Canada: Rogers Communications on Monday announced a takeover of Shaw Communications

Telecommunications companies from all over the world are gathering like geese. For a total of C$20 billion, Rogers Communications of Canada announced on Monday that it had agreed to acquire Shaw Communications for an increased value of more than 69% over the previous day’s closing price. As a result, three of the top four service providers would remain. If regulators with a vengeance can be persuaded to relax their teeth, such agreements can be profitable.

It’s clear that Joe Natale’s company is in a rush to get rid of Shaw, as its revenue is expected to drop by 8% in 2020. Five-generation (or 5G) networks are neither cheap nor easy to deploy. Some of the C$1 billion in synergies Rogers expects to find comes from revenue gains that are less reliable. Even if the companies are able to extract the full amount, the taxed and capitalized gains should be worth around C$7.5 billion, which is less than Rogers’ C$8 billion premium.

It’s possible Natale is being evasive. T-Mobile US’s acquisition of Sprint is another example of a four-to-three telecoms deal. Approximately $43 billion in cost savings were touted by T-Mobile US when it launched its offer in April 2018. However, since then, the combined market value of the two companies has increased by $81 billion. They would only be ahead by $5.7 billion if they had matched Verizon as a competitor.

Watchdogs, however, aren’t always happy with the growth of large telecom companies, fearing that customers will suffer as a result. Due to lengthy US regulatory scrutiny, T-Mobile was forced by Dish Network to sell its assets to create a fourth wireless company. European deals have had to jump through hoops as well. They made it to the other side, such as the Dutch telecom Tele2 and Deutsche Telekom’s union.

As a result, regulators and Rogers are likely to engage in some horse trading. Already, it has committed C$2.5 billion to the construction of 5G networks in Western Canada and C$1 billion to the connection of remote and rural communities as well as indigenous ones. Shaw’s shares were trading at C$34 as of late Monday, compared to an offer price of C$40.50 for the company. That could be a sign of what’s to come. If T-example Mobile’s is any indication, the effort is worthwhile.


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