OTTAWA — Rogers can buy most of Shaw and Videotron can acquire Shaw’s discount Freedom Mobile wireless unit, Innovation Minister François-Philippe Champagne announced Friday morning, allowing a major realignment of Canada’s telecom industry.
The decision comes more than two years after the $26-billion takeover was unveiled. Here’s what you need to know:
Talking Points
- Rogers and Videotron can divvy up Shaw in a major change to Canada’s telecom industry
- The deals are subject to legally enforceable conditions set by Innovation Minister François-Philippe Champagne, who said he believes the result will be lower telecom prices
The conditions: The sales are subject to detailed requirements enforced by the government, in exchange for allowing Videotron to acquire Freedom’s licences for wireless spectrum—the rights to offer cellphone service. Rogers has to maintain a “western headquarters” in Shaw’s home city of Calgary for at least 10 years and hire at least 3,000 people in the West, for example (two promises it made from the outset, Rogers pointed out). Videotron must offer service plans that are “at least 20 per cent more affordable” than current service providers’ in its new territory in B.C., Alberta and Ontario, and upgrade Freedom’s 5G infrastructure.
A fourth player? Champagne repeatedly hit two points. First, his goal is to cut consumer prices and he believes the divestment of Freedom to Videotron, in particular, will do that. Videotron will go “toe to toe” with Bell, Telus and the enlarged Rogers, he said.
Second, the conditions on the deals are in binding contracts that will be subject to regular reporting.
“When is the last time that you’ve had a contract between the federal government and telcos which included liquidated damages—in the case of Rogers, up to $1 billion?” Champagne said. He addressed the telecom companies: “We will enforce the terms, but in addition to that, don’t mess with the regulator because [if you do,] I’m going to go seek additional power from Parliament if I need to, to make sure that we drive down prices.”
The fine print: As Champagne spoke, the agreements with Videotron and with Rogers were posted to his department’s website. Notable in the contracts: Rogers’s penalties for not meeting the terms are capped at $100 million a year and $1 billion in total. Videotron’s penalties are capped at $25 million a year and $200 million in total.
A rethink: The minister also announced an immediate moratorium on “high-impact” transfers of spectrum licences. Canada’s spectrum policy is outdated and needs an overhaul, Champagne said: “I’ll be making sure that this new framework will be conducive of lower prices in Canada.”
The reactions so far: Rogers, Shaw and Videotron are happy and extended their self-imposed deadline for closing their transactions to April 7. Sen. Colin Deacon is skeptical. OpenMedia is not happy. University of Ottawa cyberlaw professor Michael Geist is not happy. Indie internet provider TekSavvy, which has an outstanding challenge of the deal before the CRTC, is not happy.