Rogers, Shaw close merger

April 3, 2023
The final regulatory approval for the deal, made possible by a definitive court victory January 24, 2023, came from François-Philippe Champagne, Canadian minister of Innovation, Science and Industry, March 31.

After a rollercoaster several months when their merger faced strong opposition from Canada’s competition authority, Rogers Communications Inc. and Shaw Communications Inc. have finally closed their merger, first announced just over two years ago. As part of a plan to counter anti-competitive concerns, Shaw also has divested its Freedom Mobile wireless business to Videotron Ltd., a wholly owned subsidiary of Quebecor. Rogers agreed to buy Shaw in March 2021 for approximately CAN$26 billion ($20.85 billion), inclusive of approximately CAN$6 billion ($4.8 billion) of Shaw debt (see "Rogers, Shaw agree to merge").

The final regulatory approval for the deal, made possible by a definitive court victory January 24, 2023, came from François-Philippe Champagne, Canadian minister of Innovation, Science and Industry, March 31. To receive the final signoff from Minister Champagne, which involved transferring Shaw’s spectrum licenses to Videotron, Rogers has agreed to eight enforceable commitments:

  1. Investing $1 billion to improve connectivity for rural, remote, and indigenous communities and unserved remote highways in Western Canada
  2. Investing $2.5 billion to expand and upgrade Rogers 5G network in Western Canada
  3. Investing $3 billion in technology and network services in Western Canada, including modernizing and expanding fiber-powered internet
  4. Creating 3,000 new jobs in Western Canada and maintaining them for at least 10 years after the closing date
  5. Maintaining a Western Canada headquarters in Calgary for the same amount of time
  6. Expanding the company’s low-cost Connected for Success Internet program to eligible Canadians across Western Canada
  7. Introducing a new low-cost Connected for Success wireless program nationwide for eligible Canadians
  8. Honoring a five-year price commitment for remaining Shaw Mobile customers.

Meanwhile, Videotron also has a to-do list:

  • Offer plans that are comparable to those currently available in Quebec and offer options at least 20% cheaper than those made available by other major service providers
  • Refrain from transferring the Freedom Mobile licenses for 10 years
  • Expand its 5G wireless network in Freedom Mobile's pre-existing operating territory within two years
  • Expand mobile service into Manitoba via the use of a signed mobile virtual network operator (MVNO) agreement or other means and offer plans comparable to what it offers in Quebec
  • Increase the data allotments of existing Freedom Mobile customers by 10% as a near-term bonus while it invests to bring down prices overall.

Champagne stated that Videotron could be fined up to $200 million if they fail to meet their requirements and Rogers up to $1 billion if it falls short of its commitments.

“This is a momentous day for our customers, who will benefit from the latest services and network technology, and for our teams, who have worked so hard to get us here,” said Tony Staffieri, president and CEO of Rogers. “We’re proud to bring together these two iconic companies to deliver more value, more connectivity, and more innovation for Canadians.”

“For more than 50 years, Shaw has been a fixture in millions of homes and thousands of communities across Canada. Today, we close one chapter of our story and we open another that, together with Rogers, will see more Canadians have access to higher-quality networks and expanded connectivity to rural, remote and Indigenous communities,” said Brad Shaw, former Executive chair and CEO of Shaw. “By investing in and providing Canadians with access to fast, next-generation networks, my family and the employees of the new combined company are excited to continue building on Shaw’s legacy while helping usher in a new wave of competition and innovation.”

The deal makes the Shaw family one of the largest shareholders of Rogers. Brad Shaw and Trevor English, Shaw’s former executive vice president and chief financial and corporate development officer, will be nominated to the Rogers board of directors. They are expected to be appointed to the Rogers Board on April 4, 2023.

Turbulent approval process

When announced, the proposed merger met almost immediate opposition from smaller operators and others who were concerned that the merger would lessen competition, particularly in the wireless space. Commissioner of Competition Matthew Boswell in May 2022 revealed plans to file objections to the deal with the Competition Tribunal. The two companies placed the merger on hold while the filing made its way through review and engaged with Boswell to overcome his objections, including agreeing to divest Shaw’s wireless interests to Quebecor/Videotron (see "Rogers’ acquisition of Shaw hits Canadian regulatory snag"). Boswell remained unmoved (see “Rogers, Shaw fail to persuade Commissioner of Competition on benefits of merger”).

Meanwhile, Champagne last October announced that he would not approve any spectrum license transfer directly between Shaw and Rogers, making the sale of assets to Quebecor/Videotron essential to completion of the deal. He further stated that any approval of spectrum transfer to Quebecor/Videotron would be contingent upon several conditions – which ended up in the final list described above.

However, in perhaps a score against the run of play, Canada’s Competition Tribunal set aside Boswell's objections and approved the deal on December 29, 2022, leading Boswell to take the matter to court. On December 31, 2022, the court dismissed Boswell’s suit; he appealed that decision but was thwarted when a Federal Court of Appeal on January 24, 2023, rejected his appeal and cleared the way for the merger to proceed once Champagne could be convinced to approve the spectrum transfer to Quebecor/Videotron.

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