Rogers today signed an agreement to purchase Shaw Communications and its subsidiary Freedom Mobile for $26 billion.
If the deal – which is inclusive of approximately $6 billion of Shaw debt – goes through, the Shaw family will become Roger’s largest shareholder post-transaction. Brad Shaw, Shaw Communications’ chief executive officer, will join Rogers’ board of directors.
Shaw Communications showed excellent financial results in its Q1 2021 earnings report. The company announced 101,000 new wireless additions in the quarter and a 10 per cent revenue wireless growth year over year.
The deal will be subjected to regulatory scrutiny and is expected to close in the first half of 2022.
In conjunction with the acquisition news, Rogers also announced a new $1 billion fund to connect rural, remote and indigenous communities to high-speed internet in western Canada. As part of the plan, Rogers promised to consult with indigenous communities to create indigenous-owned and operated internet service provides.
What the acquisition means for Shaw customers
Rogers does not plan on immediately increasing subscription costs for Freedom Mobile subscribers post-acquisition. In a March 15 news release, Rogers said that it “will not increase wireless prices for Freedom Mobile customers for at least three years following the close of the transaction.”
Rogers and Shaw have had diverging views on mobile overage charges. Paul McAleese, president of Shaw Communications, once described data overage fees as “toxic revenue.” Freedom Mobile does not charge data overage fees for all of its subscribers and chooses to throttle their speeds instead.
The deal is still subjected to regulatory scrutiny and its merit to foster competition will be debated. The combined company promised to invest $2.5 billion into 5G networks and create more affordable options for consumers. Some experts suggest mobile sector consolidation is more of a trend than an anomaly.
“We have seen mobile sector consolidation in many other jurisdictions, most recently, with T-Mobile and Sprint in the US,” wrote telecom consultant Mark Goldberg in an email to the publication. “Just last year, The EU Court annulled opposition to consolidation [between Three and O2] in the UK.”
While news releases from both Shaw and Rogers addressed Freedom Mobile, they did not mention how Rogers will manage Shaw’s internet services. Shaw Communications is the largest internet service provider on Canada’s west coast and has been continuously expanding its fibre network in the region. Last year, the company announced that it’s offering fibre internet access to all of its subscribers.
“What jumps out to me is that Shaw has wireline facilities in places that Rogers does not – according to BMO, the combined entity will pass 8.9 million homes and 4.7 million internet subscribers (basically doubling these metrics for Rogers),” Goldberg wrote. “Why is that important? As 5G gets rolled out to more households, the next phase of network deployment needs fibre access to the wireless towers, and Shaw’s national and regional fibre networks would be a way to accelerate 5G deployment.”
Moreover, neither company addressed Shaw Mobile, Shaw’s new mobile service that launched in Alberta and B.C. in July 2020.
Rogers, Shaw and the CRTC were not immediately available for comment.
Competition Bureau Canada responds
Canada’s Competition Bureau responded to the acquisition announcement with a release that wrote “under the Competition Act, the Competition Bureau has a mandate to review mergers to determine whether they are likely to result in a substantial lessening or prevention of competition.”
The Bureau noted that it will not “hesitate to take appropriate action” if it determines that the transaction will reduce competition.
*Updated on March 15, 2020 at 2:56pm with quotes from the Competition Bureau Canada*
