Purchasing Freedom Mobile | The sale to Quebecor could be insufficient for the competition

(Toronto) Rogers Communications’ decision to sell wireless service provider Freedom Mobile to Quebecor-owned Videotron will only create a “weaker” competitor in the market, a telecoms observer says.

Carleton University professor Dwayne Winseck said it won’t be easy for Quebec-based Videotron to expand nationally, which will make it less of a threat to Rogers.

Mr. Winseck notes that Videotron has had national ambitions for some time, but feels that its brand recognition is too weak and that it has not been able to secure solid agreements with other national suppliers despite its pockets. quite deep.

Over the weekend, Rogers announced it would sell Freedom to Quebecor for $2.85 billion, as it seeks regulatory approval for its $26 billion takeover of Shaw Communications. In particular, she argued that this decision would give Canadians “competition and choice”.

The deal will see Quebecor buy all of Freedom’s wireless and internet customers, as well as its infrastructure, spectrum and outlets.

Mr. Winseck, who specializes in media and communications, pointed to Shaw’s strong presence in Western Canada and the fact that its wireless service, Shaw Mobile, would not be divested as part of the merger. other reasons that could complicate the task for Videotron in its attempt to penetrate the rest of Canada.

The Competition Bureau is seeking to block the merger, fearing it would significantly reduce competition in the wireless sector, and most observers expected the sale of Freedom to be a condition of regulatory approval. .

Disputed advantages

In new submissions to the Competition Tribunal on Friday, the regulatory agency broadened its opposition to the proposed takeover, challenging the telecoms giant’s claims about efficiencies and economic benefits, while saying the consumers would face price increases.

For their part, Rogers, Shaw and Quebecor say their deal would effectively address competition issues and sustain a “strong and sustainable” fourth wireless service provider in Canada.

“I don’t think it will go far enough for the Competition Bureau,” Mr. Winseck said.

However, some analysts believe the sale will move the deal forward and ease the bureau’s competition concerns.

“We believe this agreement raises the prospect of closing the transaction to over 95%,” Canaccord Genuity analyst Aravinda Galappatthige wrote in a note to clients.

“We believe that (Quebecor’s) strong operating history, balance sheet, expertise and asset mix will make it more difficult for the regulator to assert that the Canadian wireless competitive landscape will be materially impacted. by the merger (between Rogers and Shaw),” analyst Jérôme Dubreuil of Desjardins said in a note.

Quebecor was not the only competitor in the race to acquire Freedom Mobile.

Anthony Lacavera of Globalive Capital had been widely vocal about his firm’s interest in possibly acquiring Freedom, formerly Wind Mobile, which he founded in 2008. Telecoms company Eastlink, of Halifax, and neo of Brunswick-based Xplornet Communications, had also shown interest in Freedom.

Mr. Winseck does not believe there is another buyer capable of creating a strong enough fourth competitor.

“For me, the only viable alternative would be for a company that is not already a major player to come forward to take over Shaw in its entirety,” he said.

So far, the Rogers-Shaw transaction has received approval from the Canadian Radio-television and Telecommunications Commission (CRTC). It still needs to be approved by the Competition Bureau and Innovation, Science and Economic Development Canada.

Competition Tribunal hearings on this issue are scheduled to begin the week of November 7.

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