Videotron takeover of Freedom “dream scenario”, Tribunal hears

The takeover of Shaw Communications Inc.’s Freedom Mobile unit by Quebecor Inc.’s Videotron would be a “dream scenario”, Shaw’s chief financial officer said Monday. Trevor English was testifying before the Competition Tribunal looking into Shaw’s proposed merger with Rogers Communications Inc. “I don’t think you could have got a better solution here in terms of the fourth- and fifth-largest wireless operators coming together with scale and size, 3.3 million customers across the four most populous provinces in this country,” he stated. The new company will have the resources to compete effectively going forward, he added. Competition Bureau attorney Alexander Gay raised a series of objections to the line of questioning, even though Chief Justice Paul Crampton had earlier ruled the questions were within bounds. Gay repeatedly and heatedly put forth his objections, stating he wanted to get them on the record. “This is completely improper,” Gay expounded. “That’s for Videotron to comment on and no one else.” Shaw had been shopping the company around for a while, the CFO admitted. At one point there was an offer from Company A, which Shaw lawyer Kent Thomson identified as BCE Inc. English said there were various options for selling the telecom firm but decided to go with Rogers. “The best outcome for all constituents – not just shareholders, but most importantly our customers – is a partnership and a sale to a strategic operator that has operational scale to effectively compete in the future,” he said. Shaw is not in danger of going bankrupt, but its share price has stagnated on the stock market, English continued. Its telecom assets in Alberta and British Columbia are dwarfed by the market power of Telus Corp. “Since 2016 we’ve lost over 15 per cent of our wireline consumer base, and the majority of that loss has been to Telus,” he stated. English will be cross-examined beginning Tuesday morning. Earlier in the day Quebecor CEO Pierre Karl Péladeau gave his testimony. He walked the Tribunal through a history of his company, including Videotron’s purchase of spectrum in 2008, 2014 and 2021. It bought spectrum nationally in anticipation of being a cross-country operator. “We used to be quite a conventional media operation,” he told Videotron lawyer John Rook. That changed when Quebecor bought Videtron in 2000. It tried to buy Fido Mobile from Microcell Telecommunications Inc. in 2004 but was outbid by Rogers and Telus. Rogers ultimately bought the company. Videotron and Rogers negotiated a deal that saw the Quebec carrier operating as a mobile virtual network operator (MVNO). The pair agreed to a third party internet access (TPIA) protocol, with Rogers supplying bandwidth to Videotron. It also serves as a facilities-based telecom. Its success in Quebec inspired it to seek expansion across Canada. The morning session was taken up by testimony from Mohamed Drif, VP of the technical branch of Videotron. Although most of his testimony was heard in camera due to commercial concerns, he touched upon much of the same territory that his boss would mention in the afternoon sitting. Gay took him through an affidavit sworn by former Videotron senior vice president of market expansion Pierre Bonin. Bonin listed a handful of companies that could provide TPIA agreements to the Quebec telecom. Drif said there were actually more firms out there who could do it. “Nobody’s going to take us hostage because we’re going to build whatever we have to build,” he said according to a simultaneous translation. Friday’s session saw Dalhousie University economics professor Lars Osberg testifying on behalf of the Competition Bureau. He presented a paper which stated that the true winners in a Rogers-Shaw merger would be the shareholders, especially those in the Rogers and Shaw families. Other telecoms would be able to raise prices in the face of diminished competition, he said, benefitting their stockholders. “When we look at the surveys of Canadian business or any other of the surveys of top wealth holders, the Rogers family typically owns in the top 16, so that’s the top one in a million, so that’s the top one per cent of the top one per cent of the top one per cent,” Osberg stated. “The Shaw family isn’t quite as rich, only two billion, but they’re close enough.” The professor spoke on the last day of the Competition Bureau presenting its case. Financial observers were skeptical of the bureau’s efficiency. “We can’t help but wonder–IS THAT REALLY IT–in terms of what we witnessed over the past two weeks at the Tribunal hearing,” Adam Shine of the National Bank of Canada wrote in a Friday note. “We don’t believe a strong case was put forward opposing the remedial solution as part of the Rogers-Shaw deal.” Shine speculated that the bureau expected to build a strong case on the grounds of market efficiencies but saw the wind taken out of its sales with the announcement of the Videotron-Freedom deal. The first witness for the respondents was Videotron VP finance Jean-François Lescadres. He reported that the company now has 1.7 million wireless subscribers in Quebec and in eastern Ontario. The firm believes in bundling services to customers but doesn’t think it needs to own infrastructure. It began with a TPIA in Abitibi with Bell subsidiary Cablevision. Lescadres said Quebecor decided against buying Shaw Mobile because Shaw uses the wireless service to prevent churn of wireline customers. Videotron could not charge Shaw prices and still make a profit. “It doesn’t make sense for us basically to service those customers and that would have basically been against the movement that we want to bring which is basically to bring lower prices to the customers,” the vice president stated. –Reporting by Paul Park at ppark@thewirereport.ca and editing by Michael Lee-Murphy at mleemurphy@thewirereport.ca

Videotron takeover of Freedom “dream scenario”, Tribunal hears

News | November 22, 2022

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Videotron takeover of Freedom “dream scenario”, Tribunal hears

News | November 22, 2022

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