The acquisition of Shaw Communications Inc. by Rogers Communications Inc. has been finalized, two years after it was first revealed. Days after Industry Minister Francois-Philippe Champagne gave the deal his final approval, Rogers and Shaw made the merger of the two main Canadian telecom companies official. A fourth player is expected to enter the national market in the coming months.
The multibillion dollar merger of Rogers and Shaw in the telecommunications industry has been given approval by the federal government as well, but with conditions that Ottawa claims will benefit customers. The question would be, what benefit would a Canadian consumer have from it? When we think about past mergers like US investor buying The Bay and its daughter store Zellers, the outcome is very well known. Or perhaps someone will remember the merger of Best Buy and Future Shop?! We can not see any consumer benefit there, can we?
The $26 billion transaction represents a basic transformation of the Canadian telecommunications industry, with far-reaching effects on Canadians’ phone bills. Rogers has been losing clients for months, recent issues with cell phone signals and home internet has deterred many clients, especially in Southern Ontario. Will this new shakeup help or make it even worse to maintain and to gain new clients?
Here’s everything Canadian consumers need to know
Rogers first disclosed intentions to buy Shaw, a company headquartered in Calgary, in March 2021, but that plan differs significantly from the one that was accepted on Friday.
As part of the agreement, Videotron, a company headquartered in Quebec, will purchase the vast majority of Shaw’s wireless division, Freedom Mobile. Rogers will continue to run a much smaller portion of Shaw’s wireless division, known as Shaw Mobile, which primarily serves Alberta and British Columbia. Freedom Mobile and its more than two million customers will transfer to Videotron.
The more than 10 million wireless users Rogers currently has across all of its brands, including Fido, Chatr, and others, will now include those from Shaw Mobile.
Moreover, Videotron must:
- provide 5G connectivity globally Within two years, Freedom is presently operational.
- Offer MVNO service in Manitoba
- Increase the current Freedom customers’ data allotments by 10%.
Will consumer prices stay the same?
Statistics Canada statistics show a general decline in wireless prices across Canada in recent years. Between December 2018 and December 2022, the agency’s Cellular Services Price Index decreased by 32%, while the general Consumer Price Index increased by 15% during that same period.
However, overall premiums for premium plans remain among the highest in the globe. The announcement of the merger’s approval on Friday was hailed by the consumer advocacy organization OpenMedia as “a dark day for the Internet in Canada.” Nearly 100,000 Canadians, according to OpenMedia, have expressed opposition to the merger. It also points out that many of the conditions of the agreement, such as spending billions to improve connectivity in rural areas and keeping a head office in Western Canada, were things Rogers had promised to do when it first floated the idea of the merger.
Ben Klass, a telecom policy researcher at Carleton University in Ottawa, concurs that it is a stretch for the government to portray this agreement as beneficial to consumers in any manner.
In history what merger has brought lower rates for consumers? Maybe there is, but, usually the there is less competition and more of a monopoly market, the prices will probably at best stay the way they are.
The Competition Tribunal rejected the Competition Bureau’s case late last year after the bureau, which oversees merger deals in Canada, tried to “full block” the transaction. The tribunal determined that Rogers’ side agreement to dispose of Shaw’s Freedom Mobile was sufficient to allay worries about diminished market rivalry.
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Layoffs in forecast for Rogers
The remarks were made to BNN Bloomberg on Friday by Anthony Lacavera, founder and chairman of Globalive, following the federal government’s final approval of Rogers Communications Inc.’s planned acquisition of Shaw Communications Inc.
Lacavera forecasted that Rogers’ only option for paying for the pricey takeover will be through layoffs.
Because Freedom Mobile is not owned separately, according to Lacavera, he does not anticipate it will effectively compete or drive down wireless prices at its rivals.
He asserted that the Rogers-Shaw approval has enabled this structure to persist and that the cable and phone companies, which own Canada’s wireless carriers, will want to “defend their legacy business” and maintain high prices.
In the age of information, digitalization and AI, it is hard to believe Rogers will create new jobs in Canada, in contrary, the trend is very different. Many companies are restructuring their processes and operations with high layoffs as recent McDonald’s decision to close offices and let people go shows.
What will the outcome of this newest merger be, we shall see in the near future.