Canadian Merger Lastly a Performed Deal

An extended-running telecom saga got here to an finish final month with the conclusion of the C$25 billion ($18.4 billion) merger between Canadian operators Rogers Communications and Shaw Communications.

The deal—which first reached settlement in March 2021—combines Rogers’ nationwide cell community with each operators’ coast-to-coast mounted networks. The ensuing nationwide cable, media, and cell working firm affords fiber-powered cable web to almost 70% of Canadian households.

Rogers and Shaw declared they’ll now “bundle extra merchandise to extra Canadians, together with every part from web, tv, cellphone, and sensible residence monitoring; to wi-fi companies; bank card affords; sports activities and media content material.”

Because of the merger, the Shaw household is now one of many largest shareholders of Rogers.

Whereas the deal was initially valued at C$26 billion, the ultimate worth was underneath C$25 billion—comprising C$18.9 billion money, C$1.4 billion in shares, and the belief of C$4.5 billion of debt.

Competitors Considerations

The merger proceeded after remaining federal approval for the requisite switch of Shaw’s cell subsidiary Freedom Cell to Quebec-based Videotron.

In March 2022—a yr after the preliminary settlement—Canada’s Minister of Innovation, Science and Trade, Francois-Philippe Champagne, indicated that at the very least a few of Freedom’s mobile spectrum licenses would have to be divested as a situation of merger approval.

A joint assertion from Rogers and Shaw adopted, studying: “We proceed to work constructively with the federal government and regulators to shut this transaction and ship the advantages of the merger to all Canadians.” Rogers then initiated talks with potential patrons of Shaw’s cell enterprise.

The merger was placed on maintain in Might 2022 as a way to resolve objections from Canada’s Competitors Bureau. The next month, Rogers and Shaw agreed to the sale of Freedom Cell to Quebecor, the dad or mum of cable and cell community operator Videotron. A definitive settlement for the sale was signed on August 12.

Regardless of this sale settlement, mediation between the merger events and the Competitors Bureau was unsuccessful.

Regardless of this sale settlement, mediation between the merger events and the Competitors Bureau was unsuccessful. The regulator argued that the deal would “degrade competitors and result in increased costs for customers.” The proposed tie-up then went earlier than a Competitors Tribunal public listening to in November/December 2022.

The merger was ultimately cleared by the Tribunal on December 29, after the physique claimed it was unlikely to result in increased costs for customers in Shaw’s Western heartlands of Alberta and British Columbia. The Competitors Bureau instantly launched an attraction, nevertheless it was rejected by the Federal Court docket of Attraction on January 24, 2023.

Champagne Second

Minister Champagne lastly authorized the switch of spectrum licenses from Freedom to Videotron on March 31, 2023, including “strict” and “unprecedented” legally-binding situations to the twin mergers.

The Minister declared: “This switch follows a sequence of agreements signed by the events that can be certain that this new nationwide [mobile] fourth participant [Videotron] will likely be in it for the lengthy haul, have the ability to go toe-to-toe with the large three [Rogers, Bell and Telus], and really drive down costs throughout Canada.”

The announcement of approval on the Innovation, Science and Financial Improvement Canada web site confirmed that Videotron:

• Will provide plans which can be akin to these at present obtainable in Quebec, and provide choices at the very least 20% cheaper than these obtainable from the most important gamers.
• Can’t switch the Freedom licenses for a interval of ten years.
• Should develop its 5G community in Freedom’s pre-existing working territory inside two years.
• Will develop cell service into Manitoba by way of an MVNO settlement or different means and provide plans akin to what it affords in Quebec.
• Will enhance knowledge allotments of current Freedom prospects by 10% as a near-term bonus whereas it invests to carry down costs total.

Individually, Rogers will likely be topic to commitments requiring main investments to enhance connectivity inside the subsequent 5 years, together with:

• Creating 3,000 new jobs in Western Canada and sustaining them for at least ten years after the cut-off date.
• Establishing a Western headquarters in Calgary and sustaining it for at least ten years.
• Investing C$1 billion ($740 million) to develop broadband web entry at speeds of at the very least 50Mbps/10Mbps (down/add), and 5G cell service in areas the place it’s not at present obtainable.
• Investing at the very least C$2.5 billion to reinforce its 5G community in Western Canada, and C$3 billion in further community service enlargement tasks.
• Increasing entry to low-cost broadband web plans and launching a brand new low-cost cell providing for low-income Canadians.

As Minister Champagne underlined, “These agreements are topic to important monetary damages for non-compliance: as much as C$200 million within the case of Videotron and as much as C$1 billion within the case of Rogers. These agreements will likely be launched publicly and are topic to annual reporting necessities.”

Videotron and Rogers additionally entered into business community entry agreements—together with an MVNO and Home Roaming Settlement—on phrases that can assist Videotron compete extra successfully because it expands in different areas of Canada.

Alongside his choice, the Minister declared a moratorium on “giant scale” spectrum transfers and introduced the initiation of a “complete assessment” of the spectrum switch framework—“one thing which has not been performed in virtually a decade.”

“Right this moment’s announcement permits for the institution of [an effective] fourth nationwide participant for the primary time in Canada’s historical past. If Canadians don’t start to see a transparent and significant discount in costs inside an inexpensive period of time because of this choice, I’ll haven’t any selection however to make use of additional legislative and regulatory powers to drive down costs,” Minister Champagne concluded.

Market Shake-up

TeleGeography’s GlobalComms Database notes that Rogers and Shaw had a mixed 4.38 million retail mounted broadband subscriptions at end-December 2022. The market chief at the moment, Bell Canada, had 4.26 million.

Rogers was Canada’s cell market chief as of end-2022 with 11.94 million subscriptions and 31.1% of the general sector. Rogers was adopted by Telus with 10.86 million (28.2%) and Bell Canada with 10.80 million (28.1%).

The acquisition of Freedom Cell by Videotron, in the meantime, has created a bigger fourth cell market participant.

The acquisition of Freedom Cell by Videotron has created a bigger fourth cell market participant.

This participant stacks up with a mixed complete of greater than 3.5 million cell subscriptions—alongside Videotron’s Quebec cable subscription base (1.9 million mounted broadband, 1.4 million TV, and 750,000 mounted voice)—and practically 7,500 workers.

Trying ahead, Rogers plans to take a position greater than C$6.5 billion to reinforce and develop its networks throughout British Columbia, Alberta, Saskatchewan, and Manitoba, together with C$1 billion to attach rural, distant, and Indigenous communities.

Rogers goals to develop 5G protection to succeed in a complete of 300 communities—with a community protecting 140,000 sq. kilometers—whereas additionally upgrading and increasing its fiber broadband infrastructure to cross 4.7 million houses in British Columbia and Northern Ontario.

Key Statistics
Canada, December 2022

Supply: TeleGeography’s GlobalComms Database