Business
Rogers pushes back against competition watchdog on first day of hearing on Shaw deal
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Rogers Communications Inc. is pushing back against Canada’s competition watchdog in the first day of a weeks-long hearing on its $26-billion proposed takeover of Shaw Communications Inc., arguing that the deal is “pro-competitive.” The price tag includes $6 billion of debt.
Earlier in the day, the regulator reinforced its opposition to the takeover and intention to fully block it.
In the Competition Bureau’s opening arguments Monday, it reiterated its position that the planned sale of Shaw-owned wireless carrier Freedom Mobile to Quebecor Inc.’s Videotron Ltd. is not enough to eliminate its concerns that the broader merger would lead to worse services and higher prices for consumers.
The sale of Freedom Mobile to Videotron would see Quebecor buy all of Freedom’s branded wireless and internet customers as well as all of Freedom’s infrastructure, spectrum and retail locations in a move that would expand Quebecor’s wireless operations nationally. Quebecor agreed to buy Freedom in a $2.85 billion deal earlier this year.
The regulator said separating Freedom from Shaw would make it a diminished competitor because it would remove Freedom’s access to certain shared human resources and synergies the company “has enjoyed” as part of Shaw.
It said the divestiture would not replace the “vigorous” competitive presence offered by Shaw.
The Competition Bureau said the sale would create a situation where Videotron is likely to be more “aligned” with Rogers and more vulnerable to anti-competitive actions by Rogers.
Rogers disputed this claim in its opening arguments, saying that dependence on Rogers is “very far from reality.”
Rogers said the Competition Bureau’s view of Videotron is “problematic.” It said the regulator is underestimating Videotron’s “capacities and abilities” and discounting its success in Quebec.
Rogers added that the planned sale of Freedom to Videotron would create an “invigorated” competitor in the wireless market, and rhetorically asked why Quebecor would choose to spend almost $3 billion to acquire a business that is doomed to fail.
Additionally, the Competition Bureau said that barriers for Videotron to enter a new market are high. Videotron only operates in Quebec and a small part of Ontario.
The barriers include the challenge of acquiring spectrum, which is scarce and expensive, building infrastructure, retail distribution, and getting customers on board, the Competition Bureau said.
It also noted that even with the sale of Freedom, Rogers will still be acquiring customers from Shaw Mobile.
In its opening arguments, Shaw called the Competition Bureau’s desire to prevent the deal from happening a “dramatic overreach,” adding that blocking the deal would set the telecom industry back a generation.
Shaw said Rogers would never own or operate Freedom, explaining that Videotron would acquire Freedom before Rogers and Shaw merge.
Shaw added that it has operated Freedom as a standalone company that can “easily” and “cleanly” be separated and sold.
The company also said that Videotron would become a more viable competitor than Freedom is now, especially because the sale would allow Freedom to offer 5G services, which it hasn’t been able to do.
In a separate decision last month, Minister Francois-Philippe Champagne put new conditions on the Rogers-Shaw deal, specifically targeting the sale of Freedom to Videotron.
Champagne — who as minister of innovation, science and industry must approve any spectrum licence transfer — left the door open to a revised agreement, saying he had two major stipulations.
He said Videotron would have to agree to keep Freedom’s wireless licences for at least 10 years.
He also said he would “expect to see” wireless prices in Ontario and Western Canada lowered by about 20 per cent, putting them in line with Videotron’s current Quebec offerings.
In response, Quebecor said it would accept the conditions, agreeing to incorporate them in a revised deal.
In its opening arguments, Shaw also argued that the Rogers-Shaw deal would boost competition not lessen it, particularly in western Canada, due to Rogers’ size, scale and resources being substantially greater than Shaw’s but relatively equal to Telus, which dominates that part of the country, consequently putting Telus and Rogers on equal footing.
The Competition Bureau is one of three regulatory agencies that must approve the deal before it can close, in addition to the CRTC and Innovation, Science and Economic Development Canada.
The hearing is expected to last four weeks with oral arguments scheduled for mid-December.
Rogers is hoping to close the Shaw deal by the end of the year, with a possible further extension to Jan. 31, 2023.
For the most part, drivers in the Maritimes are paying slightly less for gas Friday, but the cost of diesel is up.
NOVA SCOTIA
In mainland Nova Scotia, gas is down three cents to a minimum price of 152.9 cents per litre.
In Cape Breton, motorists are now paying a minimum price of 154.8 cents per litre for regular self-serve gasoline.
Diesel increased 2.5 cents, the minimum price is now 137.7 cents per litre.
The minimum price for diesel in Cape Breton is now 139.6 cents per litre.
PRINCE EDWARD ISLAND
On Prince Edward Island, gas increased 1.1. cents, the minimum price is now 165.6 cents per litre.
Diesel on the island increased 1.5 cents, the minimum price is now 157.5 cents.
