Anthony Lacavera calls on Ottawa to reject the sale of Freedom Mobile to Quebecor

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Entrepreneur and investor Anthony Lacavera isn’t giving up on re-acquiring the mobile company he started and says he never wanted to sell.

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Anthony Lacavera calls on Ottawa to reject the sale of Freedom Mobile to Quebecor Back to video

Lacavera, the founder and chair of venture capital firm Globalive Capital Inc., sent a letter to Industry Minister François-Philippe Champagne last week, urging him to reject Rogers Communications Inc.’s deal to sell Freedom Mobile to Quebecor Inc., the company’s latest attempt to clear the way for its $26-billion purchase of Shaw Communications Inc.

Freedom is the current incarnation of Wind Mobile Corp., the telecommunications company that Lacavera launched in 2008 and Shaw purchased seven years later for $1.6 billion.

The letter, seen by the Financial Post and also sent to the head of the Competition Bureau, said the $2.85-billion Freedom sale would still leave the combined Rogers and Shaw with valuable wireless assets, and therefore would “not remedy the anti-competitive aspects of the merger.”

Moreover, even if Quebecor were to pony up to buy some or all of the additional wireless assets that Shaw holds outside Freedom, Lacavera questioned Quebecor’s commitment to competition over the longer term, citing the company’s record of buying and then selling valuable wireless spectrum outside its home market.

Pierre Karl Péladeau, Quebecor’s chief executive, said in May that he intended to expand the company’s wireless offerings beyond Quebec with or without Freedom’s assets. He reiterated his commitment to push into other provinces when asked to comment on Lacavera’s suggestion that Quebecor is only serious about competing with Rogers, BCE Inc.’s Bell Canada, and Telus Corp. in Quebec.

“The regulatory and competitive environment has changed considerably in recent years,” Péladeau said in a statement forwarded via email by Quebecor’s vice-president of communications, Véronique Mercier. “We intend to expand our service offering significantly across Canada with the acquisition of Freedom. We will continue to offer the best products and customer service, which have been the recipe for our success thus far. This is a new era for Canadians with a robust 4th player.”

Lacavera has been trying to muscle his way into the bidding for Freedom since it became clear that competition regulators would block any purchase that allowed Rogers to add Canada’s fourth-largest wireless carrier to its already formidable network, going as far as suggesting that Shaw renege on its agreement with Rogers it order to sell its assets to other bidders.

Rogers showed little interest in dealing with Globalive, announcing on June 17 that it intended to sell Freedom to Quebecor, the dominant telecommunications player in Quebec, but a bit player anywhere else. The purchase price was much lower than the $3.5 to $4 billion analysts were expecting after the Competition Bureau rejected an earlier “remedy” proposed by Rogers and Shaw.

The two companies have so far been unable to assuage concerns in Ottawa that their merger, announced last year, would reduce competition. Competition authorities moved in May to block the merger, saying it would reduce wireless competition and raise prices for consumers. The battle is currently playing out before the Competition Tribunal and the parties are set to begin mediation July 4 to try to resolve the issues.

Lacavera said he’s been spurned by Rogers, despite offering $900 million more than Quebecor is paying.

In an interview, Lacavera said he has provided details of commitments from his financial backers to Rogers and to the government, and noted that he beefed up his initial offer with a 20-year network and spectrum-sharing agreement with Vancouver-based Telus.

“The point of our letter is Rogers just continues to try and end-run the regulatory process and (sell to) the weakest competitor possible in Ontario, B.C., and Alberta,” Lacavera said. “I’m going to keep going (directly to) the government, and I’m going to keep making sure the government is clear on what our offer really is.”

Rogers spokesperson Chloe Luciani-Girouard and Shaw spokesperson Chethan Lakshman declined to comment.

The letter was addressed to Champagne and Matthew Boswell, the Commissioner of Competition, and dated June 24. Champagne is one of four cabinet ministers with oversight of the telecommunications industry as head of Innovation, Science and Economic Development Canada, which must approve both the proposed sale of Freedom Mobile and the merger of Rogers and Shaw.

“Our March 11 offer made clear that we would willingly acquire more than just the Freedom Mobile business should the merger approval require it,” Lacavera wrote. “This was an important element of our offer since, like you, we have always held the view that the divestiture of the Freedom Mobile alone was unlikely to adequately address the anti-competitive effects resulting from the merger.”

Lacavera said he could afford to pay more for Shaw’s wireless assets and still offer lower prices than a regional telecommunications company such as Quebecor because, as a “pure play” wireless company, he would not have to worry about existing borrowing to fund other operations or protecting “bundles” with businesses like cable and home phone, and competitors would be unable to retaliate by targeting those lucrative customers.

In the letter, Lacavera noted that Quebecor, as a public company, must report average revenue per user, a key metric watched by analysts and shareholders that would take a hit from the additional wireless assets on a blended basis. As a result, he argued, a publicly listed regional cable company is an inadequate choice for the Shaw assets if the government hopes to make good on its intention to produce a strong fourth national wireless player.

“Even if Videotron were to acquire Shaw Mobile (in addition to Freedom), Videotron is incapable of providing the robust competition that the Canadian wireless sector desperately needs,” Lacavera wrote.

He told authorities that Globalive and its financial backers — previously identified as a consortium of North American investors including U.S private equity firms Baupost Group LLC and Twin Point Capital LLC — are willing to do what it takes to become a viable fourth national wireless player.

Lacavera launched a wireless business under the Wind Mobile banner in 2008, which was subsequently sold to Shaw following foreign ownership challenges, and rebranded Freedom Mobile in 2016.

“We’re the only ones that have actually competed in Ontario, B.C. and Alberta and actually brought prices down, and we did it for eight years,” Lacavera said. “I voted against selling at the time. I feel pretty good about the government taking us seriously.”

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