Two Canadian media powerhouses could soon become one.
Rogers Communications announced Monday that it will buy Alberta-based Shaw Communications in a $26 billion deal that would combine Canada’s two largest cable operations.
The deal, if approved by federal regulators, would alter the Canadian telecom landscape and experts say it’s one that Rogers has long been looking to make.
“Bell Canada enterprises and Telus co-operate extensively and are certainly together rolling out a 5G network, Rogers and Shaw getting together is a counterpoint to Telus and BCE’s on-going co-operation,” said David Black, an associate professor at Royal Roads University.
Although Shaw and Rogers aren’t direct competitors in cable and internet because their networks are in different parts of the country, they have been fierce combatants in the wireless sector since Shaw bought the former Wind Mobile in 2016.
Rogers owns a national wireless network that operates under the Rogers, Fido and Chatr brands while Shaw owns Freedom Mobile and Shaw Mobile in Alberta, B.C. and Ontario.
They both compete against the other national wireless companies owned by Canada’s biggest phone companies: Bell, including Virgin Mobile and Lucky Mobile, and Telus and its Koodo and Public Mobile brands. Rogers, Telus and Bell are known as the Big Three wireless companies in Canada.
Laura Tribe, executive director of consumer advocacy group OpenMedia, said in a statement that the government shouldn’t approve the deal.
“We need more competition in Canada, not less,” Tribe said in a statement. “Over the years, we’ve seen competitor after competitor swallowed up by the Big Three. The result is always the same, more profits for the Big Three, worse plans and less choice for Canadians. We can’t afford this deal.”
Rogers chief executive Joe Natale told analysts in a morning conference call that it’s too early to speculate on whether the competitors will be required to divest any of their operations before approval is granted from federal regulators, including the Competition Bureau.
“But we feel confident this transaction will be approved,” Natale said.
According to the Canadian Wireless Technology Association, which represents most of the carriers, there were about 33.8 million subscribers in Canada as of Sept. 30, 2020. Rogers had the most, with about 10.9 million, while Freedom had about 1.8 million subscribers.
“If the transaction can go through without a divestiture of wireless, it would be a key positive for all three (national) wireless names (especially Rogers of course),” Galappatthige said.
He said Montreal-based Quebecor, which owns Videotron, would likely be at the front of the line if there is a forced divestiture of Freedom, which has little presence east of Ontario.
Francois-Philippe Champagne, the federal minister of Innovation, Science and Industry, issued a brief statement that said he wouldn’t predict the outcome of the regulatory reviews, but repeated the Liberal government’s promises of greater affordability, competition and innovation in the Canadian telecom sector.
“These goals will be front and centre in analyzing the implications of today’s news,” Champagne said.
Executives from the two companies revealed few details regarding how they expect to achieve $1 billion of synergies, which will be mostly from cost-savings.
However, they did say on a joint conference call with analysts that savings in operating expenses will likely be more significant than savings from capital spending on equipment.
As part of the transaction, the companies said Rogers will invest $2.5 billion in 5G networks over the next five years across Western Canada.
Rogers also says it will create a new $1-billion fund dedicated to connecting rural, remote and Indigenous communities across Western Canada to high-speed internet service.
Rogers chief financial officer Tony Staffieri said that, with the regulatory approvals still at least a year away, there are too many variables to be decided to make predictions on cost cutting.
However, leadership of the two family-controlled companies made it clear the joint news conference that they believe there will be great benefits from the combination.
“While unlocking tremendous shareholder value, combining (the) companies also creates a truly national provider with the capacity to invest greater resources expeditiously to build the wireline and wireless networks that all Canadians need for the long term,” Shaw chief executive Brad Shaw said in statement.
Shareholder meetings are expected to be scheduled for May.
With files from David Paddon/The Canadian Press