Quebecor wants to help Rogers and Shaw in battle against competition watchdog

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Quebecor Inc. offered to support larger rival Rogers Communications Inc. in its fight with the Competition Bureau over Rogers’ bid to get even bigger by purchasing Shaw Communications Inc.

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Videotron, the cable and wireless arm of Montreal-based Quebecor, applied to intervene in the Competition Bureau’s case to block Rogers’ $26-billion deal to buy Shaw, according to a motion filed July 8. If approved, Quebecor will be allowed to argue in favour of the deal in front of the federal Competition Tribunal.

Quebecor probably is motivated by self-interest. Last month, Rogers and Shaw agreed to sell Shaw’s Freedom Mobile assets to Quebecor for $2.85 billion in an attempt to appease Competition Commissioner Matthew Boswell’s concerns about the anti-competitive impacts of the takeover.

In his submissions to the tribunal, Boswell warned that selling Freedom Mobile to the wrong company could hobble an otherwise viable fourth challenger to Canada’s Big Three telecommunications companies, an oligopoly that includes Rogers along with BCE Inc.’s Bell Canada and Telus Corp.

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Boswell described Freedom as a welcome disrupter of Canada’s consolidated market for cellphone services, arguing that the company’s aggressive approach to setting prices and innovating services “forced the Big 3 to compete to retain customers.”

The divestiture allows Videotron to fulfill its long-standing ambition to expand outside of Québec and operate as Canada’s fourth national wireless carrier

Jean-François Lescadres, Videotron’s vice-president of finance

Quebecor chief executive Pierre Karl Péladeau insists he’s ready to assume the role as fourth player; so much so, he’s willing to make his case in front of the Competition Tribunal.

Freedom would double Videotron’s subscriber base. In its filings to the tribunal, Quebecor said it could present evidence of the company’s plans to use the Freedom acquisition to create “aggressive competition” in the wireless market outside of Quebec, which is the only place the company currently does significant business.

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“The divestiture allows Videotron to fulfill its long-standing ambition to expand outside of Québec and operate as Canada’s fourth national wireless carrier,” Jean-François Lescadres, Videotron’s vice-president of finance, wrote in an affidavit.

Lescadres said blocking the deal would destroy a “transformational transaction,” both for Quebecor and the broader Canadian wireless industry.

Michael Osborne, a lawyer who specializes in competition issues at Cassels Brock and Blackwell LLP, said it makes sense for Quebecor to intervene in the case, since the legal fight now is focused on “litigating the fix” to the Competition Bureau’s objections. And the way to fix the concerns, in this case, revolves around Quebecor.

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“They’re talking about their plans for ‘aggressive competition,’ ” he said. “This is the kind of thing that’s music to the ears of a competition authority.”

So far it’s unclear where the Competition Bureau stands on the Quebecor solution. Earlier this week, Rogers and Shaw announced that they weren’t able to come to a resolution with the bureau in mediation discussions on July 4 and 5, dashing any hopes for a quick end to the dispute. Quebecor representatives attended those meetings, according to the company’s July 8 motion to intervene in the case.

Robin Shaban, a former officer at the Competition Bureau, said Boswell appears to be concerned about the fate of Shaw’s mobile business if it can no longer offer bundles with other Shaw services, or rely on Shaw’s retail network.

“How is Quebecor supposed to transplant itself to Alberta and operate as if it was Shaw? That’s a pretty tall order. And it doesn’t even have to be as good as Shaw. But it has to be in the same universe,” said Shaban, a senior economist at Vivic Research. “Is that even possible? I don’t know.”

Financial Post

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