The federal government has approved the multibillion-dollar merger of telecom companies Rogers and Shaw, but with conditions that Ottawa insists will make the deal good for consumers.
François-Philippe Champagne, minister of innovation, science and industry, said at a news conference Friday that the government has approved the transaction first proposed in 2021.
As part of the deal, the vast majority of Shaw’s wireless business, Freedom Mobile, will be sold to Quebec-based Videotron. While Freedom Mobile and its more than two million customers will move over to Videotron, Rogers will maintain a much smaller part of Shaw’s wireless business, known as Shaw Mobile, which operates mostly in Alberta and BC
Those Shaw Mobile customers will be added to Rogers’ more than 10 million wireless customers across all of its brands, which includes Fido, Chatr and others.
The approval comes with 21 conditions that the government says are “legally enforceable,” including that Videotron will start to offer plans that are comparable to those currently available in Quebec and they can’t sell the wireless assets to anyone else for at least a decade .
Videotron must also:
- Offer 5G service everywhere Freedom currently operates within two years.
- Offer service in Manitoba via MVNO.
- Increase the data allowances for existing Freedom customers by 10 per cent.
“Today, I am informing Canadians that I have secured on their behalf an unprecedented and legally binding commitments from Rogers and Videotron. And, after imposing strict conditions, the spectrum licenses of Freedom Mobile will be transferred to Videotron,” Champagne said.
While Shaw’s mobile business and its more than two million wireless customers will move to Quebecor, Rogers will take over Shaw’s media and cable assets, most of which are in Western Canada. But Champagne says those assets are also subject to numerous conditions.
They include a requirement to create 3,000 jobs in Western Canada, to spend billions to expand its broadband and wireless networks and to offer new lower cost plans to consumers in both.
“Should the parties fail to live up to any of their commitments, our government will use every means in our power to enforce the terms on behalf of Canadians,” Champagne said, noting that Rogers is subject to financial penalties of up to $1 billion for non-compliance.
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Videotron, for its part, is on the hook for up to $200 million in penalties if it doesn’t live up to its end of the bargain.
“This transfer follows a series of agreements signed by the parties that will ensure that this new national fourth player will be in it for the long haul, be able to go toe to toe with the Big Three, and actually drive down prices across Canada, ” Champagne said, pitching the deal as a win for consumers.
But Canadians have heard promises like that before — including when the government opened up Canada’s wireless industry to new players like Freedom in the first place in 2008.
Yet prices have come down in recent years. Statistics Canada says prices for cellular services have declined by about 25 per cent since 2020, according to the latest Consumer Price Index.
But overall rates for high-end plans are continuing to be among the highest in the world. Consumer watchdog group OpenMedia called Friday’s news that the merger had been approved “a dark day for the Internet in Canada.”
“Today’s decision is the largest blow to telecommunications competition and affordability we’ve ever seen,” executive director Laura Tribe said after the news came out.
OpenMedia says it has heard from nearly 100,000 Canadians who are opposed to the merger, and notes that many of the stipulations of the deal, including spending billions on expanding connectivity to rural communities, and maintaining a head office in Western Canada, were things Rogers said it was going to do when it first proposed the tie-up.
“It’s a massive betrayal that’s only made worse coming from a government that has long-promised improved telecom affordability,” the Tribe said.
Ben Klass, who researches telecom policy at Carleton University in Ottawa, also thinks it’s a stretch for the government to pitch this deal as being in any way good for consumers.
“These types of deals lead to higher prices for consumers, they lead to reduction in choice,” he told CBC News in an interview Friday. “It’s a slightly less bad deal than was initially proposed but that doesn’t change the fact that the flavor is still not good.”
Klass says it’s misleading to claim the deal is encouraging competition when what it’s actually done is encouraging existing companies to sign favorable network-sharing deals with each other.
“When most people think about competition, they think about a variety of providers offering choice and affordable services to customers in a diverse marketplace, companies fighting for your business,” Klass says. “What we’ve seen here are agreements from companies who are merging with each other, to play nice.”
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“This is a merger that is going to help the billionaire families that own these companies, not average Canadians who have to pay mobile bills at the end of the month,” he said.
The approval by government is the final step in a lengthy process that started 746 days ago, when Toronto-based Rogers first proposed to take over Calgary-based Shaw in a deal with a $26-billion price tag — $20 billion of equity for Shaw shareholders , along with assuming $6 billion of the company’s debt.
The deal faced intense opposition from the start, and numerous regulatory agencies weighed in along the way. The Canadian Radio-television and Telecommunications Commission (CRTC) signed off on the broadcasting part of the deal last year.
Canada’s Competition Bureau fought hard against the deal, but ultimately lost in a tribunal ruling last year.
Shareholders of all companies involved have already signed off on the pact, and Friday was the self-imposed deadline they had set to finalize the deal. After word of the government approval came out, Rogers, Shaw and Videotron issued their own release stating they expected the deal to be finalized on April 7.
“We are very pleased to move forward with this transformative merger and proudly deliver on our commitments to enhance and expand network coverage, connect under-served communities, and improve access for low-income Canadians,” Rogers CEO Tony Staffieri said in a press release .
“Building on a shared legacy with Shaw, we will invest substantially to bring more choice, more value and more connectivity to Canadians across the country.”