Investors are casting more doubt over Rogers Communications Inc.’s proposed $20 billion takeover of Shaw Communications Inc. as last week’s national network failure draws increasing scrutiny from Canada’s industry watchdogs.

The deal spread, the difference between Shaw’s stock price and the $40.50 a share offer by Canada’s biggest cable and wireless firm, climbed to $6.17 at the close on Wednesday, its widest point in a month. That’s down from less than $3 at the start of July as investors price in further risk of the transaction collapsing in the wake of an outage that pushed millions of Rogers customers offline. 

Industry Minister Francois-Philippe Champagne, whose department will make the final decision on the deal, called the network problem “unacceptable” and ordered telecommunications companies to agree to emergency roaming and mutual assistance during future outages. The Canadian Radio-television and Telecommunications Commission, the telecom regulator, ordered Rogers on Wednesday “to respond to detailed questions and provide a comprehensive explanation” for the network outage. 

While the controversy throws Rogers into the middle of concerns around network reliability, the debacle could bolster antitrust czar Matthew Boswell’s argument that putting more power in the hands of one company could further harm competition in the nation’s already narrow telecommunications market. The antitrust agency said in May it opposed one of the country’s largest-ever mergers. As the July 31 closing date looms, uncertainty is seeping in and investors are opting out. 

“Boswell and the bureau are taking a pretty hard line publicly on these issues and, given all the jitters around regulators and the relatively consolidated nature of the Canadian markets, this kind of hard line tone on Shaw’s wireless assets has created jitters,” Jonestrading market strategist Cabot Henderson said in an interview. “The outage has not helped in the court of public opinion.”

Rogers shares have slumped 4.5 per cent since Friday’s outage, while Shaw’s are down 5.8 per cent. At least three analysts, those at Royal Bank of Canada, Bank of Montreal and National Bank of Canada, lowered their price targets on Rogers stock as the company plans to reimburse customers to help mitigate churn.

Even so, analysts remain bullish on Rogers’ prospects of closing the deal. The company previously agreed to sell Shaw’s wireless unit Freedom Mobile to rival Quebecor Inc. in an attempt to soothe the bureau’s concerns. By removing mobile services from the transaction, Rogers is essentially acquiring a cable provider by shuffling off its wireless division to a smaller competitor.

“As for the government’s desire to bring about more facilities-based competition to stimulate pricing options and less reliance on the Big 3 networks, we think the best opportunity it’s seen in years has presented itself with the prospect of Quebecor buying Freedom as part of a remedy solution for the proposed Rogers-Shaw merger.,” NBC Financial Markets analyst Adam Shine said in a note to clients.