Why does BCE need to buy Shaw Communications?

Written by Carma Hassan, CNN The Office of the Competition Bureau is expected to begin the government-commissioned investigation into the proposed transaction on Tuesday. The relationship between Rogers and Shaw “can be characterized as…

Why does BCE need to buy Shaw Communications?

Written by Carma Hassan, CNN

The Office of the Competition Bureau is expected to begin the government-commissioned investigation into the proposed transaction on Tuesday.

The relationship between Rogers and Shaw “can be characterized as wide and generous,” says William Watson, a law professor at McGill University in Montreal. “Their mobile and Internet services are virtually synonymous, and they’re the only companies providing radio and television signals in many communities across Canada.”

A powerful team of lobbyists will also be hired for the deal, Watson notes. Advocates behind BCE and Telus also made offers for Shaw, with bids including $6.2 billion from Telus and $5.5 billion from BCE.

“The government can turn down this deal because of concerns about competition. However, it’s a long process,” Watson says. “This should not turn into a trade union debate.”

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The report is expected to present findings by December 2020.

Should the deal be approved, the combined firm will control 46% of the Canadian mobile market, 50% of mobile revenues and nearly 70% of the TV market, according to the Canadian Broadcasting Corporation . The company is also the dominant player in the landline telephone market, CBC noted.

Telecom companies “want to grab as much of the pie as they can, and video is now the big money spinner,” said Jordan Estlin, co-founder of Infact Education and research.

“In 2014, Bell sold 15.5 million homes lines for $14.7 billion and 31 million mobile phone lines for $6.7 billion, while Shaw sold just 1.5 million lines in 2014 for $2.2 billion.”

Strong wireless industry

The wireless industry in Canada is much healthier than in the United States, say several experts. Telus and BCE together have “a grip on 65% of the mobile subscribers in Canada, while Sprint and T-Mobile combined have only 8% of the U.S. mobile market,” said Burke, president of the National Association of Regulatory Utility Commissioners.

The approval process is complicated by the complex infrastructure of the industry, says Jonathan Wober, an associate professor at the John Molson School of Business at McGill University.

“Rogers is a vertically integrated company, meaning it owns both the hardware and the software in its networks,” Wober told CNN. “It’s a very complex and complicated relationship, and our telecom commission made recommendations to Ottawa in 2014 to try to streamline that process.”

In a statement to CNN, Rogers said: “The proposed acquisition has the support of the Communications Workers of America, which represents 23,000 employees at the combined company.”

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