(Reuters) -Canada's antitrust agency is seeking to block Rogers Communications Inc's $16 billion deal to buy Shaw Communications Inc on the grounds that it would lead to less competition in the wireless industry.
Rogers offered to buy Shaw for C$40.50 per share last year to create the country's second-largest telecom company and take on rivals Telus Corp and BCE Inc in a highly competitive market.
"Eliminating Shaw would remove a strong, independent competitor in Canada's wireless market – one that has driven down prices, made data more accessible, and offered innovative services to its customers," Commissioner of Competition Matthew Boswell said on Monday.
The news sent shares of Shaw Communications tumbling 7.7% in afternoon trading, while those of Rogers fell 3.5%.
Both, Rogers and Shaw did not immediately respond to Reuters' requests for comment on the Competition Bureau's statement.
The two companies have offered to address competition concerns by divesting Shaw's Freedom Mobile business, the country's fourth-largest wireless carrier.
"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.
The companies have extended the closure of the deal by a month to July 31.
A report in the Globe and Mail newspaper on Friday said Rogers had asked telecom firm Quebecor Inc to join a bid for Shaw's Freedom Mobile.
(Reporting by Tiyashi Datta and Eva Mathews in Bengaluru; Editing by Aditya Soni and Anil D'Silva)