(Bloomberg) — Rogers Communications Inc. Chief Executive Officer Tony Staffieri defended his company’s C$20 billion ($15.4 billion) deal to buy Shaw Communications Inc. as a way to improve the reliability of Canada’s communications system after a nationwide network failure left millions without service and drew the ire of the country’s industry minister.
“We very much remain committed to the Shaw transaction. That transaction has always been about expanding our network capabilities, attaining more redundancy and coverage across the nation that can only help in situations like this,” Staffieri said Monday in an interview on BNN Bloomberg Television.
But the shares of both companies tumbled as investors grow more concerned that the deal could fall apart. Champagne’s department has the final say on approvals for Rogers’ proposed acquisition of Shaw, a major internet and wireless provider based in Canada’s west.
Shaw dropped as much as 6.6% and was down 4.3% to C$34.67 as of 3:51 p.m. in Toronto. Its shares are now more than 14% below the Rogers takeover offer of C$40.50 a share. Rogers fell 4.6%.
Staffieri apologized again for the network failure, which began Friday and stretched into the weekend. He is due to meet Industry Minister Francois-Philippe Champagne on Monday afternoon to discuss what happened.
Champagne blasted the company’s network problem as “unacceptable” and said work was needed to fix reliability issues. The meeting is scheduled to discuss “how important it is to improve the reliability of the networks across Canada,” according to a statement from the minister’s office. Champagne will speak to reporters afterward.
“This is a significant test for the leadership of the Rogers organization,” Robert McFarlane, former chief financial officer of Rogers competitor Telus Corp., said on BNN Bloomberg. “They need to seize the moment. They need to apologize. They need to take concrete actions so it never happens again. And they need to compensate or do actions that engender loyalty.”
The country’s antitrust body, known as the Competition Bureau, has opposed the Shaw deal and Friday’s outage could provide the regulator with more ammunition in its battle to stop the merger.
The “unprecedented” failure “is likely to introduce incremental regulatory risk to the Shaw transaction, heightens investor concerns regarding Rogers’ ability to execute on deal synergies and counters a constructive industry narrative on network performance,” BMO Capital Markets analyst Tim Casey wrote in a note Monday.
Casey estimated Rogers will take a C$70 million hit to revenue and toearnings before interest, taxes, depreciation and amortization in the third quarter because of the outage. He lowered his estimate for revenue and Ebitda by C$150 million this year and next.
(Updates share prices and other new information)
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