The Rogers-Shaw merger has crossed its final barrier for approval with François-Philippe Champagne, Minister of Innovation, Science and Industry (ISED), announcing he’ll allow the transfer of Shaw’s Freedom Mobile assets to Quebecor-owned Videotron.
Coming just over two years since Rogers and Shaw announced their intention to consolidate in a $26 billion transaction, the Videotron approval is contingent on a number of conditions for both parties.
Videotron will have to offer consumer options that are at least 20% more affordable than those of the other major service providers; would be unable to transfer Freedom spectrum licences for a decade; and must expand its 5G network into the wireless provider’s pre-existing territory within two years. Increasing data allotments to existing customers by 10% and expanding its mobile service into Manitoba are also conditions.
Separately, Rogers will also be required to make major investments to improve connectivity within the next five years – most of which were presented in its original merger proposal – including creating 3,000 new jobs in Western Canada and maintaining them for a minimum of 10 years after the merger’s closing date, in addition to establishing a Western headquarters in Calgary for the same period.
Rogers will be expected to invest $1 billion to expand broadband internet access, at speeds of at least 50/10 megabits per second, and 5G mobile service in areas where it’s not currently available; invest at least $2.5 billion to enhance its 5G network in Western Canada, and $3 billion in additional network service expansion projects; and expand access to low-cost broadband internet plans and mobile offerings for low-income Canadians.
Subject to annual public reporting, the approval comes with financial penalties of up to $200 million for non-compliance for Videotron and up to $1 billion for Rogers.
“Since the proposed merger between Rogers and Shaw was announced, I have been very clear: affordability and competition are central to any decision I make in my role as Minister of Innovation, Science and Industry,” said Champagne, in a statement. “That’s why last October, I officially denied the request to transfer Shaw’s wireless spectrum licences – held by their subsidiary, Freedom Mobile—to Rogers. At the time, I also outlined my expectations for the separate proposed transfer of Freedom Mobile’s spectrum licences to Videotron.”
“Since then, the Competition Bureau, the Competition Tribunal and the Federal Court of Appeal have all weighed in on the potential competitiveness a fourth national player could have on our telecom industry. The evidence is clear: Having a strong fourth competitor does lead to lower prices, as we’ve seen in Atlantic provinces, Quebec, Ontario, Alberta and British Columbia.”
Moratorium on large scale spectrum transfers
As part of the decision, Champagne has announced a moratorium on large scale spectrum transfers, with a review of the spectrum transfer framework forthcoming – the first undertaken in a decade.
“The establishment of an effective national fourth player who can compete and drive down prices has been the goal of successive governments for decades. Today’s announcement allows for the establishment of that fourth national player for the first time in Canada’s history,” added Champagne. “If Canadians do not begin to see a clear and meaningful reduction in prices within a reasonable amount of time as a result of this decision, I will have no choice but to use further legislative and regulatory powers to drive down prices.”
“Canadians rightfully expect and deserve more from their telecom sector. We will continue to ensure the industry meets these standards, including improving competition, reliability and affordability,” he concluded.
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