Back to top

Image: Bigstock

Rogers (RCI) Pauses Merger Deal With Shaw Over Antitrust Probe

Read MoreHide Full Article

Rogers Communications (RCI - Free Report) recently announced that the company will not close the proposed $26 billion merger with Shaw Communications (SJR - Free Report) until the resolution of the concerns of the Federal Commissioner of Competition, either through a negotiated agreement or through a verdict by the Competition Tribunal.

This will prevent the Competition Bureau from seeking an interim injunction as planned, to block the deal over concerns, which include reduced competition in wireless services, poor service quality and higher prices for consumers.

The planned merger, announced last year, received approval from Shaw’s shareholders and the Canadian Radio-television and Telecommunications Commission but still requires approval from the Competition Bureau and Innovation, Science and Economic Development Canada.

The acquisition enables Rogers to use Shaw's fiber network in Western Canada for 5G backhaul. As part of the transaction, the companies will together invest $2.5 billion in 5G networks over the next five years across Western Canada, which will enhance competitiveness.

Antitrust Probe Delays Deal Closure

Rogers and Shaw have agreed to extend the timing of the deal to Jul 31, 2022, to allow continued engagement with the Competition Bureau.

Government officials and competition authorities have indicated that the wholesale transfer of Shaw’s wireless assets would not be permitted due to concerns about reduced competition in Canada’s wireless landscape, wherein Rogers, Bell Canada Enterprise (BCE - Free Report) and Telus (TU - Free Report) currently serve about 87% of Canadian subscribers.

In first-quarter 2022, Telus added 148K net customers, up 3K from last year. It was inclusive of 46K mobile phones and 46K connected devices, in addition to 30K Internet, 26K security and 10K TV customer connections.

Bell Canada Enterprise had previously made an offer to buy Shaw Communications. Bell’s initial bid for Shaw valued the company at $37 per share, higher than Rogers’ initial bid of $35. However, Bell and Shaw Communications could not agree on other conditions, which allowed Rogers to seal the deal.

Rogers and Shaw have offered to address concerns regarding the possible impact of the deal on Canada’s competitive wireless market by proposing to sell Shaw’s wireless business, Freedom Mobile, which has about two million customers in Ontario, Alberta and British Columbia.

Strengthening Wireless Internet Businesses to Aid Growth

Rogers Communications is expected to benefit from continuing strong demand for data by consumers and businesses. An improving Wireless penetration rate is anticipated to boost the subscriber base.

The company expects the demand for broadband data to witness growth of about 30% per year. Rogers Communications currently offers 1-gigabyte speed to its user base.

This Zacks Rank #3 (Hold) company continues to benefit from Internet subscriber additions and the shift of Internet users to higher-usage tiers. As of Mar 31, 2022, the retail Internet subscriber count was nearly 2.245 million, up 89K from the year-ago quarter. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

The company’s investments in the 5G spectrum and partnerships with leading real estate companies to support 5G infrastructure deployment are catalysts. It expanded the Rogers 5G network to 1500 communities across Canada, which will be a major growth driver over the long haul.

Further, the acquisition of Shaw is expected to expand the user base. It also enables Rogers to use Shaw's fiber network in Western Canada for 5G backhaul. As part of the transaction, the companies will together invest $2.5 billion in 5G networks over the next five years across Western Canada, which will enhance competitiveness.

Published in