TORONTO, CALGARY and MONTREAL – Rogers Communications, Shaw Communications and Quebecor Inc. announced late Friday night they have reached an agreement for the sale of Freedom Mobile to Quebecor in a deal valued at $2.85 billion, subject to regulatory approval.
Rogers initiated a process of selling Freedom several months ago, after the Minister of Innovation, Science and Industry François-Philippe Champagne released a statement saying he would not permit Rogers to acquire all of Shaw’s wireless assets.
The sale of Freedom to Quebecor “will ensure the presence of a strong and sustainable fourth wireless carrier across Canada,” a press release says. “The parties strongly believe the agreement effectively addresses the concerns raised by the Commissioner of Competition and the Minister of Innovation, Science and Industry regarding viable and sustainable wireless competition in Canada.”
Quebecor has agreed to the purchase on a cash-free and debt-free basis.
The agreement “provides for the sale of all Freedom branded wireless and Internet customers as well as all of Freedom’s infrastructure, spectrum and retail locations. It also includes a long-term undertaking by Shaw and Rogers to provide Quebecor transport services (including backhaul and backbone) and roaming services,” the press release explains.
“Our agreement with Quebecor to divest Freedom is a critical step towards completing our proposed merger with Shaw. We strongly believe the divestiture will meet the Government of Canada’s objective of a strong and sustainable fourth wireless services provider,” said Tony Staffieri, president and CEO of Rogers, in the press release.
“This agreement between proven cable and wireless companies will ensure the continuation of a highly competitive market with robust future investments in Canada’s world class networks. We look forward to securing the outstanding regulatory approvals for our merger with Shaw so that we can deliver significant long-term benefits to Canadian consumers, businesses and the economy.”
“This is a turning point for the Canadian wireless market,” said Pierre Karl Péladeau, president and CEO of Quebecor.
“Quebecor’s Videotron subsidiary is the strong 4th player who, coupled with Freedom’s solid footprint in Ontario and Western Canada, can deliver concrete benefits for all Canadians. We have always believed that for there to be healthy competition in wireless services only a player with a proven track record can successfully enter the market,” he said.
“Rogers will offer (under a long-term agreement) backhaul and backbone services to Quebecor, as well as roaming,” wrote Canaccord Genuity telecom analyst Aravina Galappatthige in a note to investors on Monday. “We expect that there may be some concessions (likely for a limited time period) in these rates vs mandated or market rates. We estimate (subject to certain assumptions) that the transaction translates to 7.6x EV/EBITDA (LTM) for the Freedom assets.
“The most noticeable item here is the absence of any network sharing deal as part of the transaction,” he noted.
“Today’s announcement marks an important milestone in our bold and transformative journey to join together with Rogers,” added Brad Shaw, executive chairman and CEO of Shaw. “Since Shaw entered the wireless business in 2016, we have made significant strides towards changing the Canadian wireless landscape. We made a promise to Canadians that we would increase choice and affordability and I’m proud to say we delivered on that promise. Today’s announcement ensures that Freedom Mobile will remain a strong competitor.”
The transaction still needs to be cleared under the Competition Act and needs the approval of ISED. Since Friday, the company has let it be known it intends to hang onto approximately 400,000 Shaw Mobile customers because none of the bidders for Freedom were interested in also taking on those customers – many of whom are multi-service customers of Shaw.
Earlier on Friday, the Competition Tribunal posted submissions on its website made by the Commissioner of Competition in relation to his application to have the merger of Rogers and Shaw blocked.
The commissioner indicated in the submissions the sale of Freedom would not be a good enough remedy to compensate for the effect on competition he claims the approval of the Rogers/Shaw merger will have.
The deal is far less than the $3.75 billion offer Globalive’s Tony Lacavera told media he made to acquire Freedom, however the Bureau has made it clear (not directly with words, but clear nonetheless) that it’s preferred buyer is Quebecor.
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