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Ontario wireless customers won’t see lower prices if Quebecor’s deal to buy Freedom Mobile goes through, critics say


Don’t expect Quebecor to usher in lower wireless prices in Canada, warn critics of a new side deal to the Rogers and Shaw merger.

The companies announced an agreement late Friday that would see the Quebec telecom, which is controlled by billionaire CEO Pierre Karl Péladeau, pay $2.85 billion to buy Shaw’s Freedom Mobile wireless business, including its subscribers, cellphone towers and retail stores.

Rogers and Shaw are hoping the arrangement with Quebecor will convince the Competition Bureau and the federal government that their larger proposed $26-billion cable merger won’t kill competition in the cellphone industry. The bureau has gone to court to challenge the entire transaction.

Shaw bought Freedom Mobile in 2016 and the business operates in British Columbia, Alberta and Ontario, and has an estimated 1.75 million customers. (National Bank telecom analyst Adam Shine estimates Shaw has another 450,000 subscribers to its Shaw Mobile service, which bundles wireless with home internet and television service in B.C. and Alberta. Those customers are not included in the Quebecor deal.)

The Competition Bureau says Freedom has challenged the dominance of Bell, Telus and Rogers in those three provinces, winning market share, helping bring prices down and pressuring the Big Three to offer more customer-friendly options, such as unlimited monthly data packages.

Quebecor has money to invest and experience going up against the Big Three in its home province, capturing about one-fifth of the Quebec wireless market since launching a Vidéotron cellular business more than a decade ago.

But it has not been as “disruptive” as Freedom Mobile, said Ben Klass, a PhD candidate at Carleton University’s School of Journalism and Communication, who noted that Freedom’s pricing and offers of larger data buckets tend to be more appealing to consumers than the packages offered by Vidéotron.

“For Freedom customers in Ontario, they stand to lose if Vidéotron replaces Freedom,” Klass said, though he later added, “There’s no doubt that Vidéotron as fourth competitor is better than a market dominated by the Big Three.”

John Lawford, executive director of the Public Interest Advocacy Centre, said he doesn’t believe Quebecor will be “as aggressive as someone who’s truly independent.”

That’s because if Quebecor threatens the Big Three on wireless outside Quebec, they could hit back on its home turf, undercutting its prices and offers there and stealing away its more valuable customers who pay for cellular service plus TV and home internet.

“I just don’t think (Quebecor) will be a real game changer with lower prices,” Lawford said. “At best it will be sort of like where Shaw was, but weaker.”

David Soberman, professor of marketing at University of Toronto’s Rotman School of Management, said he’s “very skeptical” that the deal would “give Quebecor motivation to reduce prices.”

“If what we’re looking for is a situation where there’s truly competition and truly a reduction in phone rates, I don’t think this is going to have much of an effect.”

Anthony Lacavera, whose investment firm Globalive Capital has also offered to buy Freedom, said Monday he still hopes the government and Competition Bureau will reject the Quebecor deal, saying Ottawa must now decide whether it wants to “perpetuate the oligopoly or not.”

Quebecor’s offer is worth $900 million less than Globalive’s own $3.75-billion offer, and Lacavera argued that Rogers is willing to take less to avoid facing stronger competition in the wireless business.

Péladeau was the one-time leader of the separatist Parti Québécois before returning to run his family controlled business.

Lacavera doesn’t expect those politics to play a role in government approval of the deal, but he did predict that Quebecor would try to sell its wireless assets outside Quebec to one of the Big Three for a profit several years down the road if the current deal is approved.

Representatives for both the Competition Bureau and the Minister of Innovation said Monday they could not comment on the specifics of the Quebecor proposal but would review it in due course.

In a court filing on Friday, hours before the companies announced the Quebecor deal, the Competition Bureau made clear it remained opposed to the entire Rogers-Shaw merger transaction.

The bureau said the deal will “harm millions of Canadian consumers in Ontario, Alberta and British Columbia through higher prices, lower quality services, and lost innovation.”

While low- and moderate-income Canadians would pay higher prices for wireless service, the bureau said, the deal would result in a wealth transfer from those groups to Rogers and Shaw, “whose shareholders include ultra-rich members of the family ownership groups of these companies.”

National Bank’s Shine said in a report Monday that the Competition Bureau is wrong to assume that a buyer of Freedom Mobile alone could “at least match Shaw’s wireless efforts and competitiveness.”

Other analysts said Monday that the agreement with Quebecor helps address the bureau’s concerns about competition. “We believe this agreement increases the prospect of the transaction closing to over 95 per cent,” Canaccord Genuity analyst Aravinda Galappatthige wrote in a note to clients.

With files from The Canadian Press

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