Major Canada Telecom Tie-Up Could Still Go Forward

Analysts say a multi-billion-dollar merger between Rogers Communications Inc. and Shaw Communications, two of Canada’s largest telecommunication companies, could still be completed despite initial government rejection.

Federal Industry Minister Francois-Philippe Champagne on Tuesday said he denied the original proposed $19.11 billion merger. But he appeared to leave the door open if the companies meet certain conditions for the sale of Shaw-owned wireless carrier Freedom Mobile to Quebecor Inc.’s Videotron Ltd., a key component in the proposed transaction between the two telecom giants.

The deal would see the wholesale transfer of wireless spectrum licenses from Shaw to Rogers, which requires Champagne’s approval.

Champagne said he needed two specific concessions: Videotron would have to agree to keep the Freedom wireless licenses for at least 10 years, he said. And he would “expect to see″ wireless prices in Ontario and Western Canada lowered by about 20 per cent, putting them in line with Videotron’s current Quebec offerings.

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In a note to clients, Desjardins analyst Jerome Dubreuil said Champagne’s conditions suggest he supports the merger and is signaling that the deal would be acceptable if Quebecor Inc. can properly compete in the long term.

Scotiabank’s Maher Yaghi said Champagne’s “pragmatic view” could provide “a good middle ground″ for the companies to build on and believes there’s a 90% chance the Rogers-Shaw deal will close.