The proposed $26 billion merger of Rogers and Shaw stumbled over one of its final hurdles this weekend.

In a joint statement released Friday evening, the two companies said they had been informed that Commissioner of Competition intends to oppose the merger. Both companies “remain committed” to the deal, and intend to oppose the application to block the merger while “continuing to engage constructively with the Competition Bureau.” Rogers and Shaw have agreed to extend the deadline for the deal from June 13 to July 31 to allow for “continued engagement with the Competition Bureau.”

On Monday morning, the bureau released a statement saying it would be seeking a “full block” of the merger, saying its investigation concluded that it would “substantially prevent or lessen competition in wireless services” and was likely to result in “higher prices, poorer service quality and fewer choices” across the industry.

In March, the CRTC gave its approval to the deal, albeit with several conditions. While the CRTC’s review was focused primarily on the impact the deal would have on the broadcast environment, the Competition Bureau has been looking at how it would impact competition in the wireless sector. According to the Competition Bureau’s statement, roughly 87% of revenues in the retail mobile wireless market goes to Rogers, Bell or Telus.

Anticipating the Bureau’s concerns, Rogers and Shaw have proposed selling off the latter’s Freedom Mobile, Canada’s fourth-largest mobile carrier by subscriber base. The companies said in their statement that they are currently engaged in a process to sell Freedom.

One consideration for the transaction is not just selling Freedom, but giving it to a buyer that is capable of maintaining its operations and ensuring it can remain competitive with the big three telcos. Companies that have publicly stated they’d be interested in buying Freedom include Quebecor – which sees Freedom Mobile’s infrastructure as a way to extend its Videotron brand outside of Quebec – and Globalive Capital, an investor group that includes Wind Mobile founder Anthony Lacavera.

However, last month, The Globe and Mail reported that in a proposal to the Ministry of Innovation, Science and Economic Development, the company had proposed Xplornet as a buyer. The independent ISP entered the mobile market in 2018 when, as part of divestitures made to allow for Bell’s acquisition of Manitoba Telecom Services, it acquired 24,700 former MTS wireless customers.

The Bureau’s statement did not reference Roger’s plan to sell Shaw, though did say the sale of assets was a potential remedy for its plans to block the merger. The statement largely focused on the kind of competition Freedom has allowed for since 2017 and what would happen should Shaw’s wireless assets become part of Rogers. It noted that Freedom’s pricing, data allowances and service innovations were highly differentiated from the big three telcos, which put it in a better position to limit Rogers’ market power than Telus or Bell. It also noted that prices for wireless in Canada, while still among the highest in the world, have come down as Freedom has gained subscribers, something that has been especially apparent in new markets the carrier has entered into. The elimination of this, the Bureau says, would increase Rogers’ market power well beyond that of its biggest competitors, likely resulting in wireless prices going up.

Finally, the Bureau noted that the proposed merger has already had an impact on competition in the wireless sector, as Shaw’s investment into entering new markets and 5G network infrastructure has declined since it was announced, further alleging that Shaw’s reduced marketing has resulted in an overall loss of competition in the market.

Rogers and Shaw now have 45 days to file a response, which the Bureau will then have 14 days to reply to.

The federal Ministry of Innovation, Science and Economic Development also needs to approve the deal. Minister François-Philippe Champagne has previously stated that he would not allow the deal to go through if it included the wholesale transfer of Shaw’s wireless licenses to Rogers.