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News

Why the Rogers outage has cast more doubt over its $26B Shaw deal

After “a network system failure following a maintenance update” in Rogers’s core network took down its internet and cellphone services last Friday and Saturday, whether the company will be able to buy Calgary-based rival Shaw in a $26-billion transaction is now in more doubt.

News

Why the Rogers outage has cast more doubt over its $26B Shaw deal

By David Reevely
Rogers chair Edward Rogers, right, and Shaw CEO Brad Shaw chat before the start of the CRTC hearing looking into the merger of the two communication companies in Gatineau, Que., in November 2021. Photo: The Canadian Press/Fred Chartrand
Jul 11, 2022
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After “a network system failure following a maintenance update” in Rogers’s core network took down its internet and cellphone services last Friday and Saturday, whether the company will be able to buy Calgary-based rival Shaw in a $26-billion transaction is now in more doubt.

The Competition Bureau is already challenging the acquisition by Rogers, whose financing expires if it doesn’t close by the end of the year.

Telecom networks are necessary for whole swathes of the economy to function. Rogers has competitors, but many in Canada discovered Friday that it’s the only supplier of digital connectivity for companies and systems that don’t have ready alternatives.

The financial system: During the outage, many people found that debit transactions didn’t work.

Interac implicitly acknowledged its dependence on Rogers in a weekend tweet saying it had heard users’ frustrations and would be “adding a supplier to strengthen our existing network redundancy.” The company didn’t respond to questions from The Logic about why it relied so heavily on one provider.

Speaking on a panel at the International Economic Forum of the Americas in Montreal today, Andrew Graham of Borrowell criticized the Canadian payments system’s reliance on one provider: “We essentially have one system for peer-to-peer payments in Canada. And when it goes down, it goes down.”

The minister: Innovation Minister François-Philippe Champagne summoned Canada’s telecom CEOs to a virtual meeting this afternoon, scheduled for 3:30 p.m. ET, to talk about how they can back each other up in emergencies like Friday’s.

In March, Champagne addressed the Rogers-Shaw merger by pointedly talking about competition in the Canadian telecom marketplace. He emphasized how competition promotes affordability, but also mentioned innovation—and reliability.

The analyst: BMO’s Tim Casey wrote in a research note that the outage “is likely to introduce incremental regulatory risk to the Shaw transaction … and counters a constructive industry narrative on network performance.” In other words, government authorities are more likely to stop the deal, and the full-day outage undermines telcos’ assertions that bigger networks are stronger networks.

The share price: After reaching $76.07 a share in April, Rogers’s stock has been sliding, to a recent low of $57.93 in mid-June. It had made back some ground but fell 4.6 per cent today, closing at $58.70. Shaw’s shares fell 4.25 per cent.

With files from Jon Victor and Aleksandra Sagan

#Rogers #Shaw #Telecom

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Photo: The Canadian Press/Fred Chartrand

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