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Thursday, Mar 28, 2024
Mugglehead Magazine
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Quebecor acquires Freedom Mobile, creates fourth major wireless carrier in Canada

Videotron has promised the Minister of Innovation, Science and Industry to keep prices low

NEWSQuebecor acquires Freedom Mobile, launches fourth major wireless carrier in Canada
Photo by Nathan Denette via Canadian Press

Quebecor Inc. (TSE: QBR.B) has completed the acquisition of Freedom Mobile owned by Shaw Communications Inc. (TSE: SJR.B) and created the fourth-largest wireless service provider in Canada.

Both companies announced the closing of the transaction on Monday where Videotron Ltd. a subsidiary of Quebecor, will acquire Freedom for $2.85 billion.  Videotron paid $2.17 billion in cash and took in debt, such as lease obligations.

A syndicate of financial institutions provided funding for the cash consideration through a new secured term credit facility of $2.1 billion for Videotron. The credit facility consists of three equal tranches, all maturing in different periods: October 2024, April 2026 and April 2027.

Together, Freedom and Videotron will have over 3.5 million customers for mobile services and boast the expertise of almost 7,500 employees.

“We are very pleased to be closing the acquisition of Freedom Mobile today, bringing its Canadian footprint as well as the expertise and experience of its employees into our fold,” Quebecor CEO Pierre Karl Péladeau said.

“The alliance of Freedom and Videotron will permanently transform Canada’s wireless market for the benefit of consumers and create a new competitive environment that delivers innovative products and services at better prices.”

“Today marks the beginning of a new era for Canadians,” Péladeau added.

In the last five days, Quebecor stock went up by 6.81 per cent to $2.15 on the Toronto Securities Exchange.

Read more: Innovation, Science and Industry Minister and CRTC take aim at rising roaming fees

Read more: Competition Tribunal rules in favour of Rogers and Shaw telecommunications merger

Minister Champagne imposes conditions for the acquisition

Last Friday, Minister of Innovation, Science and Industry of Canada François-Philippe Champagne said that since the proposed merger between Rogers and Shaw was announced, it has been clear that affordability and competition are central to any decision he makes as Minister.

“That’s why last October, I officially denied the request to transfer Shaw’s wireless spectrum licences – held by their subsidiary, Freedom Mobile—to Rogers. At the time, I also outlined my expectations for the separate proposed transfer of Freedom Mobile’s spectrum licences to Videotron,” Champagne said in a statement.

He added that since then, the Competition Bureau, the Competition Tribunal and the Federal Court of Appeal have all weighed in on the potential competitiveness of a fourth national player.

“Today, I am informing Canadians that I have secured on their behalf unprecedented and legally binding commitments from Rogers and Videotron. And, after imposing strict conditions, the spectrum licences of Freedom Mobile will be transferred to Videotron.”

He explained that the transfer follows a series of agreements signed by the parties that will ensure this fourth wireless company to be in for a long time, compete with other carriers and drive down prices.

As part of the agreement, Videotron will offer plans comparable to those currently available and offer options at least 20 per cent cheaper than the major players. It is also prohibited to transfer the Freedom Mobile license for ten years.

The company will have to expand its 5G wireless network in Freedom Mobile’s pre-existing operating territory within two years and expand service into Manitoba via the use of a signed Mobile Virtual Network Operator (MVNO) agreement. The company will also have to increase data allotments of existing Freedom clients by 10 per cent as a near-term bonus.

The Minister also imposed conditions on Rogers such as creating 3,000 new jobs in Western Canada, establishing headquarters in Calgary, investing $1 billion to expand broadband and investing at least $2.5 billion to enhance its 5G network.

“These agreements are subject to significant financial damages for non-compliance: up to $200 million in the case of Videotron and up to $1 billion in the case of Rogers,” said Champagne.

The agreements will be released publicly and are subject to annual reporting requirements.

“Should the parties fail to live up to any of their commitments, our government will use every means in our power to enforce the terms on behalf of Canadians.”

Videotron and Rogers have made agreements that allow Videotron to access commercial networks, including an MVNO (mobile virtual network operator) and Domestic Roaming Agreement, with terms that will assist in its expansion into other regions of Canada. This will ensure that more Canadians can benefit from lower prices for wireless services.

Champagne also announced he is implementing a moratorium on large-scale spectrum transfers and directing the Department to conduct a comprehensive review of Canada’s spectrum transfer framework, which has not been done in almost ten years.

Videotron makes promises to Minister to keep prices low

Videotron has made several promises to Minister Champagne, as part of the acquisition of Freedom Mobile.

The company has committed to ensuring that Freedom’s plans will be at least 20 per cent more affordable than those offered by existing incumbents in British Columbia, Alberta, and Ontario markets over a period of ten years.

Additionally, Videotron has pledged to maintain prices for existing Freedom customers for five years and provide a 10 per cent increase in local data limit at no extra cost. Moreover, the company will participate in the “Connecting Families” initiative for low-income Canadian families and seniors, within its wireline footprint, which is already implemented by Videotron.

Lastly, Videotron has committed to investing over $150 million to upgrade Freedom’s infrastructure, which will enable 90 per cent of its customers to access the 5G network with a compatible device within two years, while also committing to keeping Freedom’s spectrum licenses for at least ten years after their transfer.

“If Canadians do not begin to see a clear and meaningful reduction in prices within a reasonable amount of time as a result of this decision, I will have no choice but to use further legislative and regulatory powers to drive down prices,” said Minister Champagne.

“Canadians rightfully expect and deserve more from their telecom sector. We will continue to ensure the industry meets these standards, including improving competition, reliability and affordability.”

The recent acquisition of VMedia Inc. has expanded Videotron’s capabilities, allowing them to provide multi-service bundles to Canadians in British Columbia, Alberta, Manitoba, and Ontario in the near future. Along with wireless services, Videotron will offer customers access to internet and television services through this acquisition. This will enable the company to provide customers with a more comprehensive suite of services, increasing the potential value for money they receive.

“Joining Videotron’s track record of success in Quebec with Freedom’s highly skilled teams will bring our customers the benefit of our combined expertise and our unwavering customer-centric focus. Finally, we also want to thank Shaw and Rogers for their ready cooperation throughout this process, which is so important to Canada’s economic future.”

“We are incredibly proud of what our team has accomplished in the past several years to make Freedom Mobile a strong competitor in British ColumbiaAlberta, and Ontario,” CEO Brad Shaw said. 

“We are confident that, with these assets under Quebecor’s leadership, Canadians will continue to benefit from increased wireless competition, investment and affordability.”

Since the announcement, Shaw stock went up by 4.08 per cent to 40.48 on the Toronto Securities Exchange.

 

 

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