Rogers Tightens Grip On Canada’s Telecom Sector With $26 Billion Acquisition Of Shaw Communications

With its blockbuster deal to buy Shaw Communications (TSX:SJR.B) for $26 billion, Rogers Communications (TSX:RCI.B) is strengthening its dominance of Canada's telecommunications sector.

The deal, which is subject to regulatory approval in Ottawa, will see Rogers pay $40.50 in cash for each of Shaw's outstanding class A and class B shares. Shaw shares jumped 42% to $34 on news of the deal Monday. Shares of Rogers increased seven per cent to $64.

As part of the transaction, the companies said Rogers will invest $2.5 billion in 5G wireless networks over the next five years across Western Canada. Rogers also said it will create a new $1-billion fund dedicated to connecting rural, remote and Indigenous communities across Western Canada to high-speed internet service.

Rogers owns a national wireless network that does business under the Rogers, Fido and Chatr brands. Shaw owns Freedom Mobile and Shaw Mobile in Alberta, B.C. and Ontario.

The combined company — which will create up to 3,000 net new jobs — will provide cellular and cable services from a Western regional headquarters at Shaw Court in downtown Calgary where the president of Western operations and other senior executives will be based.

Rogers said it has secured committed financing to cover the cash portion of the deal, while about 60% of the Shaw family shares will be exchanged for 23.6 million Rogers B-class shares.

Consumer groups in Canada criticized the Rogers-Shaw combination, saying it will further reduce competition in the telecommunications space. Canada's telecoms industry came under the spotlight during the last federal election, with voters complaining about cellphone bills, which are among the highest in the world.

In March 2020, Prime Minister Justin Trudeau's minority Liberal government ordered Canada's top three telecom operators, which together control 90% of the market, to cut prices on their mid-range wireless service plans by 25% within two years or face regulatory action.

Rogers said it would not raise wireless prices for Freedom Mobile customers for at least three years after the closure of the deal.