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Rogers Communication's (RCI) Takeover Deal Approved by Canada

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Rogers Communication’s (RCI - Free Report) C$26 billion takeover of Shaw Communications receives approval by Canada. This will be the biggest telecom deal in Canadian history.

This approval was the last regulatory approval needed for the deal to go through. The deal was announced almost two years ago and finally it received all the approvals.

The transfer of Shaw-owned Freedom Mobile’s wireless licences to Quebecor Inc.’s Videotron was approved by Champagne. Rogers and Shaw decided to sell Freedom Mobile for C$2.85 billion to ease competition concerns for the deal.

Rogers had first announced this deal in March 2021. The closing deadline for the deal has been pushed back numerous times. With the final approval received, the deal is expected to be completed by Apr 7, 2023.

Ottawa has ensured Rogers and Videotron agree to 21 conditions for the deal to go through. These conditions include adding 3,000 jobs in Western Canada in the coming months, Videotron must offer plans 20% lower than competition and spend C$150 million in the coming two years to upgrade Freedom Mobile’s Network.

If these commitments are not met, Rogers and Videotron would be liable to pay up to C$1 billion and C$200 million, respectively.

What Lies Ahead for RCI?

This Zacks Rank #3 (Hold) company is looking to reap benefits from its takeover of Shaw. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Rogers Communication have decreased 18.5% in the past year compared with the Zacks Consumer Discretionary sector’s decline of 18.2% in the same period.

RCI reported fourth-quarter 2022 profit of 80 cent per share, beating the Zacks Consensus Estimate by 8.11%. Revenues decreased 1.28% year over year to $3.06 billion, which missed the Zacks Consensus Estimate by 0.35%.

The Rogers and Shaw deal would bring down the number of telecoms from four to three in Canada. The other two telecommunication giants are Bell Canada Enterprise (BCE - Free Report) and Telus Corp. (TU - Free Report) .

Telus recently completed the $1.2 billion acquisition of WillowTree. This would further strengthen its position in CX and UI. It would also enable its ability to cross-sell products to mutual customers.

Bell has previously made an offer to Shaw which was better than Roger, but that deal didn’t happen. Rogers is currently focusing on making internet accessible to lesser connected parts like Town of Lincoln, Essex Centre and Harrow.

Shaw reported 2.29 million wireless subscribers in the first quarter of fiscal 2023. These subscribers will be part of Rogers user base going forward. Roger’s subscribers are also expected to gain access to Shaw’s and Tubi’s content. This should not only attract more clientele but boost revenues as well.

On the announcement of the final approval, shares of Shaw have increased more than 3% to C$40.43, just below the offer price of C$40.50 and shares of Rogers have decreased by 1.6%.

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