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Canada Orders Investigation Into 19-Hour Rogers Outage; Could Complicate Shaw Merger

Rogers Shaw merger
(Image credit: Rogers Communications)

A 19-hour July 8 broadband service outage for Rogers Communications customers that disrupted airlines, banking and 911 calls has prompted the Canadian government to investigate the matter, a move that some say could throw a wrench into Rogers’ pending C$20 billion merger with Shaw Communications

Rogers, the largest telecom company in Canada, blamed the outage on a network system failure that occurred during a planned maintenance update. In a statement on its corporate website on July 9, Rogers CEO Tony Staffieri said the problem had been addressed and its systems are now operational. 

“We know how much our customers rely on our networks and I sincerely apologize,” Staffieri said in the statement. “We’re particularly troubled that some customers could not reach emergency services and we are addressing the issue as an urgent priority.”

He added that all customers would receive a credit automatically applied to their accounts for the outage. Some reports put the cost of those credits at between C$65 million and C$75 million. 

But the biggest impact could come in the form of more intense scrutiny of the Shaw deal. Canadian regulators already are looking closely at the merger — and in June, both Rogers and Shaw said they would delay the closing of the deal as they worked out any issues the government may have. 

The latest service outage has caused some regulators to wonder if it’s a good idea to foster further consolidation in the industry. About 90% of the Canadian telecom market is controlled by three companies, Rogers, BCE and Telus.   

In a press conference on July 11, Canada Industry Minister François-Philippe Champagne said he directed Canadian telecom companies to help each other during emergencies and develop protocols to keep customers informed during outages. According to Reuters, Champagne has give the three telecom giants 60 days to enter inter a formal agreement. 

In a statement, Canadian Radio-television and Telecommunications Commission (CRTC) chairperson and CEO Ian Scott said the regulatory body ordered Rogers to answer a series of questions concerning the outage and provide a comprehensive explanation as to why it occurred. Rogers has until July 22 to respond.  

“This widespread network outage not only disrupted Canadians and Canadian businesses across the country, it prevented access to services such as 911 and emergency/public alerting as well as other critical infrastructure services,” Scott said in the statement. “The CRTC is requesting a detailed account from Rogers as to ‘why’ and ‘how’ this happened, as well as what measures Rogers is putting in place to prevent future outages. We take the safety, security, and wellness of Canadians very seriously and we are responsible for ensuring that Canadians have access at all times to a reliable and efficient communications system.”

According to Reuters, citing merger arbitrage traders, the chances that the deal would be completed fell to 62% on Monday (July 11) from 88% a week prior.  

Shares of Rogers fell 5% on July 11 to $45.15 each. The stock rose 2.5% on July 12 to $46.27 each, sliding 0.2% in early trading July 13 to $46.17 per share. 

Shaw stock fell 4.6% on July 11 to $27.95 per share and continued to slide in subsequent trading, priced at $26.24 each on the afternoon of July 13, down 1.2%. ■ 

Mike Farrell is senior content producer, finance for Multichannel News/B+C, covering finance, operations and M&A at cable operators and networks across the industry. He joined Multichannel News in September 1998 and has written about major deals and top players in the business ever since. He also writes the On The Money blog, offering deeper dives into a wide variety of topics including, retransmission consent, regional sports networks,and streaming video. In 2015 he won the Jesse H. Neal Award for Best Profile, an in-depth look at the Syfy Network’s Sharknado franchise and its impact on the industry.