Undertakings of Quebecor Media Inc. and Videotron Ltd. with respect to Freedom Mobile

Letter regarding the undertakings of Quebecor Media Inc. and Videotron Ltd. with respect to Freedom Mobile

The Honourable François-Philippe Champagne
Minister of Innovation, Science and Industry
235 Queen Street
Ottawa, Ontario
K1A 0H5

Subject:

Undertakings of Quebecor Media Inc. and Videotron Ltd. with respect to Freedom Mobile

Dear Minister,

This is to set out the conditions that Quebecor Media Inc. ("Quebecor"), through its subsidiary Videotron Ltd. ("Videotron"), undertakes to satisfy should it close the acquisition of Freedom Mobile. We respectfully ask that you please bear these conditions in mind as you consider whether to approve the transfer of Freedom Mobile"s wireless spectrum licenses to Videotron.

With more than 6,500 employees and over 3 million customers in Québec and Ontario, Videotron is a major player in the Canadian telecommunications market. It launched its wireless service in 2006 and its own mobile network in 2010, becoming the first next-generation operator in Québec. Through its business strategies and go-to-market approach, it has created a highly competitive environment and lowered prices by approximately 40%, to the benefit of consumers.

In addition, Videotron has participated in all major spectrum auctions since 2007, including the 2021 auction in which it acquired 294 blocks of 3500 MHz spectrum at a cost of $830 million. These purchases have been accompanied by massive investments in network infrastructure in order to provide Videotron customers with a high-quality network, including 5G technology, which has demonstrated its reliability and robustness. In total, Videotron has invested over $4 billion in spectrum and infrastructure. Last year, it also acquired VMedia, enabling it to offer consumers in British Columbia, Alberta, Manitoba and Ontario innovative products and discounted multiservice bundles.

With its proven expertise, demonstrated capacity for innovation, impressive track record in its current markets and significant resources, Videotron is the strong fourth player that Canadians have been waiting for. Our company is ready and determined to disrupt the Canadian wireless market following the acquisition of the assets of Freedom Mobile. The Competition Tribunal concurred in its December 31 decision, noting that "Videotron is an experienced market disruptor that has achieved substantial success in Quebec. It has drawn upon that experience to develop very detailed and fully costed plans for its entry into and expansion within the relevant markets in Alberta and British Columbia, as well as in Ontario."

In consideration of the foregoing and in light of the conditions you have set for approval of the transfer of Freedom Mobile"s wireless spectrum licenses, which is the final step towards the acquisition of Freedom Mobile by Videotron, Videotron undertakes, as of the closing date, to:

1. Ensure that over a period of ten years, Freedom Mobile's plans will be at least 20% more affordable than the equivalent plans offered by the incumbents in the British Columbia, Alberta and Ontario markets as of February 10, 2023, failing which Videotron may be subject to damages of up to $200 million;
2. Maintain prices for Freedom Mobile"s existing customers for five years. In addition, existing Freedom customers will automatically receive a 10% increase in their local data limit at no additional cost;
3. Invest more than $150 million to upgrade Freedom Mobile"s infrastructure, which will, among other things, enable 90% of its current and future customers to access the 5G network using a compatible device within two years. In the interim, Freedom"s new non-5G plans with national roaming will be priced 20% below the price of the incumbents" equivalent 5G plans as of February 10, 2023.

To do so, Videotron will maintain an equivalent number of direct and indirect jobs for skilled workers, it being understood that the increase in investment will necessitate a skilled workforce to ensure system evolution, network expansion and construction, and infrastructure upgrades, and that in view of lowering prices for mobile plans, Freedom will need to have the agility to compete.

In addition, Freedom will participate, within its wireline footprint, in the Connecting Families initiative available to low-income families currently receiving the maximum Canada Child Benefit and low-income seniors receiving the maximum Guaranteed Income Supplement, as Videotron already does.

The attached Undertaking attests to the above commitments. These commitments are in addition to the public undertaking made by Quebecor on October 25, 2022 to retain the wireless spectrum licences for a period of at least 10 years following the date of their transfer. In this regard, we reiterate that Videotron is committed to the long term and is determined to lower prices for the benefit of Canadians. It has done so in Québec, as confirmed by reports from the Canadian Radio-television and Telecommunications Commission, the Competition Bureau and Innovation, Science and Economic Development Canada, and it will do the same in the rest of Canada.

