The IT Nerd

Bad news. The news is out that the merger of Rogers and Shaw has been approved by the Canadian government:

Federal Industry Minister Francois-Philippe Champagne is set to make an announcement this morning about Rogers Communications Inc.’s proposed $26-billion purchase of Shaw Communications Inc.

A senior government official, speaking on the condition they not be named in order to discuss matters not yet made public, says the minister will discuss the transfer of wireless licences at a news conference before the stock market opens.

The deal was first announced more than two years ago and has been awaiting regulatory approval since then.

A full-scale purchase of Shaw by Rogers raised competition concerns, and the original deal has been revised to include the sale of Shaw’s Freedom Mobile to Quebec-based Videotron.

The CRTC and Competition Bureau have each given the agreement the green light.

So, if Canadians were hoping that this deal would not be approved and that competition, as little as it is in the Canadian telco space, wouldn’t shrink any further will be disappointed in this news. All this is going to do for Canadians is reduce choice and increase prices because there are less players in the market. I was going to say that I don’t understand why nobody in Ottawa sees that. But instead I will say that I don’t understand why nobody in Ottawa cares because Canada pays some of the highest prices in the world for telco services and this issue gets lip service at best from the Canadian government. And to be honest, I don’t know what it will take to change that.

Today is a very sad day in Canada.

This morning I was not hopeful about the chances of Canadians getting a positive outcome in terms of the Rogers – Shaw merger decision from last night. But there’s hope as news is out that the Competition Bureau is appealing the decision:

The Competition Bureau is appealing the Competition Tribunal’s dismissal of its case against Rogers Communications Inc.’s $26-billion takeover of Shaw Communications Inc., the companies said as they expressed their disappointment in the move.

The telecommunications companies said Friday that they were informed of the bureau’s intent to appeal the tribunal’s decision, released late Thursday. They said they were alsot told that the bureau will apply for an injunction to block the deal from closing until an appeal is heard.

“We are deeply disappointed that the Commissioner continues to attempt to deny Canada and Canadians the advantages that will come from these proposed transactions,” the companies said in a joint statement.

The Competition Bureau did not immediately respond to a request for comment. Commissioner of Competition Matthew Boswell said in a statement late Thursday that he was very disappointed by the tribunal’s dismissal and was carefully considering next steps.

It’s bad news for Rogers and Shaw. But it’s good news for Canadians as this is a bad deal for Canada and must be stopped. Thus I am hopeful that this deal will be stopped so that Canadians don’t end up getting shafted as a result.

Canadian telco consumers should prepare to have less competition in the telco space because late last night the merger of Rogers and Shaw which has been fought by Canada’s competition watchdog have been approved. CBC has the details:

In a summary of its decision released Thursday, the tribunal says the merger of the two telecommunications companies would not result in materially higher prices.

The decision says the deal, which includes the sale of Shaw-owned Freedom Mobile to Quebecor-owned Videotron, would not likely prevent or lessen competition substantially.

Quebecor agreed to buy Freedom Mobile in a $2.85-billion deal earlier this year.

Concerns that Bell and Telus — the closest competitors to Rogers in Canada’s telecom market — would be unable to compete with the combined company were also dismissed.

“The tribunal has also determined that the strengthening of Rogers’ position in Alberta and British Columbia, combined with the very significant competitive initiatives that Telus and Bell have been pursuing since the merger was announced, will also likely contribute to an increased intensity of competition in those markets,” the decision reads.

It says a more detailed decision will be released in the next two days.

I’m sorry, but this decision is horrible for Canadians because the exact opposite is going to happen as there’s going to be one less player in the marketplace. While this still has to be approved by Innovation, Science and Economic Development Canada, I expect that to be a rubber stamp as the current federal government in Canada pays lip service to having an affordable and competitive telco space. Canadian consumers might want to remember that when the next election comes and vote accordingly.

In a move that will be seen as good news to many, Rogers and Shaw have agreed to pause their merger via agreeing to a preliminary injunction until the Competition Tribunal decides if the deal can go ahead. Here’s a quote from the Competiton Bureau website:

Today Rogers and Shaw agreed to a preliminary injunction that prohibits them from closing their proposed merger until the Commissioner’s challenge is heard and decided by the Competition Tribunal.

As part of an agreement that will be registered with the Tribunal, Rogers has also agreed not to enforce any condition in its agreement with Shaw, or any other agreement entered into in connection with the proposed merger that limits Shaw’s ability to operate, maintain, enhance or expand its wireless business.

Rogers and Shaw have also agreed to the Commissioner’s request for an expedited hearing process before the Tribunal. The Commissioner sought an expedited process given the ongoing harm he has alleged is already occurring in the market. The expedited schedule will be set by the Tribunal with input from the Commissioner and the parties.

This isn’t really good news or bad news in my opinion. Though some will see it as good news. In reality it’s just part of the process of the Competition Bureau trying to stop this deal. Because they know that what Canadians from coast to coast to coast know. This is a bad deal and Canadians will lose if it goes ahead as it creates less competition and not more. The only thing that is interesting is that the Competition Bureau is trying to expedite things. That part is good as this needs to be sorted sooner rather than later. And I am hoping that by “sorted” it means that this deal is shot out of the sky.

