Canadian Telecom Embraces Mindless Consolidation With Yet Another Major Megamerger

from the growth-for-growth's-sake dept

We've noted repeatedly how the United States has an unhealthy fascination with the growth for growth's sake mindset. That's best exemplified by our near-endless adoration of megamergers in sectors like telecom, which result in extremely harmful monopolization and consolidation problems that are extremely obvious, but we choose to ignore anyway. Time after time after time in telecom (and banking, and airlines, and...), companies promise a universe of investment, job creation, innovation, and synergies in exchange for merger regulatory approval. And time after time after time, reality shows that these pre-merger promises are meaningless and harmful... unless you're one of the few investors or executives who benefit.

Despite the steady drumbeat of market, employment, and consumer harms from such mergers, we insist on learning nothing from the experience here in the States; the job and competition killing Sprint T-Mobile deal being just the latest in a long line of examples of companies promising all manner of job growth, competition, and innovation, right before the exact opposite happens. With no meaningful penalty whatsoever, unless you're a consumer or employee.

While you might think things are different up in Canada, often they're even worse. This week, two of the nation's biggest telecom giants, Shaw and Rogers, announced they'd struck a new $26 billion deal that would dramatically reduce overall competition in the already not-particularly-competitive Canadian telecom market. The announcement is rife will all manner of dodgy claims of amazing "synergies" and job creation:

"Rogers to maintain and grow local Shaw jobs so that teams across Alberta, British Columbia, Manitoba and Saskatchewan will continue to serve customers and support local communities."

And:

"New technology and network investments will create up to 3,000 net new jobs across Alberta, British Columbia, Manitoba and Saskatchewan."

Of course this sort of job creation and retention never actually happens. What almost always does happen is the merging companies put on a good show for about a year to pretend nothing is really going to change. Then, once the press and policymakers stop paying attention, a massive stream of pink slips arrive as redundant positions and headquarters are inevitably eliminated.

It's not really something that's debatable; it's more akin to physics. The deals create massive new debt pressure that's only relieved by trimming rosters, and usually, trimming investment. The end result: Americans and Canadians alike pay some of the highest prices for fixed and wireless broadband in the developed world. So while Rogers and Shaw are promising that the deal will create jobs and is necessary to help fund 5G deployments, the reality is the deal will inevitably result in stunted deployment and fewer new jobs. How do we know? Because this has happened after every major telecom merger for going on forty years now.

One of the reasons we keep making the same mistakes is thanks to regulatory capture and blatant corruption. But another major culprit is the press, which routinely stenographs these announcements without including any historical context. Case in point: dig through these news reports on the Rogers Shaw deal, and try to find any that clearly spell out the historical human costs of monopolization and consolidation in any specific way. They literally don't exist. This Deadline's report on the deal can't even be bothered to mention the word "competition." Just mindless repetition of baseless claims of "synergies":

"Both companies are family founded and publicly traded on the Toronto Stock Exchange but have significant U.S. shareholders. Shares are both jumped Monday on the deal news. The scale created by the combination will allow for infrastructure expansion critical to drive growth and technology adoption and attract new consumer and business customers, the companies said. It will remain one of the biggest employers in Western Canada."

Most press reports on these US and Canadian mergers are pure stenography. And few if any of the outlets that hype pre-merger promises can be bothered to circle back around to report on the very real human impact of these deals. There's just no money in it. Wash, rinse, and repeat. Over and over and over again.

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Filed Under: antitrust, canada, competition, mergers, telecom
Companies: rogers, shaw


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  1. identicon
    Anonymous Coward, 18 Mar 2021 @ 1:24pm

    Consolidation

    You're overlooking the most important point. The bigger the corporation, the more it can afford to spend on lobbying. The more it spends on lobbying, the more political influence it has. The more political influence it has the more insulated it becomes from market forces and competition. And the more insulated it becomes, the better it is for the major investors and the CEO's looking for a few good quarters to inflate their golden parachutes. So bigger is better -- for the few who have influence on the decision making process.

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