By Theophilos Argitis, Paula Sambo, and Kait Bolongaro Bloomberg
The fate of Rogers Communications Inc.’s $16 billion takeover of Shaw Communications Inc. may come down to which the Canadian government wants more: better wireless networks or lower prices.
The transaction would reduce the number of wireless providers to three from four in about two-thirds of the country, according to BMO Capital Markets, potentially driving up consumer costs. It could also alter Shaw’s status as a low-cost alternative to the big carriers.
The companies, for their part, say the deal will allow them to spend billions on faster networks for remote regions and across the less densely populated west.
Ruling the Airwaves
A takeover of Shaw could give Rogers half of Ontario’s wireless market.
Most analysts expect the deal, which also includes the companies’ cable assets, to be approved by the government and regulators in 2022, but with stipulations. Here are the key issues.
To assuage antitrust concerns, the government is almost certain to force Rogers to divest some of Shaw’s wireless assets, which include a physical network, customer base and spectrum.
About 70% of Shaw’s wireless subscribers are in Ontario, and most of those are in the greater Toronto region, BMO telecom analyst Tim Casey said in a report. The merged company could have 51% market share in Canada’s largest province.
“We expect a much more contentious review of wireless” than any other part of the deal, Casey wrote, adding that Rogers might satisfy regulators by selling subscriber accounts and spectrum. “An outright sale of the Shaw wireless business does not seem obvious to us.”
Canadians have long bemoaned the cost of mobile services, especially as compared with their neighbors to the south. In 2020, the country ranked 209th in affordability out of 228 countries tracked by cable.co.uk. In Canada, the average price of 1 gigabyte of mobile data is $12.55, versus $8 in the U.S.
Geography is a big reason: Providing service to a country that’s larger than the U.S. but has 12% as many people is expensive.