Yesterday I reported that Rogers and Shaw received communication from the Competition Bureau saying that they were going oppose the merger of the two telcos. Now the Competition Bureau has confirmed that this communication happened. And they provided among other details, this:

The Competition Bureau is seeking to block Rogers proposed $26 billion acquisition of Shaw in an effort to protect Canadians from higher prices, poorer service quality and fewer choices, particularly in wireless services.

The Bureau challenged the merger today by requesting an order from the Competition Tribunal to prevent it from proceeding. The Bureau is also requesting an injunction to stop the parties from closing the deal until its application can be heard. The Bureau must now prove its case before the Tribunal in order for the deal to be stopped. 

The Bureau alleges that removing Shaw as a competitor threatens to undo the significant progress it has made introducing more competition into an already concentrated wireless services market, where Rogers, Bell and Telus (the Big 3) serve approximately 87% of Canadian subscribers. 

Following an extensive investigation, the Bureau determined that competition between Rogers and Shaw has already declined. The Bureau’s position is that if the proposed merger is allowed to proceed, that harm will continue and may worsen. The applications filed seek to safeguard an effective, growing and disruptive regional competitor for the benefit of consumers.

Well, this is a very interesting development. The Competition Bureau sees this merger the way that Canadians see this merger. Which is that it is harmful to Canadians because it shrinks competition. I for one will be cheering for the Competition Bureau in this fight as Canada needs to do better when it comes to its telco services.

Rogers and Shaw apparently got some bad news on Friday night. Apparently the Competition Bureau dialled them up and let them know that their proposed merger was going to be opposed by them. Rogers put out a press release that among other things said this:

Rogers Communications Inc. (“Rogers”) and Shaw Communications Inc. (“Shaw”) were notified this afternoon following the close of trading of the Commissioner of Competition’s intention to file applications to the Competition Tribunal opposing Rogers’ proposed merger with Shaw (the “Transaction”).

Rogers and Shaw remain committed to the Transaction, which is in the best interests of Canada and Canadians because of the significant long-term benefits it will bring for consumers, businesses and the economy. The companies have offered to address concerns regarding the possible impact of the Transaction on Canada’s competitive wireless market by proposing the full divesture of Shaw’s wireless business, Freedom Mobile. Rogers and Shaw are engaged in a process to sell Freedom Mobile, with a view to addressing concerns raised by the Commissioner of Competition and ISED.

Rogers and Shaw will oppose the application to prevent the Transaction to be made by the Commissioner of Competition, while continuing to engage constructively with the Competition Bureau in an effort to bring this matter to a resolution and ensure that the Transaction’s benefits can be realized by all Canadians.

As a result of this news, Rogers and Shaw have pushed the the outside date of the merger to July 31 2022. That way they can “engage” with the Competition Bureau and get them to change their minds. Something that I personally don’t see happening. So I expect this to be in court at some point.

Frankly, i’m not at all surprised by this as there has been healthy opposition to this merger as it is seen as reducing competition rather than increasing it. And frankly, Rogers specifically has larger issues at the moment. While they have made announcements about increasing the speeds of their Internet offering to better compete with Bell and Telus, the facts are that those announcements really won’t make the Internet experience for the majority of their customers any better anytime soon. So if I were Rogers, I’d focus on that rather than reducing competition by buying Shaw.

Yesterday, the CRTC approved the takeover of Shaw by Rogers. In it’s decision, it said this:

The Commission approves, subject to a number of modifications and the fulfilment of specific conditions of approval, an application by Rogers Communications Inc. (Rogers), on behalf of Shaw Communications Inc. (Shaw), for authority to transfer the effective control of the broadcasting undertakings licensed to Shaw or its subsidiaries to Rogers or its subsidiaries. The Commission concludes that the transaction as modified by the Commission is in the public interest and advances the objectives set out for the Canadian broadcasting system in the Broadcasting Act (the Act).

Those conditions are:

• A $27.2 million payout to the Canada Media Fund, Independent Journalism Fund and other cultural agencies
• Time-bound commitments to Shaw customers, such as notifying them 90 days before current contracts end about the impending merger
• Rogers also must report annually on its increased contribution to local news
• Hiring more journalists at its Citytv stations
• Producing an extra 48 news specials annually “that reflect local communities.”

Now this decision only covers broadcasting elements of the transaction. It doesn’t cover the cellular parts of the deal for example. But regardless, the CRTC has once again proved that they don’t have the interests of Canadians in mind. This deal would reduce competition, raise prices, and not benefit Canadians at the end of the day because they would have less choice in the telco marketplace. And it proves that the CRTC needs to be abolished in favour of a regulatory body that protects Canadians and holds telcos accountable. Because when the head of the CRTC meets his telco friend in a bar for a beer, then any pretence of impartiality goes out the window. Which by extension means that decisions like this are suspect by default.

Now to be fair, there are other hoops that this deal has to go through. And one can hope that common sense prevails and nukes this deal from orbit. But somehow I see this as the beginning of the end for affordable telco services in Canada.