Competition Bureau looking into Shaw-Rogers spectrum deal

The federal Competition Bureau received a Federal Court order compelling Rogers Communications Inc., Shaw Communications Inc. and Globalive Wireless Management Corp. to turn over information as part of an inquiry into Rogers' option deal to purchase Shaw's spectrum licences, court records show. According to motions and affidavits filed with the Federal Court on June 6 and obtained by The Wire Report this week, the Competition Bureau received an order that the companies turn over documents related to the deal, which the bureau said may “prevent or lessen competition substantially” in Canada's wireless industry. “The Bureau requires access to the Requested Material now in order to determine whether the existence of the Option Agreement and Proposed Transfer has affected, or is affecting, competition in Canadian wireless markets,” Gregory Lang, a senior competition law officer in the Competition Bureau's mergers branch, said in an affidavit filed with the court. Lang, the lead officer of the inquiry, said the option deal could make Canada's wireless industry less competitive by preventing another carrier from acquiring and using the spectrum for wireless services. As part of Rogers' deal for the spectrum, made public in January, the company paid $50 million for an option to purchase Shaw's unused wireless licences in September 2014 for between $325 million and $350 million, including the option. Shaw, which paid $190 million for the spectrum as a new entrant player in a 2008 auction, abandoned its plans to launch a wireless network in 2011. Its spectrum was set aside for new entrants and cannot be sold or transferred to incumbent carriers Rogers, BCE Inc. or Telus Corp. until after a five-year moratorium expires in September 2014. Under the deal with Rogers, Shaw is also prohibited from selling the spectrum to anyone else during that time. Lang said in court documents that Rogers and Shaw informed the bureau of the deal before its public release, and that after the bureau launched an “investigation” into the agreement, which was elevated to an “inquiry” on March 4. “In connection with the Inquiry and its predecessor investigation, I have reviewed public sources of information about the wireless telecommunications industry, as well as economic analyses and relevant articles in trade and other publications,” Lang wrote, adding that he interviewed industry players and reviewed other information. “Based on the information gathered from these various sources, the Commissioner has reason to believe that grounds exist for the making of an order under Part VIII, generally, and section 92, specifically,” he said, citing the Competition Act and a section that allows the bureau to block or attach conditions to mergers that could reduce competition. “This is a normal part of the review process—we expected there would be a review of the acquisition," Rogers spokeswoman Patricial Trott said in an emailed statement." We look forward to working through the process with the Bureau and providing them with any materials they require.” The deal could result in other new entrants “prematurely committing to sell their spectrum licences to incumbent service providers, rather than using those licences to compete against the incumbents,” Lang wrote. He asked the court to order Rogers, Shaw and Globalive, which operates new entrant Wind Mobile, to produce documents and answer questions under Section 11 of the Competition Act. He requested information from Rogers about its decision to purchase the spectrum; the impact on Rogers' plans to expand its network; “the extent to which Rogers is currently utilizing its existing spectrum holdings;” and any “efficiencies” of the deal that would offset negative impacts on competition. The bureau also sought information from Shaw about its decisions to purchase the spectrum, to abandon its plans for a wireless network, and to sell the spectrum to Rogers “as opposed to any other person,” Lang said. It requested information from Globalive related to “Shaw's decision to sell the Licences to Rogers, as opposed to any other person.” He said all three companies could have information about “barriers” that new players face in Canada's wireless market, including the amount of spectrum required to “effectively operate” a network and the “competitive rivalry” between Canada's wireless companies. The bureau asked all three companies how the public announcement of the option agreement affected the “financing and strategic choices” of competing wireless providers. The Competition Bureau expressed concern about new wireless entrants in 2010 when it launched a $10-million lawsuit in Ontario Superior Court against Rogers for alleged misleading advertising for Rogers’ discount brand Chatr, which had advertised “fewer dropped calls than new wireless carriers" in the summer and fall of 2010. Hearings for that case finished this spring and a decision is expected this year. Lang noted in the documents that all three companies provided the bureau with requested documents and that Rogers and Shaw agreed in May to provide information and documents “on a voluntary basis.” According to the court registry, Federal Court Chief Justice Paul Crampton granted the bureau's motions following a 13-minute hearing in Ottawa on June 12. He ordered Rogers and Shaw to produce documents and answer the bureau's questions within 60 days and Globalive within 45 days. He granted the bureau's request for Globalive's chief financial officer, Brice Scheschuk, to “attend and be examined on oath or solemn affirmation” by bureau staff. Competition Bureau spokesman Greg Scott said in a telephone interview Wednesday that the bureau is “currently reviewing” the spectrum option deal, and declined to say whether it had received the requested files from any of the companies. According to a monthly report of concluded merger reviews posted on the bureau's website, in May it approved a deal by Toronto-based private equity firm Thomvest Seed Capital Inc. and New York-based Cartesian Capital Group LLC to acquire new entrant Public Mobile Inc. The bureau has not yet approved a separate deal Rogers reached in May giving Quebecor Media Inc. subsidiary Videotron Ltd. an option to sell to Rogers its unused new entrant spectrum in Toronto for $180 million after the transfer restrictions on Videotron's spectrum expire in December. Industry Minister Christian Paradis has made wireless industry competition a policy priority, with an objective to ensure a fourth competing wireless provider in each region of the country to compete against the incumbents. This spring, Paradis blocked Telus' proposed purchase of new entrant Mobilicity, operated by Dave Wireless Inc., due to the government's spectrum transfer rules. Further industry consolidation among new entrants is expected this summer in advance of a Sept. 17 deadline for applications to participate in Industry Canada's 700 MHz spectrum auction. Following that date, companies registered to participate in the auction cannot merge or engage in acquisition talks, according to the auction rules. —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca.

Competition Bureau looking into Shaw-Rogers spectrum deal

News | July 11, 2013

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Competition Bureau looking into Shaw-Rogers spectrum deal

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