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Regulatory/Politics

Rogers, Shaw fail to convince regulator on merger

Rogers and Shaw had another stab this week at trying to convince Canada's Competition Bureau that their proposed merger should go ahead.

Talks were held on Monday and Tuesday involving all three parties in the presence of a tribunal judge – as part of a mediation process – with Rogers presumably focused on trying to assuage the regulator's concerns that its proposed C$26 billion (US$20.6 billion) takeover of Shaw will lead to less competition and higher consumer bills.

Those discussions came to naught, however. "It was wishful thinking that a resolution could have been reached during the mediation process," said Aaron Glick, a director with New York-based investment firm Cowen LLC, as cited by Reuters.

The two cable operators tried to put a brave face on things it seems. "Rogers and Shaw are not precluded from continuing discussions with the commissioner at any time," the duo said in a joint statement.

The inconclusive mediation process – again, according to Reuters – means a decision on the deal "could drag on for months" until the tribunal gives a verdict. This could be at the end of this year, said "people familiar with the process," or until the disputed parties reach a settlement.

Canada's competition watchdog clearly remains unmoved by Rogers suggested remedy of agreeing to sell Freedom Mobile, one of Shaw's cellular businesses, to Montreal-based Quebecor.


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The Competition Bureau, while studying the potential impact of the sale on competition, had previously indicated this would not be enough in itself to address antitrust concerns.

One potential snag with the Freedom Mobile sell-off, at least from the Bureau's point of view, is that the deal reportedly does not include the Freedom business in Alberta and British Columbia due to lack of interest from Quebecor (and other prospective buyers). This would mean Rogers holds onto about 450,000 of Freedom's 2 million subscribers.

Time running out

While both operators appear keen on plugging away at trying to convince Canada's authorities to waive the merger through, there is a July 31 deadline to close the deal. Moreover, Rogers has to pay Shaw a breakup fee of C$1.5 billion ($1.2 billion) if the merger falls through.

Light Reading is not clear if that sum has to be paid, however, if the mediation process is still ongoing after July 31. And even if the competition watchdog does sign off on the deal, Rogers and Shaw will still need approval from Canada's Ministry of Innovation, Science and Economic Development.

Rogers maintains that one justification of the Shaw takeover is that it will provide muscle for a speedier rollout of 5G. The operator is promising a C$2.5 billion ($2 billion) investment in 5G networks across western Canada over the next five years, the creation of up to 3,000 new jobs in that region, another C$3 billion ($2.4 billion) for additional spending on technology and services and low-cost broadband for poorer families.

— Ken Wieland, contributing editor, special to Light Reading

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