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Rogers stock tumbles after outage raises concerns over Shaw merger

Click to play video: 'Rogers fallout after major internet outage'
Rogers fallout after major internet outage
WATCH ABOVE: Rogers fallout after major internet outage – Jul 11, 2022

Shares of Rogers Communications Inc slipped on Monday as analysts voiced concerns over increased risk to the Canadian telecom operator’s $20-billion deal for rival Shaw Communications following last week’s 19-hour outage.

The unprecedented outage on Friday affected nearly every facet of daily life in Canada as access to internet and phone services, both mobile and landline, was cut off. Some callers could not reach emergency services via 911 calls, police across Canada said.

On Monday Canadian payment gateway Interac said it was adding another network provider to its system after the Rogers outage left millions of Canadians locked out of online payments.

Click to play video: 'The fallout from the Rogers outage and tips to stay proactive'
The fallout from the Rogers outage and tips to stay proactive

“We are adding a supplier (besides Rogers) to strengthen our existing network redundancy so Canadians can continue to rely on Interac daily,” Interac told Reuters in a statement.

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Rogers’ Canadian-listed shares fell nearly 4.61 per cent and Shaw dropped 1.8 per cent at a near one-month low of $35.56, while the benchmark Canadian share index was down 1.1 per cent by afternoon.

Industry Minister François-Philippe Champagne was expected to meet the CEOs of Rogers, BCE Inc  and Telus Corp, which control 90 per cent of the Canadian telecommunications market, on Monday to discuss how to improve network reliability across Canada.

“This isn’t just about checking off a box. The minister will have some ideas and, hopefully, some solutions will come out of it,” said a ministry official, who did not wish to be quoted due to the sensitivity of the issue.

Read more: Canada’s industry minister to meet with Rogers CEO after ‘unacceptable’ outage

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Friday’s disruption came two days after Rogers held talks with Canada’s antitrust authority to discuss possible remedies to its blocked takeover of Shaw.

Canada’s competition bureau blocked the deal earlier this year, saying it would hamper competition in a country where telecom rates are some of the world’s highest. The merger still awaits a final verdict.

“The incident is likely to introduce incremental regulatory risk to the Shaw transaction,” BMO analyst Tim Casey said, adding that it would also raise investor concerns over Rogers’ ability to execute on deal synergies.

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Rogers’ second outage in 15 months has led consumers and politicians to call on the government to allow more competition in the sector.

Rogers said on Saturday that its services were close to fully operational and narrowed the cause to a network system failure following a maintenance update.

Scotiabank analysts said increased political and regulatory risk is a possibility after the outage but said the oversight needs to balance the risk of future failures against the increased consumer/economic costs in building other parallel networks.

Click to play video: 'Rogers CEO apologizes, says ‘maintenance upgrade’ behind major outage'
Rogers CEO apologizes, says ‘maintenance upgrade’ behind major outage

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