Rogers and Shaw sign deal to sell Freedom Mobile in bid to unblock merger

Tech

Rival Canadian telcos Roberts and Shaw have signed an agreement to sell Freedom Mobile to Quebecor, a move designed to alleviate the competition regulator’s objections to the two firms merging.

The firms announced today that they have entered into a definitive agreement for the sale of Freedom Mobile to Videotron, a subsidiary of Quebecor, subject to the closing of the proposed  merger. Offloading Freedom Mobile, which is owned by Shaw, is being pitched as the ‘best opportunity to create a strong fourth national wireless services provider’.

The new combined business of Videotron and Freedom ‘will be well-positioned to launch a strong, competitive national 5G offering, using Videotron’s 3500 MHz holdings’ say Rogers and Shaw. They care about this because the Canadian regulator’s reasons for blocking Rogers from buying Shaw is that it would damage competition in the country’s telecoms space, so this is supposed to be a move to level the playing field. ‘Accordingly, the parties believe the Rogers-Shaw Transaction should now be approved,’ says the release.

“We are very pleased with this Agreement, and we are determined to continue building on Freedom’s assets,” said Pierre Karl Péladeau, President and CEO of Quebecor. “Quebecor has shown that it is the best player to create real competition and disrupt the market. Our strong track record combined with Freedom’s solid Canadian footprint will allow us to offer consumers in British Columbia, Alberta and Ontario more choice, value, and affordability through discounted multiservice bundles and innovative products.”

Tony Staffieri, President and CEO of Rogers added: “This Agreement with Quebecor brings us one step closer to completing our merger with Shaw. We strongly believe that this divestiture solution addresses the concerns raised by the Commissioner of Competition and the Minister of Innovation, Science and Industry and we look forward to securing the outstanding regulatory approvals for our merger with Shaw so that we can start delivering its significant long-term benefits to Canadian consumers and businesses, including improved network resiliency.”

Rogers announced plans to buy rival Shaw for C$26 billion in March last year, in a deal that both companies pitched as a driver of 5G rollout in Canada, and which they had  aimed to complete it in the first half of 2022. Perhaps anticipating regulatory nosing about, the firms said in a joint statement at the time of the purchase announcement: “Rogers and Shaw intend to work cooperatively and constructively with the Competition Bureau, the Ministry of Innovation, Science and Economic Development and the Canadian Radio-television and Telecommunications Commission. Subject to receipt of all required approvals, closing of the Transaction is expected to occur in the first half of 2022.”

However in May this year, Canada’s Commissioner of Competition indicated he intends to block the deal, at which point he two firms extended their completion deadline to the end of July to give them time to plead their case with regulators.

So far the firms don’t seem to have managed to convince the regulatory body into changing its mind, and it was announced last month that mediations had thus far failed to resolve the concerns. Whether the actual inking of a deal to sell off Freedom Mobile will shift the Commissioner’s opinion remains to be seen, though it’s not clear there’s anything more they could do other than successfully sell off the bit of the firm that is causing the problem.

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