Counsel for the Competition Bureau tried to build the case Tuesday that Shaw Communications Inc. is not in as troubled a position as the company has made it seem as the hearing on the $26-billion proposed deal with Rogers Communications Inc. continued.
During cross-examination of Shaw’s chief financial officer Trevor English, the competition watchdog pointed to Shaw’s fiscal 2020 financials, noting free cash flow of approximately $750 million and capital expenditures of approximately $1.1 billion.
However, English said while the company is not in financial distress, Shaw is concerned about future capital required to compete more effectively both on the wireline and wireless side of the business longer term.
He added that the company’s dividend growth has been stagnant, which is important as a public company, especially in the telecom industry, and referred to Shaw’s share price underperformance over recent years.
On Monday evening, English told the Competition Tribunal that Shaw does not see a viable path forward as a standalone company.
English also said that Shaw has been struggling to keep up with its main competitor in Western Canada, Telus Corp.
Later on in cross-examination Tuesday, English said Shaw’s most important constituent is its customers, which is why it agreed to enter into a deal with Rogers.
English said even without the divestiture of Shaw-owned wireless carrier Freedom, the deal is good for consumers.
Part of Rogers’ strategy to get its deal across the finish line is the sale of Freedom to Quebecor Inc.-owned Videotron. Quebecor agreed to buy Freedom in a $2.85 billion deal earlier this year.
When the Competition Bureau asked whether or not Shaw knew the proposed merger would present regulatory risk, English said the company’s board and management had considered that it might need to dispose of some wireless assets because of the federal government’s long-standing desire to have a fourth national wireless carrier.
Following cross-examination of English, Shaw’s president Paul McAleese told the tribunal that the COVID-19 pandemic impacted Freedom’s customer growth.
He also said that Shaw did not achieve its objective of addressing the loss of subscribers in the company’s wireline business with the launch of Shaw Mobile in 2020.
He said he believes Videotron will be able to operate Freedom successfully, calling the business a highly competent network manager.
The hearing before the Competition Tribunal is expected to last until mid-December and aims to resolve the impasse between the Commissioner of Competition, who wants to block the deal, and Rogers and Shaw.
The Competition Bureau is one of three regulatory agencies that must approve the deal, in addition to the CRTC and Innovation, Science and Economic Development Canada.
Rogers wants to close the Shaw deal by the end of the year, with a possible further extension to Jan. 31, 2023.
The Canadian Press