We are eager to show consumers how a fourth player can disrupt the market, to their benefit.

We look forward to your decision.

Sincerely,

(s) Courtesy translation (s)

Pierre Karl Péladeau
President and Chief Executive Officer
Quebecor Media Inc.

Encl.: Undertaking by Quebecor Media Inc. and appendix

Agreement between Videotron ltd. and His Majesty the King in Right of Canada, as represented by the Minister of Industry

Whereas Rogers Communications Inc. ("Rogers"), Shaw Communications Inc. ("Shaw"), Shaw Telecom Inc. ("Shaw Telecom") and Quebecor Media Inc. ("Quebecor") reached a tentative agreement on June 17, 2022 regarding the sale of Freedom Mobile Inc. ("Freedom") to Quebecor or one of its direct or indirect subsidiaries, subject to regulatory approval;

Whereas, in accordance with the said tentative agreement, Quebecor and Shaw jointly filed on June 27, 2022 an application with Innovation, Science and Economic Development Canada ("ISED") for approval of the deemed transfer of the commercial mobile spectrum licences held by Freedom;

Whereas a definitive agreement was reached on August 12, 2022 by Rogers, Shaw, Shaw Telecom, Videotron Ltd. ("Videotron") and Quebecor regarding the sale of Freedom to Videotron;

Whereas Freedom currently operates its mobile wireless network in the Eastern and Southern Ontario, Alberta and British Columbia markets (hereinafter the "Markets");

Whereas the Minister of ISED made a public statement on October 25, 2022 regarding competition in the telecommunications industry and setting out, inter alia, a restriction on the transfer of the spectrum licences currently held by Freedom for a period of ten years;

Whereas the Competition Tribunal issued a decision on December 31, 2022, which was upheld by the Federal Court of Appeal on January 24, 2023;

Whereas Quebecor appeared before the Standing Committee on Industry and Technology on January 25, 2023;

Whereas access to affordable mobile wireless services of high quality is essential to enable Canadians to fully participate in the digital economy;

Whereas Videotron has repeatedly demonstrated its ability to compete effectively with national mobile wireless service providers;

Whereas the Competition Bureau, the Canadian Radio-television and Telecommunications Commission and ISED have all recognized Videotron's role in the lowering of the prices of  national telecommunications service providers, including for mobile wireless services, for the benefit of Canadian consumers;

Whereas the Minister's mandate letter of December 16, 2021 asks him to accelerate broadband delivery by requiring those that have purchased rights to build broadband to meet broadband access milestones or risk losing their spectrum rights;

Whereas Videotron's strategies and approaches have created a highly competitive environment in Québec and have brought prices down by approximately 40%, for the benefit of consumers;

Whereas Videotron's competitive presence in the Markets following the Minister's authorization to transfer the spectrum will have the effect of lowering prices in the Markets;

Whereas Videotron will invest more than $150 million to upgrade Freedom's infrastructure, which will enable, among other things, 90% of its current and future customers to access a 5G network using a compatible device within two years;

Whereas Freedom will participate, within its wireline footprint, in the Connecting Families program available to low-income families and seniors;

Now therefore, Videotron undertakes, as soon as practicable following the Acquisition of freedom by Videotron ("the closing"), to:

