Do the Benefits Outweigh the Downfalls?
By Jonathan Paglialunga
March 15th 2021 marked the birth of a controversial $26 billion deal between two Canadian communications companies: Rogers and Shaw. Under the proposed plan, Rogers will pay $40.50 for each of Shaw’s outstanding class A and B shares. The March 15th proposal resulted in Shaw’s shares springing 42% to $34, a number still well below the offering price. If the acquisition of Shaw,the fourth-ranked telecommunications company in Canada, goes through, Rogers will be able to jump into the number two spot, usurping Telus.
The deal at hand is not without obstacles as the proposal will be reviewed by various external regulatory parties including the Competition Bureau of Canada, the Canadian Radio-television and Telecommunications Commission (CRTC), as well as the federal department of Innovation, Science, and Economic Development (ISED). In addition, Canadian Innovation Minister has stated that the intentions of the review are focused on “affordability, competition, and innovation.”
This deal raises two significant questions: How does this situation effectively change prices for consumers? How does this acquisition affect the employees of both companies? In addressing the first question, few large players in the space allows for decreased competition and inflated prices. Reaffirming the underlying basis of high prices, University of Toronto professor Walid Hejazi argued, “You have three companies that are protected from international competition and the service they provide us is inferior.”
Shaw’s acquisition clearly poses a threat to Canadian consumers who are seeing the small glimpse of competition left in the market disappear before their very eyes. According to Laura Tribe, Executive Director of OpenMedia,”Over the years, we’ve seen competitor after competitor swallowed up by the Big 3. The result is always the same: more profits for the Big 3, worse plans and less choice for Canadians.”
Among the downfalls pointed out by critics, Rogers has attempted to positively contribute to the communities with which it works. As a part of the deal, Rogers claimed that they would refrain from raising Freedom Mobile’s prices for consumers for at least three years. Rogers and Shaw noted that 10% of Canadian homes have no internet access and nearly 600,000 in Western Canada do not have access to internet speeds recommended by the federal government. Rogers therefore, committed to dedicating $1 billion to fund internet services in rural, remote and Indigenous communities across Western Canada.
Both companies’ reason that the timing of the deal had to do with the demand to build 5G networks in Western Canada, which they argue will result in boosted productivity and connectivity among the Canadian population.
The transaction on hand includes the intent to create 3000 new jobs with a regional headquarters located in Calgary but there are questions as to if we can realistically expect a merger to produce jobs rather than take them away, especially in a repetitive industry. According to Tribe once again, “companies merge to fire, not hire people. Just ask the hundreds of workers who lost their jobs following the Bell-MTS merger. Given this, it’s hard to take Rogers’ pledge to add 3,000 jobs seriously.”
At this point in time, it can be almost impossible to distinguish whether this acquisition would contribute to the overall betterment of the country or if it will further disproportionately increase consumer prices. I personally hope that this acquisition positively impacts the community as a whole but realistically, I am doubtful that these large corporations will truly follow through on their word given the current economic standing of the Big 3.