Mobile telephony | A Canadian advance at 2.85 billion for Quebecor

After years of speculation, Quebecor’s Canadian breakthrough in the wireless sector could materialize. The Quebec conglomerate agrees to pay 2.85 billion to buy the activities of Freedom Mobile, which would allow it to become the fourth largest player in the industry in the country, along with Bell, Rogers and Telus.

This transaction is at the heart of Rogers’ acquisition of Shaw Communications, an estimated $26 billion marriage. To convince regulators to approve the merger, Rogers had agreed to ditch Shaw’s mobile phone network.

“This is a pivotal moment for the Canadian wireless market,” Quebecor president and CEO Pierre Karl Péladeau said Friday night after the transaction was announced.

The conglomerate was not the only suitor coveted by Freedom Mobile, the fourth-largest player in the mobile phone niche with 1.7 million customers in Ontario, Alberta and British Columbia. In Quebec, Videotron, Quebecor’s main subsidiary, had 1.6 million active lines as of March 31.

On more than one occasion in the past, Quebecor had raised the possibility of expanding outside of Quebec in mobile telephony. This time it could be the right one.

not done yet

There are still several steps to go before Quebecor expands to the rest of the country. The announced transaction with Rogers must obtain regulatory approval. Under the terms of the agreement, Quebecor would acquire all of the company’s customers, infrastructure, licenses and stores from Freedom Mobile.

“Our agreement with Quebecor for the sale of Freedom is a crucial step toward the completion of our proposed merger with Shaw,” said Rogers Chairman and CEO Tony Stafferi.

Last week, Drew McReynolds of RBC Capital Markets said in a note to clients that Quebecor was a serious contender to take over Freedom Mobile’s business.

It remains to be seen how the Quebec conglomerate intends to finance the transaction. At the end of March, the company had 1.65 billion. You will have to find additional liquidity to have the means for your ambitions.

The deal comes despite strained relations between Quebecor and Rogers. The Videotron subsidiary had filed an $850 million lawsuit against the Toronto company, alleging that Rogers had “artificially caused a dead end” in an agreement between the two companies to create a common wireless network in Quebec and Ottawa.

always fear

Rogers and Shaw’s presence in Quebec is limited. In the rest of the country, however, the marriage between the two telecom giants is causing concern.

On Friday, the Competition Office reinforced its opposition to the consolidation in further submissions to the Competition Tribunal. In documents released after markets closed, the federal agency said the deal would hurt consumers through higher prices, lower-quality services and lost innovation.

The organization also argues that the proposed sale of Shaw Communications’ Freedom Mobile service would not be an effective solution because it would not replace the growing competition that Shaw Mobile would offer in Alberta and British Columbia, and would make Freedom Mobile “a weaker competitor from then”. than it would have been without the agreement.

“Proceeds will also be paid to non-Canadian investors,” the Office notes. These effects are adverse and must be weighed against any efficiency gains that may result. »

Five weeks of hearings are scheduled to begin the week of November 7 regarding the settlement between Rogers and Shaw, followed by written and oral arguments.

On the Toronto Stock Exchange on Friday, Quebecor’s Class B shares closed at $27.66, up 14 cents, or 0.5%. Rogers shares ended the session at $59.01, up $1.08 or 1.9%.