Lack of network sharing arrangement “notable” in Quebecor Freedom deal: analyst

The biggest piece of Friday night's blockbuster announcement of a deal that would see Quebecor Inc. emerge victorious as the buyer of Shaw Communications Inc.'s Freedom Mobile wireless brand as part of the latter company's merger with Rogers Communications Inc. was what the deal didn't include, according to one analyst: a network sharing agreement. The lack of a network sharing agreement may mean that Quebecor picked up Freedom at a cheaper price than many expected, Canaccord Genuity analyst Aravinda Galappatthige wrote in a Monday note. According to the Friday release, Quebecor is set to pick up the Freedom Mobile for $2.85 billion, lower than previously reported bids closer to $4 billion. Network sharing arrangements had become a central focus of the negotiations around the Rogers-Shaw transaction last month, after Telus Corp. and Globalive announced such an agreement in the case that Globalive purchased Freedom Mobile. Rogers boss CEO Tony Staffieri told investors at a TD Securities Telecom & Media Conference in late May that he thought a network sharing arrangement wouldn't be required to win over the Competition Bureau and hopefully stave off a protracted proceeding before the Competition Tribunal. With the announcement Friday, Rogers and Shaw appear to have bet long on that notion. According to Galappatthige, while the deal with Quebecor is "moderately negative" for incumbents because of the Quebec-based company’s relative strength compared to other potential buyers, that negative is tempered by the lack of a network sharing agreement. "Rogers, BCE and TELUS would have preferred one of the other proposed buyers to have taken Freedom, given that is arguably the strongest competitor the incumbents could face," he wrote. "e believe that Rogers’ shareholders (and even BCE, TELUS investors) can be relieved by the absence of a network share arrangement as part of the agreement," the analyst added. Galappatthige also speculated that it would likely take at least a year for Quebecor to ramp up its presence in the west, and that the move would potentially create vulnerabilities for the company in its home province as the incumbents could step up their promotional activity there. There is, also, the hanging issue of Quebecor's $850.3 million lawsuit in Quebec Superior Court against Rogers over the two companies' network sharing arrangement in Quebec, which Quebecor says has been allowed to deteriorate to the point that Rogers has effectively created a parallel network in a way that violates the agreement between the two companies. "Resolving prior issues that Rogers and Quebecor disclosed with respect to their 4G network sharing arrangement in Quebec will have to wait for a later date as this would have likely complicated and prolonged negotiations for Freedom," National Bank analyst Adam Shine wrote in a Monday note. It’s possible, however, that we could see Quebecor withdraw its $850M lawsuit against Rogers in the future and other matters getting resolved related to the 4G arrangement but not necessarily anything associated with 5G where no deal exists." If Rogers and the Competition Bureau intend to pursue mediation at this stage of the process before the Competition Tribunal, they must file their briefs by June 28. — Reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Paul Park at ppark@thewirereport.ca

Lack of network sharing arrangement “notable” in Quebecor Freedom deal: analyst

News | June 20, 2022

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Lack of network sharing arrangement “notable” in Quebecor Freedom deal: analyst

News | June 20, 2022

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