Analysts say new conditions laid out by Industry Minister Fran莽ois-Philippe Champagne Tuesday indicate a willingness to get the proposed $26-billion deal between Rogers Communications Inc. and Shaw Communications Inc. across the finish line.
The stipulations address the sale of Shaw-owned wireless carrier Freedom Mobile to Quebecor Inc.'s Videotron Ltd., a key component in the proposed transaction between the two telecom giants.
In a note to clients, Desjardins analyst Jerome Dubreuil said Champagne's conditions suggest he supports the merger and is signalling that the deal would be acceptable if Quebecor has the ability to properly compete in the long term.
Scotiabank's Maher Yaghi said in a note that Champagne's "pragmatic view" could provide "a good middle ground" for the companies to build on and believes there's a 90 per cent chance the Rogers-Shaw deal will close.
Investors seemed to be pleased with the news as shares of both Rogers and Shaw were up in late-morning trading with seven per cent and 9.7 per cent gains, respectively.
Champagne, whose approval is required for any spectrum licence transfer, left the door open to a revised agreement Tuesday, saying he had two major conditions for before he would approve Quebecor's purchase of Freedom Mobile.
He said Videotron would have to agree to keep Freedom's wireless licences for at least 10 years.
He also said he would "expect to see" wireless prices in Ontario and Western sa国际传媒 lowered by about 20 per cent, putting them in line with Videotron's current Quebec offerings.
Quebecor agreed to buy Freedom Mobile for $2.85 billion earlier this year.
The sale of Freedom Mobile to Videotron would see Quebecor buy all of Freedom's branded wireless and internet customers as well as all of Freedom鈥檚 infrastructure, spectrum and retail locations in a move that would expand Quebecor鈥檚 wireless operations nationally.
It would also remove one of the biggest stumbling blocks to Rogers' purchase of Shaw, since keeping Freedom, the fourth-largest wireless carrier, would give the combined companies too much power in the wireless market, therefore lessening competition.
In a statement late Tuesday evening, Quebecor CEO Pierre Karl P茅ladeau said he intends to accept the industry minister's conditions, agreeing to incorporate them in a new version of the transaction.
"They are in line with our business philosophy, which has proved highly successful in Quebec, where we have taken a significant market share in a very short span of time," the statement said.聽
"We will work to deliver better prices for Canadians in the other provinces and to end the reign of the Big Three (telecom companies) by promoting competition, the public interest and the digital economy in sa国际传媒."
Champagne told reporters Wednesday that he was pleased with Quebecor's response.
"It's a good thing that they listened to me because I am the one who at the end will have to decide whether we transfer the licence or not," he said.
There are some concerns about Champagne's decision, however.
Telecom researcher Ben Klass said the industry minister could have gone further.
"The minister is trying to have it both ways, wanting to be seen to be acting in the interest of consumers, but also appeasing an industry that comprises of an oligopoly of powerful companies," he said.
"I think that the minister who's supposed to be protecting the interests of Canadians needs to be more ambitious."
He pointed to one of Champagne's conditions, specifically the expectation of lowered wireless prices in Ontario and Western sa国际传媒.
"When they're setting these price targets, they need to give less wiggle room. So if they're serious about setting a price target that will help consumers, they need to make some sort of an ongoing commitment to decreases in prices," he said.
As well as Champagne's approval, the Rogers-Shaw deal requires the green light from the Competition Bureau and the CRTC.
The Canadian Radio-television and Telecommunications Commission offered its conditional approval for the broadcasting portion of the deal in March.
A mediation is scheduled for later this week between the Competition Commissioner and Rogers and Shaw. The Competition Bureau is attempting to block the merger, saying that the sale of Freedom Mobile does not go far enough to eliminate its concerns that telecom bills would increase amid reduced competition.
Canaccord Genuity analyst Aravinda Galappatthige said in a note that Champagne's new conditions "indirectly places some degree of pressure" on the Competition Commissioner to negotiate a solution when mediation begins Thursday.
Klass said that he doesn't believe the latest developments will have an effect on the Competition Bureau's decision and the November hearings.聽
This report by The Canadian Press was first published Oct. 26, 2022.
- With files from Mia Rabson
Companies in this story: (TSX:RCI.B, TSX:SJR.B, TSX:QBR.B)
Adena Ali, The Canadian Press
