Shaw has yet to recoup $4.5-billion investment in Freedom Mobile, CFO tells tribunal | Canada News Media
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Shaw has yet to recoup $4.5-billion investment in Freedom Mobile, CFO tells tribunal

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Sean Kilpatrick/The Canadian Press

Shaw Communications Inc. SJR-B-T has not recouped the $4.5-billion it has invested in its wireless business since 2016, an executive for the Calgary-based telecom told a Competition Tribunal hearing into the proposed $26-billion merger of Rogers Communications Inc. RCI-B-T and Shaw.

Trevor English, chief financial and corporate development officer at Shaw, said the investment, which includes the $1.6-billion that Shaw paid to acquire wireless carrier Freedom Mobile, is “net negative” by about $3.3-billion. Shaw has also not generated any free cash flow from its wireless business, he noted.

“We have not been able to increase our dividend since 2016 when we made the investment into Wind,” Mr. English said. (Shaw rebranded Wind Mobile to Freedom Mobile in late 2016.)

As part of the proposed merger between Rogers and Shaw, the cable companies have agreed to divest Freedom, Canada’s fourth-largest wireless carrier, to Quebecor Inc.’s QBR-B-T telecom subsidiary, Videotron Ltd., for $2.85-billion. That was in order to address concerns that the merger would hurt competition in the wireless sector.

Acquiring Freedom Mobile’s 1.7 million customers would double the size of Quebecor Inc.’s wireless business, giving it a “significant footprint” to grow outside its home province, Pierre Karl Péladeau, the telecom’s president and chief executive officer, told the tribunal earlier on Monday.

Despite the divestiture, the Competition Bureau is attempting to block the merger of Canada’s two largest cable companies, arguing that the deal would leave Freedom a weakened competitor because Rogers would acquire some of the assets that currently support the carrier.

Rogers, Shaw and Quebecor have contended that the deal will make the wireless sector more competitive by allowing Videotron to expand outside its home market of Quebec. Rogers and Shaw have also argued that combining their wireless networks would allow them to better compete against Telus in Western Canada.

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Shaw has lost more than 15 per cent of its cable and internet market share to Telus since 2016, Mr. English said. That underperformance has affected the company’s share price, he said.

“Our share price hasn’t moved in 10 years – it’s basically flat, while the majority of our peer group, including Telus, has more than doubled,” Mr. English said.

The Competition Bureau has argued that separating Freedom from Shaw’s cable network would make it more difficult for the carrier to compete.

Mr. English noted that 70 per cent of Shaw’s wireless business is in Ontario, where Shaw has no cable assets. He said Shaw has not integrated Freedom with its wireline business in a “material manner.”

Mr. Péladeau told the tribunal that if Videotron wants to enjoy the same level of growth it has previously enjoyed, it must expand beyond Quebec.

He declined to comment on his company’s strategy if it is successful in acquiring Freedom, noting that competitors “are listening.”

“I’m not sure we would want to mention in a public arena what is our strategy in terms of getting customers out of [rivals’] customer base,” he said.

However, Mr. Péladeau said that while immigration drives growth in the wireless industry, Videotron “would like to be even more successful than the flow of immigrants that Canada receives and grow our business even larger than that.”

During cross-examination, Antoine Lippé, a lawyer for the Competition Bureau, noted that Quebecor has previously acquired wireless airwaves with the stated intention of expanding outside of Quebec, but later sold them at a profit.

Mr. Lippé also noted that Mr. Péladeau has previously referred to companies that purchase wholesale access to other telecoms’ networks as “parasites.” If Quebecor is successful in acquiring Freedom Mobile, it will rely on such wholesale access to provide wireless services.

The Montreal-based company has struck a deal that would allow it to access the combined Rogers-Shaw entity’s cable network in Western Canada at what the companies have described as “favourable rates.” Those rates are below the mandated wholesale rates set by the Canadian Radio-television and Telecommunications Commission.

Mr. English described the terms of the deal between Rogers, Shaw and Videotron as a “dream scenario” in terms of enabling Videotron to carry on the Freedom business.

“I don’t think you could have gotten a better solution here in terms of the fourth- and fifth-largest wireless operators coming together with the scale and size of 3.3 million customers across the four most populous provinces in this country,” Mr. English said.

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S&P/TSX gains almost 100 points, U.S. markets also higher ahead of rate decision

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TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.

“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.

In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.

The S&P/TSX composite index closed up 93.51 points at 23,568.65.

While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.

Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.

But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.

Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.

“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.

“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.

A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.

It would also be “counter to what they’ve signaled,” he said.

More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.

“That’s going to be more important than the size of the cut itself,” he said.

In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.

“Here, the labour situation is worse than what we see in the United States,” he said.

The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.

The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.

The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.

— With files from The Associated Press

This report by The Canadian Press was first published Sept. 13, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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S&P/TSX composite up more than 150 points, U.S. stock markets also higher

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TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.

The S&P/TSX composite index was up 171.41 points at 23,298.39.

In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.

The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.

The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.

The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.

This report by The Canadian Press was first published Aug. 29, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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