Rogers Communications Inc. RCI-B-T finally completed its hotly contested $20-billion takeover of Shaw Communications Inc. SJR-B-T on Monday after two years of regulatory and political wrangling. For Rogers chief executive Tony Staffieri, the hard part begins now.
Mr. Staffieri faces a number of key challenges, including the complex process of integrating Shaw’s business and networks into Rogers. He will also need to pay down billions of dollars of debt his company has taken on to fund the acquisition.
In an interview, Mr. Staffieri said he’s “confident and comfortable” that he will be able to reduce that debt – which analysts estimate to be at least five times EBITDA – by using the combined company’s cash flows, without issuing equity or selling assets. (EBITDA stands for earnings before interest, taxes, depreciation and amortization.)
He’ll also have to find a way to compete against a growing rival. In order to win regulatory approval for the takeover, Rogers has sold Shaw’s Freedom Mobile, Canada’s fourth-largest wireless carrier, to Quebecor Inc. for $2.85-billion, creating a national expansion opportunity for the Montreal-based company’s telecom subsidiary, Videotron Ltd.
Some critics have expressed skepticism that Videotron’s takeover of Freedom will lead to lower cellphone bills across the industry. But the Competition Tribunal determined, after a month-long hearing, that the deal will create a “more aggressive and effective” wireless competitor.
That means that Rogers could find itself going up against a tougher competitor, one that it will be helping with a series of agreements that provide Videotron with access to the Toronto-based telecom’s infrastructure.
Mr. Staffieri said he’s confident that Rogers has what it takes to compete, even in the face of a recapitalized fourth carrier. The telecom has spent more on cell towers and spectrum (the airwaves used to transmit wireless signals) than “anyone else,” has an effective distribution network both online and in physical stores, and has made market-share gains over the past year and a half, he said.
“We fully expect Quebecor to bring a new level of enthusiasm to the market. We welcome that,” Mr. Staffieri said.
The two-year-long regulatory saga of combining the country’s largest cable networks came to an end at 8:30 a.m. on Friday, when federal Industry Minister François-Philippe Champagne signed off on the transfer of Shaw’s wireless licences to Videotron. Mr. Champagne’s signoff was the last hurdle standing in the way of the deal, which had already secured the approval of the Canadian Radio-television and Telecommunications Commission and defeated a legal challenge by the Competition Bureau.
Roughly 20 people, including Mr. Staffieri, company chairman Edward Rogers and the telecom’s senior leadership team, gathered in the Ted Rogers boardroom on the 10th floor of the company’s headquarters to take in Mr. Champagne’s announcement over breakfast sandwiches and coffee from McDonald’s. The room erupted into applause.
“It was quite magical to just finally listen to the approval of the minister,” Mr. Staffieri said. “As you would expect, there were a lot of smiling faces in the room.”
Mr. Staffieri, who took over the top job at Rogers more than a year ago after a high-profile boardroom battle, called serving as the CEO of the combined company “an honour and a privilege.”
“This is really about us doing more together than either one of us could have done alone,” he said.
The takeover provides Rogers with greater scale and a coast-to-coast cable network, turning it into the truly national player envisioned by its founder, Ted Rogers, who died in 2008.
That national scale presents a host of new opportunities for Rogers, Mr. Staffieri said, including the chance to significantly expand its enterprise division, and to bundle its wireless services with internet and television offerings on its newly acquired fibre-optic infrastructure in Western Canada.
Mr. Staffieri will spend Tuesday, his first day after closing arguably the most transformative deal in the telecom’s 60-year history, in Vancouver meeting with customers. On Wednesday he will be in Calgary meeting with employees, including front-line technicians.
Rogers has made a number of commitments to the federal government in connection with the deal. They are included in written undertakings designed to impose penalties if the promises are not met.
Those commitments include a previously announced promise that it will spend $1-billion within five years to expand high-speed internet and 5G wireless in areas where that connectivity is not currently available. The telecom has also pledged to invest $2.5-billion in expanding 5G coverage in Western Canada and $3-billion in other network service expansion projects. Rogers has agreed to pay $100-million for each year it fails to meet any of its commitments, up to $1-billion.
Rogers has already begun filling in 600 kilometres of highways that previously didn’t have wireless coverage, including Highway 16 in British Columbia, Mr. Staffieri said. “The fact that Telus, the incumbent telecom out there, didn’t invest – I just shake my head at that,” he said.
Tony Geheran, Telus’s executive vice-president and chief operations officer, said the Vancouver-based telecom has “the strongest track record of bringing connectivity to rural and Indigenous communities” and has invested $350-million in northern British Columbia since 2013, including bringing high-speed fibre-optic internet to communities adjacent to Highway 16, which is known as the Highway of Tears.
“It was Telus that laid the foundation for coverage on the Highway of Tears, investing $27M to reach over 500 kilometers of highway coverage along this 725 kilometer rugged stretch between Prince George and Prince Rupert BC, on time and on budget,” Mr. Geheran said in a statement.
Rogers has also promised to create 3,000 new jobs in Western Canada within five years and maintain a Calgary headquarters for at least 10 years. But the telecom is also expected to eliminate a number of jobs as it integrates with Shaw.
“Will there be some areas of duplication? Sure. But we’re going to look at those very thoughtfully,” Mr. Staffieri said. He declined to specify how many jobs would be eliminated. “This is about net growth,” he said. “Canada’s growing, and we’re growing with it.”