innovation and a former special adviser to Canada’s Competition Bureau. He said it’s “certainly possible” that Boswell will appeal it.
A Rogers store in Vancouver. Canada’s merger court ruled in favour of Rogers Communications and Shaw Communications in a key antitrust case, clearing one of the final hurdles to the union of two of the nation’s largest telecommunications firms.