Canada may have a bigger, fourth national wireless carrier soon. Rogers, Shaw, and Quebecor have agreed to merge Freedom Mobile with Quebecor's Videotron carrier, combining two of the nation's major regional carriers into a potential national player.
The real impetus for this is that it breaks a logjam in Rogers' tortured attempt to acquire Shaw. Rogers really wants Shaw's cable business, but regulators have been hostile to the acquisition because Rogers also runs the nation's largest wireless provider, and they didn't want more consolidation there.
The whole do-si-do would form another chapter in a saga stretching back to 2008. Canada is dominated by three wireless providers with, essentially, two radio networks: Rogers, the biggest, and Bell and Telus, which share some network elements. Canadians frequently complain that prices are high and that the country was late to come to options like unlimited data.
Since 2008, the government has been trying to nurture a fourth competitive provider by offering startups and regional players preferential deals on wireless spectrum. Results have been uneven.
As of earlier this year, Videotron had 1.6 million mobile-phone subscribers in Quebec. That's a healthy 22% share of the Quebec population over age 14. But Freedom's 2.2 million subscribers—stretched over Ontario, Alberta, and BC—is a mere 10.6% share of the population over age 14 in those three provinces.
What Will the Merged Network Look Like?
We are on the road at this very moment testing the Freedom and Videotron networks in Ontario and Quebec for our Canada's Best Mobile Network feature, coming out in September. We've been testing both for years.
In our tests, Freedom and Videotron haven't had the blazing speeds we've seen from the other major networks, because they own less spectrum. But Videotron's network in Quebec has been reliable in our tests, although Freedom's network in Ontario is considerably spottier.
For non-Canadians, about half of the Canadian population—18 million people—lives in the corridor between Windsor, ON and Quebec City, QC. At the moment, Freedom covers the metro areas on the Ontario side of the border, while Videotron covers the Quebec side. The two together would create a network that stretches from Detroit, Michigan, to beyond Quebec City, as shown in the image below, which was stitched together from the two carriers' websites. The orange-colored areas are native coverage for one of the two carriers.
That said, while Videotron has done a good job of covering populated semi-rural areas in Quebec, Freedom needs to do better in Ontario. As you can see, there are gaps where the merged carrier would need to rely on the three national networks, even in its home corrdior.
Outside the corridor, Freeodm has coverage in Calgary, Edmonton, Vancouver, Victoria, and some smaller Western cities. But the real competitive opportunity here is around the 3500MHz 5G airwaves Videotron bought last year. According to a government ruling, a carrier can rent out capacity from the big three networks at regulated rates as long as it owns spectrum in the area and makes an attempt to build a network.
That ruling blocked some pure virtual carriers, such as Ryan Reynolds' Mint Mobile, from setting up service in Canada. But it opens up the possibility for Videotron to throw up a few towers and offer service that's mostly on the major national networks, for at least seven years:
Will the Merger Go Through?
The Rogers/Shaw merger is still under fire, especially in the wake of the gigantic Rogers network outage on July 8.
But as most of regulators' concerns around the merger have to do with the elimination of Freedom as an independent wireless provider, a Videotron acquisition may bolster the chances of Rogers' transaction making it past the relatively hostile national antitrust regulator.