1. Cause the current prices of the plans held by Freedom's existing customers in the Markets to be maintained following the Closing, and to increase the local data limit of each existing plan by 10% and update its clients' terms and conditions in accordance with applicable laws and standards. This commitment to maintain prices shall be valid for a period of 5 years following the Closing;
2. Promote competition in the Markets and compete aggressively with the national mobile wireless service providers in order to offer users of mobile wireless services in the Markets competitive and affordable pricing;
3. Extend its business plan to the Markets, which should make it possible to reflect the lower pricing generated in the Québec market;
4. Ensure that the regular prices of the mobile plans offered by Freedom in the Markets are similar to the prices charged by Videotron for comparable plans offered in Québec;
5. Within 3 years of closing, extend its service offering to Manitoba by way of an MVNO agreement, through roaming or by expanding and building out its own network using the spectrum licenses acquired by Videotron, while ensuring that the regular pricing of the mobile plans offered is similar to that charged by Videotron for comparable plans in Québec;
6. Maintain an equivalent number of direct and indirect jobs for skilled workers, it being understood that the increase in investment will necessitate a skilled workforce to ensure system evolution, network expansion and construction, and infrastructure upgrades, and that in view of lowering prices for mobile plans, Freedom will need to have the agility to compete;
7. Offer new plans in the Markets without 5G access and including national roaming equivalent to those offered by the incumbents on February 10, 2023, a compilation of which is attached hereto (the "Benchmark Plans"), and cause such plans to be at least 20% less expensive than the prices of the Benchmark Plans upon commercialization;
8. Offer in the Markets, no later than the second year following the Closing, plans including 5G access and national roaming equivalent to those in the Benchmark Plans and cause such plans to be at least 20% less expensive upon commercialization than the prices in the Benchmark Plans (the "Objective");
9. Implement the required investment and roll-out strategies in the Markets so that said Markets can ultimately enjoy lower prices for mobile wireless services;
10. Share with ISED, upon request and confidentially, the business plans and other information in its possession, or provide ISED with such reports as it may require in order to enable it to ascertain the efforts made by Videotron in the Markets;
11. Submit to ISED, within 3 months following the first through tenth anniversaries of the Closing, a report on the commitments set forth in clauses 1 through 9. Such report shall include, inter alia, the prices of the various equivalent plans it offers in the Markets compared with the Benchmark Plans. Videotron shall make the reports public, with the exception of any confidential information;
12. In the event that the Objective is not met, Videotron undertakes to pay ISED damages in the amount of $25 million per year in which the Objective is not met for each of the third, fourth, fifth, sixth, seventh, eighth, ninth and tenth years, up to a maximum of $200 million. If no damages are levied in a given year, they cannot be carried forward to a subsequent year;
13. Following the report for the tenth year, Quebecor and Videotron shall be released from their obligations under this Agreement and the Agreement shall be terminated;
14. The commitments made under this Agreement are also subject to the absence of unexpected major technological changes or force majeure events affecting the Markets. For the purposes of this Agreement, "force majeure events" shall mean any cause that is unavoidable or beyond the reasonable control of Videotron, including war, riots, insurrection, strikes, or any act of God or other similar circumstance that could not reasonably have been circumvented by Videotron. Where a binding commitment is not met or fulfilled in any given year due to any of the aforementioned factors, Videotron shall (i) not be bound by the binding commitment; and (ii) not be required to pay any amount of damages arising from the failure to meet or fulfill such binding commitment;
15. The parties agree that this Agreement shall be governed by the applicable laws of Québec and Canada. The parties agree that any dispute arising out of the interpretation of this Agreement or relating to it may, if the parties so decide, be settled by binding arbitration between the parties in accordance with the Commercial Arbitration Act, RSC 1985;
16. This Agreement shall be binding upon the parties and their successors, assigns and beneficiaries;
17. This Agreement may be amended only with the written consent of both parties;
18. This Agreement may be executed separately in any number of separate counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. Any copy may be transmitted by facsimile or email by acceptable electronic means, including Portable Document Format (PDF), and the copy so transmitted shall have the same force and effect as an original;

19. All notices and other communications (collectively, "Notices") given hereunder shall be in writing and shall be deemed to have been duly given or delivered, as the case may be: (i) three days after mailing, if sent by registered or certified mail, postage prepaid and return receipt requested, if the postal service is operating normally; (ii) immediately upon delivery, if sent by courier; (iii) one day after transmission if sent by email, facsimile or other written form of electronic communication; or (iv) immediately upon receipt, if delivered personally.

    All Notices shall be sent to the addresses listed below, as set forth below:

    To Videotron:

    612 Saint-Jacques Street
    Montréal, Québec H3C 4M8
    Fax: (514) 985-8834
    Email: avislegal@quebecor.com  
    To the attention of the Corporate Secretary

    To the Minister:

    235 Queen Street, 6th floor, East Tower
    Ottawa, Ontario K1A 0H5
    Email: spectrumoperations-operationsduspectre@ised-isde.gc.ca
    Attention: Director General, Spectrum Management Operations Branch

20. The execution and delivery of the Agreement has been duly and validly authorized and the parties agree that the Agreement, when executed and delivered, will constitute a legal and valid obligation, enforceable in accordance with its terms.

This unofficial version of the agreement is a translation to be used for communication purposes only and it cannot serve to interpret or supplement provisions of the official agreement drafted in French.

Benchmark plans as of February 10th, 2023

Appendix of the commitment made by Quebecor Media Inc. as part of the transaction

Translated information taken from the French screen captures of benchmark plans offered by the incumbents on February 10th, 2023.