NEW BRUNSWICK
Meanwhile, in New Brunswick, gas is down 2.4 cents, the maximum price is now 164.6 cents per litre.
Diesel is up slightly to 0.6 cents, the maximum price is now 158.6 cents a litre.
Statistics Canada says the unemployment rate rose to 5.2 per cent in May, marking the first increase since August 2022.
The rate for Newfoundland and Labrador rose slightly to 10.2 per cent from 10.1. In metro, the jobless rate in May hit 5 per cent, a slight increase from the 4.9 recorded in April.
The job report comes two days after the Bank of Canada raised its key interest rate by a quarter of a percentage point, citing concerns about a string of hot economic data, including low unemployment.
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Canada’s labour market showed minor signs of softening in May, but economists and other experts said the Bank of Canada likely wouldn’t read the numbers as a sign that its rate-tightening campaign aimed at bringing down inflation is working.
Unemployment rose to 5.2 per cent from five per cent, the first increase since last August, according to the Statistics Canada Labour Force Survey for May.
The numbers released Friday said the economy lost 17,000, though employment overall was little changed.
Randall Bartlett, senior director of Canadian economics at Desjardins, cautioned that job losses were concentrated among the youngest workers in Canada as they enter the summer jobs season, and “not necessarily characteristic of what we’re seeing in the underlying labour market.” He said the job losses can’t yet be seen as a “trend.”
“We need to see how this shakes out in the months ahead, and then we’ll decide what it means for monetary policy,” Bartlett told BNN Bloomberg in a television interview.
Dominique Lapointe with Manulife Investment Management noted “small loss” mostly among the younger age group of workers should be interpreted with caution, as seasonal adjustments can be challenging for that demographic. He also pointed out that employment rose among core-aged workers.
WHAT DOES IT MEAN FOR THE BANK OF CANADA?
The jobs numbers came days after the Bank of Canada resumed its interest rate tightening cycle, hiking its key rate by a quarter of a percentage point to 4.75 per cent after a string of unexpectedly hot economic data.
Lapointe said he is expecting another rate hike next month based on recent inflation and GDP readings. He said the jobs numbers aren’t significant enough to change the central bank’s path.
“I don’t think this morning’s (Labour Force Report) report would change what’s going to happen in July. We’d probably need to see way more weakness in other economic indicators before the next meeting for them to change their course,” he said.
Jay Zhao-Murray, FX Analyst at Monex Canada, noted that the data that went against economists’ expectations for job gains in May, but agreed that the numbers wouldn’t shift the central bank’s thinking.
“With employment cooling on the whole, this latest report does weaken the case for further hikes from the Bank of Canada, but given the details and composition of employment changes, we do not think it would materially change the Bank’s latest view on the economy,” he said in a written statement.
He said he is expecting another 25-basis-point rate hike from the Bank of Canada in July, “unless the subsequent data also confirm the negative signal from today’s report.”
Economist Tuan Nguyen of RSM Canada, meanwhile, said “there are reasons to believe that May’s decline in net jobs is not a fluke,” given that most of the job losses were in business, professional services, and trades.
Taken with an uptick in the unemployment rate, he pointed to signs that “a long-awaited softening of the labor market has finally arrived.”
“Following Friday’s job data, the Bank of Canada’s decision to hike the rate to 4.75 per cent … might be the last one in this cycle. Nevertheless, we continue to believe that rates should remain at that level at least until the end of the year to ensure substantial easing of inflation,” Nguyen said in a written statement.
WAGES
Wages, which the Bank of Canada has zeroed in on as a particular concern in its inflation fight, rose 5.1 per cent year-over-year in May.
Bartlett made the case that wage growth in Canada is more “subdued” than it might appear.
He noted that StatsCan’s monthly wage reading is one of several wage indicators that the Bank of Canada looks at, and others appear to be decelerating more quickly, meaning that “wages are not the concern we had anticipated” when it comes to the possibility of a “wage-price spiral” some economists fear could push inflation higher.
Regardless, Bartlett said he expects the Bank of Canada will interpret the labour force reading as a sign that Canada’s labour market remains “very tight.”
“It needs to see the unemployment rate move meaningfully higher (and) the job vacancy rate move meaningfully lower in order to be able to see wage growth come down to a level that’s consistent with two per cent inflation,” he said.
CONSUMER SPENDING CLUES
As for the sectors where people lost jobs in May, Bartlett said the data holds clues that Canadians are still spending money despite the high-interest rate environment.
“It’s not necessarily in sectors where you would think tight monetary policy and higher interest rates would be leading to job losses,” Bartlett said.
Accommodation, food services, arts and recreation were not hit particularly hard with losses, but those are areas where people generally cut back on spending in tough economic times, Bartlett said.
“We may see the consumer continue to be relatively healthy in the second quarter, and it may be maybe pointing to that still,” he said.
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