Shaw and Rogers have reached an agreement to sell Freedom Mobile to Quebecor in an effort to appease regulators who are otherwise looking to block their merger.
But new filings from the Competition Bureau suggest the terms of the deal may not be enough to assuage its concerns about competition in Canada’s wireless market.
Announced late on Friday, Quebecor has agreed to buy Freedom on a cash-free, debt-free basis at a value of $2.85 billion, covering all of Freedom’s wireless and Internet customers, as well as its infrastructure, spectrum and retail locations. Shaw and Rogers would also provide Quebecor transport services and roaming services.
The sale is subject to customary regulatory approvals. It would also close with the concurrent closing of the Rogers-Shaw merger.
The acquisition would expand Quebecor’s wireless operations nationally for the first time. The announcement did not say whether Quebecor would maintain the Freedom brand identity, but the company has previously said that its interest in Freedom comes from using its infrastructure to expand its Videotron brand outside of Quebec.
“This is a turning point for the Canadian wireless market,” said Pierre Karl Péladeau, president and CEO of Quebecor, in a statement. “We have always believed that for there to be healthy competition in wireless services only a player with a proven track record can successfully enter the market…After fifteen years of growth in the Quebec wireless market, we have demonstrated our expertise, our ability to innovate and our financial strength.”
Freedom Mobile has the fourth-most market share in Canada’s wireless market, behind the “Big Three” of Rogers, Bell and Telus. The loss of a major competitor was a big reason in the Competition Bureau’s decision to oppose the Rogers-Shaw merger.
Tony Staffieri, president and CEO of Rogers, said in a statement that divesting from Freedom was “a critical step towards completing our proposed merger with Shaw,” and was confident the sale to a “proven” telco like Quebecor would satisfy the government’s requirements for a strong fourth competitor.
In a briefing to analysts over the weekend, Staffieri said that Rogers would retain 450,000 mobile customers currently subscribed to Shaw Mobile, as potential Freedom buyers wouldn’t include the division in their bids. Shaw Mobile is a division of Freedom that operates in Alberta and British Columbia.
In filings made to the Competition Tribunal of Friday, the Competition Bureau maintained its position that acquiring one of its competitors would harm consumers through higher prices, lower-quality services and lost innovation, while saying that Freedom Mobile would not be “an effective remedy.” While previous assertions have been based on the fact that Rogers had previously proposed selling Freedom to companies that would not be able to keep the offering competitive, Friday’s filing also said the sale won’t replace the competition Shaw Mobile provides in Alberta and British Columbia.
Industry Minister Francois-Philippe Champagne also needs to sign off on the merger before it closes.