Rogers deal would see Xplornet take over Freedom Mobile

The Rogers Communications building in Toronto on March 15, 2021.Melissa Tait/The Globe and Mail

Rogers Communications Inc. RCI-AT has presented the federal government with a deal that would see rural internet provider Xplornet Communications Inc. acquire wireless carrier Freedom Mobile in an attempt to win approval for Rogers’s $26-billion takeover of Shaw Communications Inc. SJR-AX , sources say.

It’s now up to Ottawa to determine whether Xplornet, which is owned by New York-based Stonepeak Infrastructure Partners, would be a suitable buyer for Shaw’s wireless business, according to two sources familiar with the sale process.

The Globe is not identifying the sources because they are not authorized to speak publicly about the matter.

Industry observers are watching the proposed merger closely to see how Rogers will address Ottawa’s desire for greater competition in the wireless sector. The federal government has long pursued policies aimed at creating a strong fourth wireless carrier in the hopes that it would lead to lower cellphone bills.

A spokesperson for Rogers declined to comment. Spokespeople for Xplornet and Stonepeak did not immediately respond to requests for comment.

Rogers’ takeover of Calgary-based Shaw, which would combine two of the country’s largest cable networks, still requires approval from the Competition Bureau and the Department of Innovation, Science and Economic Development. Toronto-based Rogers has said it expects the deal to close in the first half of this year.

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Critics have argued that allowing Rogers to acquire Freedom, Canada’s fourth-largest wireless carrier, would lead to higher cellphone bills.

Laurie Bouchard, a spokesperson for Industry Minister François-Philippe Champagne, declined to comment on the proposed divestiture, but said the government is “strongly committed” to promoting competition and wireless affordability.

“As the regulator responsible for approving the transfer of licensed spectrum, [Mr. Champagne] will review any applications on their merit and what is in the best interest of Canadians,” Ms. Bouchard said in a statement. (Spectrum refers to the airwaves used to transmit wireless signals.)

Mr. Champagne has said he will not allow Rogers to acquire all of Shaw’s wireless licenses, as doing so would be contrary to the government’s goal of encouraging wireless competition.

Freedom, which has about two million customers in Ontario, Alberta and British Columbia, has been credited with driving down wireless prices.

Woodstock, NB-based Xplornet has about a million rural internet customers across Canada. It was acquired by Stonepeak, a global private equity firm with US$46-billion in assets under management and significant telecom holdings, in June, 2020. The Globe reported the deal was worth about US$2-billion, including debt.

Xplore Mobile, a separate entity that was created to pick up wireless assets that were being divested as a condition to BCE Inc.’s 2017 acquisition of Manitoba Telecom Services Inc., was not part of Stonepeak’s acquisition of Xplornet.

The Globe previously reported that Xplornet’s owners split their wireless and home internet divisions and tried to run a separate sale process for the wireless unit, but ended up holding onto it.

Michael Geist, a law professor at the University of Ottawa, has said he is skeptical that selling Shaw’s wireless business to Xplornet would address competition concerns, as the company has “never made lower-cost pricing a major differentiator.”

The Canadian Radio-television and Telecommunications Commission, which was also reviewing the merger, recently approved the transfer of Shaw’s broadcasting distribution business to Rogers.

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