By Aditya Soni and Chavi Mehta
(Reuters) -Canada on Friday approved Rogers Communications Inc’s C$20 billion ($14.8 billion) buyout of Shaw Communications after securing binding commitments to pay financial penalties if it failed to create new jobs and invest to expand its network.
The final nod from Minister of Innovation, Science and Industry Francois-Philippe Champagne capped two years of antitrust uncertainty and paves the way for the creation of Canada’s No. 2 telecoms firm in a market with some of the highest wireless bills in the world.
The deal was opposed by consumer advocates and politicians on worries it could lead to higher prices due to an overlap between Rogers and Shaw’s wireless divisions.
On Friday, Champagne agreed to the transfer of wireless licenses held by Shaw’s Freedom Mobile unit to Quebecor Inc-owned Videotron – a proposal that helped resolve antitrust concerns.
Champagne has secured a commitment from Videotron that it will offer plans at least 20% cheaper than competitors and invest C$150 million to upgrade Freedom Mobile’s network in the next two years, or risk a fine of up to C$200 million.
Rogers reaffirmed its conditions, including setting up a western headquarters in Calgary, creating 3,000 new jobs in Western Canada and investing C$6.5 billion to upgrade connectivity. If it breaches the commitments, Rogers will have to pay a fine of as much as C$1 billion, Champagne said at a news conference in Ottawa.
When asked about how these commitments will be enforced, Champagne said, “I will (enforce it). Am a lawyer and it’s a contract, I know how to read a contract and enforce them. And it’s subject to arbitration.”
Champagne said if wireless prices do not go lower, he would seek further legislative and regulatory powers.
The merger unites two of Canada’s wealthy families whose companies have for long fought for market share.
Tony Staffieri, president and CEO of Rogers, said in a statement the company is “deeply” committed to delivering on its promises.
While Champagne said the sale of Freedom Mobile to Videotron would create another major national player and help lower prices, consumer advocacy groups were not convinced.
Rosa Addario, a spokesperson for internet advocacy group OpenMedia, said the concessions sought by the government were unlikely to result in lower prices.
“This is undoubtedly going to harm our competition, our choice and will make our bills more expensive,” Addario said.
Shares of Shaw rose more than 3% to C$40.43, just below the offer price of C$40.50. Rogers was down 1.6%.
The Rogers-Shaw merger had faced intense opposition from Canada’s antitrust regulator whose efforts to block it were rejected by the Competition Tribunal and a Canadian court.
Its approval now paves the way for the deal to close on April 7, after the completion date was delayed for a fifth time.
The combined company will benefit from Rogers’ strong presence in urban Ontario and Shaw’s dominance in the sparsely populated regions of Western Canada. ($1 = 1.3535 Canadian dollars)
(Reporting by Eva Mathews, Juby Babu, Aditya Soni and Chavi Mehta in BengaluruAdditional reporting by Steve Scherer in Ottawa and Maiya Keidan in TorontoEditing by Arun Koyyur and Matthew Lewis)