If you think the recent network outage of Rogers Communications (TSX: RCI.B) should be an indicator of what could be coming once its merger with Shaw Communications (TSX: SRJ.B) pushes through, you’re not alone. The Competition Tribunal hearing the pending challenges by the Competition Commission to the potential takeover ruled on Friday that the outage is a relevant factor to consider in approving the proposed business combination.
The ruling was handed down after hearing arguments from Rogers and the Commissioner of Competition on the relevance of the July 8 network outage in the proceedings of the challenged merger.
The country-wide outage affected millions of Canadian users, small businesses, and smaller interenet service providers. Internet access was said to be down to 75% of normal levels across the country by network monitor NetBlocks.
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The outage has also led to Rogers replacing its chief technology officer, as well as promising spending $10 billion on network upgrades and will spend $150 million in total to compensate customers.
The decision adds to the current challenge for the $26-billion Rogers-Shaw deal which yet has to gain the approval of the Competition Commission. The latter is raising concerns on how the merger would consolidate the network reach and leave less competition to provide customers with the best offers.
The two Canadian communication firms have agreed to put on hold the merger to address the commission’s concerns, but also proposed to divest Shaw’s Freedom Mobile to Quebecor Inc. for $2.85 billion. The commission, however, noted that the proposed divestiture is “not an effective remedy” to answer the competition issues.
The two telcos have agreed to extend the outside date for the transaction to December 31, 2022, which can be further extended for one more month “at the option of Rogers or Shaw.”
Rogers Communications Class B Shares last traded at $57.46 on the TSX.
Information for this briefing was found via Bloomberg and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
