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The companies said over the weekend the Canadian Competition Bureau plans to oppose the C$20 billion merger due to its possible impact on the country’s competitive wireless market.
The telecom firms have offered to address the concerns by divesting Shaw’s Freedom Mobile business, the country’s fourth-largest wireless carrier.
Yet investors dumped their shares in early trading, with Shaw Communications plunging 10% and Rogers dropping 6%.
“Although there is still a strong probability that the transaction can ultimately get done, one has to concede that deal risk has risen meaningfully,” Canaccord Genuity analyst Aravinda Galappatthige said.
Rogers had last year offered to buy Shaw Communications for C$40.50 per share to beef up its presence in the sparsely populated regions of Western Canada and take on rivals Telus (NYSE:TU) Corp and BCE (NYSE:BCE) Inc in a highly competitive industry.
A report in the Globe and Mail newspaper on Friday said the company has asked telecom firm Quebecor Inc to join a bid for Shaw’s Freedom Mobile.
The Competition Bureau had in 2013 conditionally approved BCE’s C$3 billion buyout of Astral Media Inc months after the proposal was put on the table, only if the company agreed to make significant divestitures of Astral’s interests in a number of pay and specialty television channels.
