Rogers’ sale of Shaw wireless assets may come down to how much it can keep

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Rogers Communications Inc. may be moving toward a sale of Shaw Communications Inc.’s wireless assets to ensure regulatory approval for the $26-billion mega-merger of the former telecom rivals, but who ends up buying will be determined by factors including the price tag and whether Rogers is able to keep any of the wireless unit.

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On Monday, media reports indicated Rogers has already set up a data room to entertain prospective buyers ahead of the merger’s anticipated June closing. Quebecor Inc., an investor group led by Wind Mobile founder Anthony Lacavera and Halifax-based telco Eastlink are among the names being floated as potential suitors for the assets.

Lacavera, whose company Globalive founded Wind Mobile more than a decade ago, told Bloomberg News on Monday that he was interested in getting back into the business by buying the assets now owned by Shaw under the Freedom Mobile banner.

“Globalive maintains its interest in Freedom Mobile assets and have indicated (the) same publicly and privately to Rogers,” Lacavera said.

The tie-up of Rogers and rival Shaw was never going to be easy because of their overlapping wireless operations. In a statement earlier this month, François-Philippe Champagne, the federal minister of innovation, science and industry confirmed what analysts had been expecting: the marriage is unlikely to move ahead without the jettisoning of at least some of Shaw’s wireless operations, housed within Freedom Mobile, which grew out of the Wind operations purchased by Shaw in late 2015 for $1.6 billion.

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Champagne said “the wholesale transfer of Shaw’s wireless licences to Rogers is fundamentally incompatible with our government’s policies for spectrum and mobile service competition,” adding that he would not permit it.

Lacavera is understood to be working with a group of investors including private equity players in the hunt for the wireless assets. But his group is not alone. Sources say Quebecor Inc., which has long held designs on becoming a national wireless player, is also interested and is seen as a front-runner by some telecommunications analysts.

A spokesperson for the Montreal-based telecommunications and media company declined to comment Monday on Quebecor’s interest in the assets or the Rogers process, but chief executive Pierre Karl Péladeau has been public since the Rogers-Shaw combination was announced about his desire to shake up Canada’s wireless landscape, which he has criticized as an “oligopoly” that makes wireless services unnecessarily expensive for consumers.

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In a note to clients earlier this month, RBC Capital Markets analyst Drew McReynolds said there were two scenarios in which he could see Quebecor walking away with the prize. In one, the Montreal-based telco would prevail in the first round, while in the other, the assets would be sold to a “Rogers remedy partner” — whatever transaction would get the Shaw deal done  — and could eventually be picked up by Quebecor.

The RBC analyst also laid out a scenario in which “a deep-pocketed financial player” picked up the Freedom Mobile assets.

Jerome Dubreuil, an analyst at Desjardins, told his clients in a note earlier this month that Quebecor is among the front-runners because the Montreal-based firm is in a position to make an “attractive” offer for the assets, has some spectrum holdings where Freedom operates, and would get synergies from the deal. Quebecor is also likely to be viewed by the federal government as a “credible operator” poised to continue competing in the market.

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However, Dubreuil said it remains “uncertain” that Quebecor will able to secure the Shaw assets due to factors including bad blood between Rogers and Quebecor over prior business dealings, potential rival bidders and a price tag that could reach $4 billion.

Besides Quebecor and the Lacavera-led group, dark-horse contenders include rural internet service provider and mobile network operator Xplornet, and Halifax-based Eastlink, which operates a hybrid fibre optic network and has television, mobile, internet, phone and smart home services.

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Adam Shine, a telecommunications analyst at National Bank Financial, said it is possible that only some of the wireless assets will have to be sold to win regulatory approval for the Shaw-Rogers marriage, which could affect who walks away with them.

In a note to clients earlier this month, he said some of Shaw’s wireless licences were acquired in 2019, so they would likely be part of a broader prohibition on transferring assets to Rogers. However, Shine noted that Champagne used the word “wholesale” when describing the type of transfer he would not permit, suggesting that “Rogers might be able to retain some of Shaw’s wireless licences.”

Andrew Garas, director of media relations at Rogers, declined to comment on the process Monday. In a joint statement March 3, Rogers and Shaw said the companies “continue to expect the transaction to close in the first half of 2022.”

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