Rogers, Shaw, Quebecor say mediation talks with Canada’s competition watchdog failed to resolve merger objections

The $26-billion merger between Rogers Communications Inc. and Shaw Communications Inc. is headed for a lengthy hearing at the Competition Tribunal after mediation talks failed to resolve the Competition Bureau’s objections to the deal.

Rogers, Shaw and Quebecor Inc. said in a joint statement issued following the negotiations, which took place in Ottawa on Thursday, that they are “disappointed with this outcome.”

“The Bureau’s unwillingness to meaningfully engage unduly delays lower wireless prices for Canadian consumers,” the companies said. “We remain committed to completing this pro-competitive series of transactions and are confident in the strength and merits of our case in front of the Competition Tribunal, including the many benefits of these transactions to Canadians.”

The Competition Bureau could not immediately be reached for comment. The agency is attempting to block the merger of Canada’s two largest cable companies, arguing that the deal would reduce competition and result in higher cellphone bills, poorer service and less choice for consumers.

The hearing in front of the Competition Tribunal is scheduled to begin on Nov. 7, although a settlement could still be reached prior to, or even during, the hearings.

Earlier this year, Quebecor struck a deal to acquire Shaw’s Freedom Mobile for $2.85-billion. Rogers and Shaw have agreed to divest Freedom in order to address concerns that the takeover would eliminate Canada’s fourth-largest wireless carrier, which has been credited with reducing wireless prices in recent years.

The Globe has reported that Rogers put forward a settlement proposal prior to mediation, which would have seen Quebecor also acquire some fibre-optic infrastructure as part of the deal. The move was aimed at resolving the Competition Bureau’s concerns that Videotron, the Montreal-based telecom owned by Quebecor, doesn’t own enough infrastructure outside of Quebec to support Freedom’s wireless business.

On Tuesday evening, Industry Minister François-Philippe Champagne outlined the conditions under which his department – Innovation, Science and Economic Development Canada – would approve the transfer of Shaw’s wireless licenses to Videotron. Those conditions include that Quebecor commit itself to reducing wireless prices and agree not to sell Shaw’s spectrum licenses for 10 years. (Spectrum refers to the airwaves used to transmit wireless signals.)

Pierre Karl Péladeau, Quebecor’s president and CEO, has already agreed to Mr. Champagne’s conditions, saying they are in line with his company’s “business philosophy” and that Quebecor, Rogers and Shaw will incorporate the criteria into a new version of their agreement.

Some industry analysts and investors were hopeful that Mr. Champagne’s comments would help the companies negotiate a settlement with the competition watchdog, and shares of both Rogers and Shaw rose sharply in Wednesday morning trading. However, the stock prices slipped slightly in the afternoon after the Competition Bureau issued a statement that said it is still intent on challenging the merger.

On Thursday, Shaw’s stock price slipped 0.7 per cent to $36.25 on the Toronto Stock Exchange, while shares of Rogers rose 1 per cent to $57.35.

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