Rogers Announces Its Intent to Purchase Shaw for $26 Billion

Rogers and Shaw in a joint press release announcing their intended merger:

As part of the transaction, the combined company will invest $2.5 billion in 5G networks over the next five years across Western Canada, which will enhance competitiveness, offer consumers and businesses more choice and improved services, help close the digital divide between urban and rural communities, and deliver significant long-term benefits for businesses and consumers.

This transaction will create Canada’s most robust wholly-owned national network, and as a result of the combined spectrum holdings and enhanced capacity, will generate more choice and competition for businesses and consumers, as well as realizing the full benefits of next generation networks for Canadians and Canada’s productivity.

It is laughable on its face that this will create more choice and, after hearing both CEOs brag in today’s conference call (MP3) about the “synergies” in this transaction, it is hard to believe it will create 3,000 jobs either.

The Canadian ISP and cellular markets already have little competition. Depending on where you live, you can typically only choose between only two or three providers for each — but it is already hard to tell the difference between any of them. Most offer near-identical services at near-identical price points and, when one provider makes a change, the others will follow in lockstep.1

Rogers and Shaw have a quirky backstory. At a local level, they only compete in cellular service. They made a point to highlight their geographically separated wired internet service on their conference call and in press releases today, but failed to explain that it was because they made a deal in 2000 to entirely avoid competing on internet service. Rogers and Shaw are making the argument that they compete on cellular service but they do not compete on wired internet and, because of that, they would like to combine companies so they can not compete on both and this will somehow create more competitive options across Canada.

On a cynical level, this deal is almost a formality. It will certainly reduce the hypothetical incentive for either company to expand and create more actual choice, but Canadians have only the illusion of that right now, even down to their technologies. As was pointed out in today’s conference call, Shaw and Rogers both use the same Comcast-licensed networking stuff and the same video service. These are not markets defined by their innovation or competition.

And how will it create jobs, anyhow? Shaw has frequently “restructured” its company inducing buyouts and layoffs. In 2018, Shaw gave over six thousand long-term non-union staff just two weeks to decide whether to accept a buyout offer from the company. Shaw was not in a dire financial position (PDF) at the time to necessitate massive cost-cutting — nor, for what it’s worth, is it now; it reported margins of over 44% last quarter (PDF). It expected only ten percent of those offered the deal to accept, but the environment was so “grim” and demoralizing that nearly half said they would take the buyout, costing Shaw hundreds of millions of dollars extra. Why would the combined companies need to hire another three thousand people? If the regulatory agencies permit this acquisition, I bet that is the first commitment that will be casually forgotten as the combined company likely announces mass layoffs.

One more thing, from the press release:

Additionally, Rogers will commit to establishing a new $1 billion Rogers Rural and Indigenous Connectivity Fund dedicated to connecting rural, remote and Indigenous communities across Western Canada to high-speed Internet and closing critical connectivity gaps faster for underserved areas. As part of this fund, Rogers will consult with Indigenous communities to create Indigenous-owned and operated Internet Service Providers, which would leverage Rogers’ expanded networks and capabilities to create sustainable, local connectivity solutions.

It seems awfully cruel to be holding hostage the promise of rural and Indigenous expansions to sweeten the likelihood of regulator approval of this anticompetitive deal.

  1. In Calgary, where I live, Rogers has a bring-your-own-device cell plan for $80 per month that includes 30 GB of high-speed data, unlimited slow data after that, unlimited nationwide talk, text, and MMS, call display, and voicemail. Telus’ $80 per month plan is identical to that, as is Bell’s. If you’re comfortable with spending exactly $100 per month, less taxes and fees, all three providers will give you 50 GB of high-speed data per month. All three providers even charge the same one-time $45 new account fee.

    The same story repeats in Ontario, British Columbia, Nova Scotia, and probably most other provinces. But if I were to move next door to Saskatchewan or across the country to Quebec, the cost of that 50 GB plan drops to $85 per month, and if I am comfortable with only 15 GB of high-speed data per month, I could spend as little as $65 per month. Both of those provinces have other providers — Sasktel and Vidéotron — and, unsurprisingly, cellular service is much less expensive there. ↥︎