We get it. Tony Staffieri is full of regret.
The president and chief executive officer of Rogers Communications Inc. RCI-B-T wants Canadians to know that he is paying his penance for the cable and wireless giant’s network outage that left millions of people across the country without cellphone, home phone and internet service earlier this month.
That’s why Mr. Staffieri is saying sorry more often than Justin Bieber these days. He’s expressed his remorse on television and in a recent full-page ad in this newspaper. He’s even tried to make amends by parting ways with his former chief technology officer.
Even so, consumers and small businesses are still fuming about the service blackout, and that public backlash is creating deal risk for Rogers’ proposed $26-billion takeover of Shaw Communications Inc. SJR-B-T
“In speaking to many of you, it is clear that what matters most is that we ensure this doesn’t happen again,” Mr. Staffieri states in a letter to Canadians posted on the company’s website.
“You have my personal commitment that Rogers will make every change and investment needed to help ensure that it will not happen again.”
Grab some popcorn, folks. Word on the street is that Mr. Staffieri’s public prostration isn’t over yet.
Bloomberg News is reporting that he’s on a “whirlwind apology tour” designed to shore up support for the Shaw transaction ahead of its July 31 deadline. But if Mr. Staffieri is serious about mollifying the masses, he should go on a transparency tour instead.
Rogers still has a lot of explaining to do about what caused its network outage and whether the fallout, including its future network investments, are changing the economics of its proposed Shaw deal.
Mr. Staffieri can start by providing clear answers to Canadians, especially to his company’s class B shareholders, about how much money Rogers needs to invest to improve its network resiliency.
Mobile Syrup, a telecom industry news site, reported that Rogers plans a significant fix that involves separating “its wireless and wireline networks through adjustments to its core network.” That entire process could take up to two years, according to the published report.
Although Rogers ducked comment for that story, Bay Street analysts took notice nonetheless.
Adam Shine of National Bank Financial Inc., for instance, estimated such a move could involve capital expenditures of $400-million to $500-million “spread over 2023-2024 amid some reprioritizing of future spending.”
In other words, that network overhaul, should Rogers pursue it, would cost big bucks and in a rising interest rate environment, no less. Given the gravity of this issue, investors shouldn’t have to wait until the company’s second-quarter earnings conference call on July 27 to get details about the potential costs.
After all, shareholders have the right to know what companies are doing with their money. And, in this case, any reasonable person would wonder whether Mr. Staffieri’s promised network spending to prevent future outages will erode Rogers’ efficiencies defence for its proposed Shaw acquisition.
When that transaction was announced in March, 2021, Rogers estimated synergies to exceed $1-billion annually within two years of the deal’s completion.
But a potential $400-million to $500-million network fix for Rogers alone would significantly offset those projected cost savings.
Even if Shaw’s network maintains a separate geographic core following the merger, it’s unclear whether it, too, would require additional investments to improve its resiliency.
Rogers declined comment for this column.
Canadians, meanwhile, are left with more questions than answers. Of chief concern for consumers and Industry Minister François-Philippe Champagne is whether Rogers’ market power allowed the company to cut corners on its own network resiliency over the years. After all, it also experienced a nationwide wireless service outage in April, 2021.
It was just last month that Rogers said the Competition Bureau had failed to demonstrate the deal would result in a substantial lessening of competition in the wireless market, adding “any alleged impact on competition is far outweighed by the transaction’s efficiencies.”
That, of course, is a nod to Section 96 of the Competition Act, which limits the Competition Bureau’s ability to intercede in a contested deal if companies can show expected efficiencies from a merger would eclipse any potential reduction of competition.
Rogers has previously stated in a public document that it plans to derive cost savings in areas including wireless network capital expenditure, wireless and wireline job cuts, and a reduction of offices and call centres, as well as core, hub-site, warehouse, programming and technical sites.
Cuts in those areas, especially its core, seem like a bad idea right now and are inconsistent with Mr. Staffieri’s pledge to make every necessary investment to prevent future service disruptions.
Although Rogers has previously said its proposed efficiencies would benefit wireless and wireline markets across Canada, that argument no longer seems reasonable.
That’s why it isn’t enough for Mr. Staffieri to apologize for Rogers’ network outage. Canadians understand he is sorry. Now provide us with answers.
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