Canada’s antitrust tribunal approved Rogers Communications Inc’s C$20 billion ($14.77 billion) bid for rival Shaw Communications Inc, ending months of uncertainty over the merger that would create the country’s second-largest telecom firm.
The ruling late on Thursday dismissed the Commissioner of Competition’s plea to oppose the merger, which has been seen as a test case for the country’s ability to foster competition in sectors ranging from telecoms to finance.
Analysts are now counting the days before the merger formally closes. Rogers and Shaw await approval from Industry Minister François-Philippe Champagne to transfer Freedom Mobile Inc’s spectrum license to Quebecor Inc’s Videotron unit.
Champagne had in October hinted his intention to approve the sale as long as Videotron held Freedom Mobile’s assets for at least 10 years and kept prices in Quebec comparable to current levels, which are 20% lower than in Ontario and Western Canada.
Canada’s concentrated telecoms market has the highest wireless bills in the world for consumers, according to Rewheel, a Finnish telecom research firm.
Rogers may have to pay about C$260 million in consent fees to bondholders if the deal does not close by Dec. 31, said Adam Shine, a telecom analyst with National Bank of Canada.
“It remains to be seen if the companies can close their deals on Saturday within about two days of notice of the Tribunal’s decision,” Shine said in a research note, adding they will need quick movement from the government.
The two companies and the competition bureau duked it out at the tribunal after Shaw’s proposal to sell Freedom Mobile to Videotron for C$2.85 billion to facilitate the deal was rejected by the watchdog. The bureau had argued that Quebecor would not be a viable competitor to a merged Rogers-Shaw.
In its Thursday ruling, however, the tribunal said acquiring Freedom Mobile would allow Videotron to expand in new markets and ensure robust competition.
It also said the Rogers-Shaw merger after the sale of Freedom Mobile may not prevent or lessen competition or lead to “materially higher” prices or a decline in quality of service.
“I am very disappointed that the Tribunal is dismissing our application to block the merger between Rogers and Shaw,” said Matthew Boswell, Commissioner of Competition.
“We are carefully considering our next steps.”
The Competition Bureau later confirmed that it was appealing the tribunal’s ruling.
The two companies said they would now work for government approval for the deal, while adding that they were disappointed by the bureau’s decision to appeal.
“The deal will receive all necessary approvals. The objection by the Competition Bureau was the main hurdle to overcome,” Cormark Securities analyst David McFadgen said.
He said there are “significant” revenue synergies for Rogers from bundling services, while Quebecor has better growth prospects from the Freedom Mobile deal.
Shaw shares surged nearly 10% on the Toronto Stock Exchange, while Rogers was up more than 4%. Quebecor was up 3% on Friday. ($1 = 1.3544 Canadian dollars)
(Reporting by Divya Rajagopal, Akriti Sharma and Akash Sriram; Editing by Arun Koyyur, Josie Kao and Anil D’Silva)