Rogers outage won’t ‘sink’ $26-billion deal to buy Shaw, competition expert says

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This article was published 10/07/2022 (899 days ago), so information in it may no longer be current.

TORONTO – As the fallout from the Rogers Communications Inc. service outage continues to play out, one competition expert says she doesn’t think it will “sink” the telecom giant’s proposed $26-billion takeover of Shaw Communications Inc., but believes it will make everyone pay closer attention to the deal.

In an interview on Monday, University of Ottawa professor Jennifer Quaid said the only way the outage would have a negative impact on the deal would be if there was any evidence showing Rogers displayed a lack of thoroughness in reporting the circumstances due to limited competition in the market.

Quaid also said that there is now a bigger opportunity for regulators to take a closer look at cost savings from the proposed deal and whether those savings would come from eliminating redundancy systems and reducing technical staff.

Telecom researcher Ben Klass said the outage shows that further consolidation and concentration of power in the market is “a bad idea” for Canada.

“We are used to hearing that ‘bigger is better’ when it comes to telecommunication and technology companies, but last weekend’s outage shows that there are also significant risks associated with putting too many eggs in one basket,” he said. “There is strength and value in diversity and decentralization.”

Edward Jones analyst David Heger said the network outage is an additional risk factor for the Rogers-Shaw transaction, but doesn’t believe it will actually hurt it.

“Regulators may point to the outage as another reason why the merger concentrates too much customer traffic with one operator,” he said. “However, I still believe that the proposed sale of Shaw’s Freedom Mobile wireless operations to Quebecor (Inc.) should address this concern.”

The deadline for Rogers, Shaw and Quebecor to reach a definitive agreement on the sale of Freedom is July 15.

The Rogers-Shaw transaction already has approval from shareholders and the CRTC, but also needs approval from the Competition Bureau and Innovation, Science and Economic Development Canada.

The Competition Bureau has been trying to block the deal arguing that it would result in less choice for Canadians and lead to higher bills for consumers.

Rogers is facing consumer backlash following last week’s outage, with a class action lawsuit filed Monday by Montreal-based LPC Avocat Inc. on behalf of customers with a contract with Rogers, Fido Mobile or Chatr Mobile who didn’t receive services on Friday or Saturday, as well as “persons in Quebec who could not operate with their own device or make transactions because of the outage” during that period.

The widespread Rogers service outage began Friday morning and lasted at least 15 hours, knocking out access to health-care, law enforcement and banking services for many Canadians. While many customers were back online by Saturday, there were many reporting service disruptions stretching into Sunday.

Bianca Wylie, partner at Digital Public, said the Canadian Radio-television and Telecommunications Commission (CRTC) should be taking more responsibility for the broad impact of the outage, arguing that the regulatory agency has limited options in the market.

“We have to hold the CRTC accountable for its role in enabling and supporting an oligopoly situation,” she said. “The CRTC should be mandating and enforcing the shared use of infrastructure assets to enable a range of different public and private internet models. The parties to hold accountable here are the CRTC and the Canadian government.”

Canada’s industry minister met with the head of Rogers and other major telecom companies on Monday afternoon.

Following the meeting, François-Philippe Champagne said in a tweet that he directed the companies to reach agreements on emergency roaming, a “mutual assistance” framework during outages and a communication protocol to “better inform the public and authorities during telecommunications emergencies.”

He also confirmed that the CRTC will investigate the outage.

This report by The Canadian Press was first published July 11, 2022.

Companies in this story: (TSX:RCI.B, TSX:SJR.B, TSX:QBR.B)