Recently, two of Canada’s major telecom giants announced a blockbuster merger worth $26B, which could reduce the four large wireless players to three. Anthony Okolie speaks with Andriy Yastreb, Telecom and Media Analyst, TD Asset Management, about the implications for consumers and the industry.
- Hey, Tony. I think the deal is mostly about 5G. And Rogers was in a bit of a disadvantage here in western Canada, because it doesn't own a deep fiber network in Alberta and BC. Those networks in those two provinces are owned by Shaw and Telus. And, as a reminder, Telus has a network-sharing agreement with Bell, which means that Rogers was the only company that didn't have this kind of infrastructure there.
And from Rogers' perspective, it had two options-- either to build this infrastructure across two provinces, which would be quite expensive to duplicate what is already there, or they could acquire Shaw. And that's what they announced.
- And what are the implications for consumers from this potential merger?
- I think there are both positives and negatives here. I think on the positive side, Rogers committed to more investments in infrastructure in the two provinces. So they committed to invest $2.5 billion into 5G, basically to accelerate rollout of 5G. And they also committed to invest $1 billion into rural broadband access in Alberta and BC, which will provide broadband service into areas that don't have that right now.
And I think from Rogers' perspective, it's better for them to invest into expanding networks and providing service to people that don't have it right now versus basically spending similar amounts on duplicating assets that are already there owned by Shaw.
And on the negative side, as you mentioned in the beginning, obviously there's an aspect of if this deal is approved as it is, it will consolidate the market on the wireless side from four to three players. And Shaw's Freedom Mobile has been quite aggressive in gaining market share and providing quite attractive low-priced mobile plans to Canadians. So, if the deal is approved without any changes, there is an issue of less competition and less options for Canadians in the mobile market.
- And what about the antitrust issues and government approval of the deal?
- Well, I think on antitrust issues, there are two parts of this question. On the cable side, which is basically the largest part Shaw's business, if you look at it from a financial perspective, Shaw and Rogers are not really competitors, because they have infrastructure and they operate in different provinces. So Shaw operates in Alberta and BC, and Rogers in Ontario and Eastern Canada. So they're not really competitors in any of the local markets. So there shouldn't be any regulatory issues on that side.
And it's a different story on the wireless side, because there are four major competitors in Canada. And this consolidation would decrease that number to three. And as I mentioned previously, Freedom has been quite aggressive and quite successful in this market, growing market share, they have now close to two million subscribers.
So from my perspective, it's hard to see how this deal gets approved on the wireless side without some kind of divestiture or some kind of solution on that side. And given that on the cable side there is no problem, I think the real question is not whether the deal gets approved or not. The real question is how much of the Freedom Mobile assets and subscribers Rogers will be required to divest to get this bill approved.
- Andriy, Thank you very much for your insights.
- Thank you, Tony. Glad to be here.