Roger's CUS$20 billion bid for Shaw shakes up Canadian telecoms industry but may irk regulators

REUTERS: Rogers Communications Inc said on Monday it was buying rival Shaw Communications Inc for about CUS$20 billion in a deal that would create Canada's second-largest cellular and cable operator but might attract stiff regulatory scrutiny.

By acquiring fourth-ranked Shaw, Rogers would leapfrog Telus Corp, taking on market leader BCE Inc. Shaw's strong presence in Western Canada would also help Rogers double down on its efforts to roll out 5G throughout the country.

Shaw shares jumped 42per cent to CUS$34, but traded well below the offer price of US$40.50, suggesting doubts about the deal, which is valued at CUS$26 billion including debt. Shares of Rogers were also up 7per cent at CUS$64.

The deal, if completed, would be the biggest Canadian telecoms merger since BCE completed the spinoff of its stake in Nortel Networks in a transaction valued at CUS$88.7 billion, according to Refinitiv data.

"It's really too early to speculate on the regulatory outcome overall," Rogers Chief Executive Officer Joseph Natale said on a conference call. "But we feel confident this transaction will be approved."

The deal will be reviewed by the independent Competition Bureau of Canada, the Canadian Radio-television and Telecommunications Commission (CRTC), as well as the department of Innovation, Science, and Economic Development (ISED).

Canadian Innovation Minister Francois-Philippe Champagne said the review would focus on "affordability, competition, and innovation."

Toronto-based Rogers said it planned to spend CUS$2.5 billion on ramping up 5G networks in Western Canada over the next five years following its acquisition of Calgary-based Shaw.

Rogers also said it would not raise wireless prices for Freedom Mobile customers for at least three years after the deal as it had pledged to continue offering affordable wireless plans.

Rogers' finance chief, Tony Staffieri, said the company was not looking to sell cable firm, Cogeco, in which it owns a 34per cent stake.

The deal brings two of the country's biggest family-founded telecom businesses together, with a combined CUS$19 billion in annual revenue. BCE raked in CUS$22.9 billion last year, while Telus had CUS$15 billion in revenue.

(US$1 = 1.2456 Canadian dollars)

(Reporting by Eva Mathews in Bengaluru and David Ljunggren in Ottawa; Writing by Subrat Patnaik; Editing by Shailesh Kuber and Anil D'Silva)