To their credit, Francois-Philippe Champagne and Matthew Boswell were clear and consistent in what they wanted from Rogers Communications Inc. in exchange for approval to take over competitor Shaw Communications Inc.
The Federal Minister for Innovation, Science and Industry and the Commissioner for Competition told Rodgers to do the right thing for millions of Canadians who think they are paying too much for monthly cell phone bills by selling the country’s fourth-largest wireless network, Freedom Mobile , a stable, long-term owner.
Rodgers wasn’t listening. Instead, the country’s largest mobile phone provider played sweet.
Rodgers now faces the only result of this $ 26 billion takeover, which he desperately wanted to avoid: The transfer of rival Quebecor Inc. of a mobile phone business with two million customers at the cost of being allowed to take over Shaw’s cable network in Western Canada. Bankers working for Rodgers have invited Quebec bankers to discuss a possible acquisition of Freedom, The Globe and Mail reported on Friday.
Rodgers alienated the Competition Bureau by offering to sell Freedom to rural Internet provider Xplornet Communications Inc., which is owned by the US Private Equity Fund, and missed the opportunity to build a competitive mobile phone business in Manitoba. Regulators were also unhappy with the prospect of selling Freedom to Francesco Aquilini, a real estate developer in Vancouver with no experience in telecommunications.
Rodgers, Shaw says Competition Bureau commissioner plans to oppose $ 26 billion merger
Quebec has been invited by Rodgers to join the Freedom Mobile bidding on the Shaw
The common theme for these potential Freedom owners is that they pose a relatively weak competitive threat. Which is good for Rodgers and the other actors – BCE Inc. and Telus Corp. and bad for consumers.
In addition, the private equity fund owned by Xplornet – New York-based Stonepeak – will have to sell the business over the next few years, leaving the property back in the government’s lap.
On Friday, Mr Boswell’s Competition Bureau told Rodgers what he thought of the remedies offered so far. The regulator has said it plans to oppose Shaw’s takeover at the Competition Tribunal.
Rodgers and Shaw are fighting now. Early Saturday, they announced that the completion of the deal, scheduled for June 13, will be postponed to July 31. The two companies said they would fight the regulator at the tribunal, “while continuing to engage constructively with the Competition Bureau in an effort to resolve this issue.”
Delays and heightened uncertainty are significant setbacks for Rogers CEO Tony Stafieri, who won the top job in November, convincing President Edward Rogers that he could do better than his predecessor, Joe Natale.
Mr. Rodgers went to war with his board and his family to install Mr. Stafieri. Now his company is struggling with regulators. A significant transaction will not be completed on schedule. And Rodgers faces the prospect of coming out of the deal in a four-way battle for mobile phone customers involving Pierre Carl Pelado of Quebec, who already has significant market share in his home province.
Until the last few days, Rodgers had avoided committing to Quebec on the potential sale of Freedom. That has changed recently. Financial analysts say negotiations may have begun because Rodgers was forced to turn to Mr. Pelado as an acceptable buyer – potentially the only acceptable remedy – for the federal government, which has consistently said Canadians need four national mobile phones. telephone networks.
There is a tasty irony in the federal liberals who are helping to direct freedom to Mr Pelado, a separatist.
Rodgers and Quebec have a history, and that’s bad. The two operate a mobile phone network in Quebec and Ottawa. Last October, a Quebec subsidiary sued Rodgers for $ 850 million for alleged breach of contract, with both sides accusing the other of unscrupulous negotiations.
Quebecor has a great history in the wireless business. Over the past decade, the company has expanded its Quebec network 10 times to 1.6 million wireless customers.
Mr Pelado never lacks ambition. Last summer, Quebecor spent $ 830 million on wireless spectrum, including blocks in Ontario, Alberta and British Columbia, for further expansion. The Montreal-based company has a balance sheet to buy Freedom, which is expected to earn up to $ 4 billion, although analysts say Quebecor is likely to make a share capital offer to help pay for the acquisition.
If Quebecor wins freedom, look for marketing campaigns that include discounts on cell phone charges, not just lizards, hippos and baby monkeys. Mr. Pelado will enjoy the role of destroyer. Increased price competition will severely weigh on Rogers, which is aiming for a wireless connection for 70 percent of its EBITDA. This can reduce profit margins in Bell and Telus.
This is far from the result that Rodgers wants. Yet company executives and their Shaw counterparts have repeatedly said they will do whatever it takes to close the deal. Selling Mr Pelado’s freedom may be what is needed.
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