In a post-Shaw merger world, “disruptive” new player Vidotron will fight hard for Canadians’ wireless dollars, according to Rogers CEO Tony Staffieri. But that competition won’t hurt Rogers itself, also according to Staffieri.
The company is continuing to wait for the final ministerial approval needed to close its $26-billion takeover of Shaw and complete a side transaction that will see it sell Shaw’s Freedom Mobile to Quebecor-owned Vidotron for $2.85 billion.
It’s a delicate time and Staffieri is carefully tailoring his messages to both investors in his company and the powers that be in the federal government.
Last week he told lawmakers during a parliamentary committee hearing that “Vidotron will become a disruptive fourth national carrier reaching nearly 90 per cent of the population.”
But when Staffieri spoke with financial analysts Thursday — the call came after the news that Rogers’ fourth-quarter profit increased by 25 per cent on the strength of its wireless business and a boost in sports-related revenue — he also said Rogers will have no trouble competing with that disruptive player.
“We have thrived in a competitive landscape in the past,” he said, noting that after Vidotron takes over Freedom Mobile, “(Then) it’s over to us, and we’re confident we have what we need to be able to compete in a four-player market, just as we’ve done in the past.”
Staffieri added that in the new wireless market, it won’t necessarily be Rogers that loses market share to Vidotron, implying rivals Telus or Bell will be the victims of the competitive shift.
His comments Thursday came after David Barden, an analyst with Bank of America Merrill Lynch in New York, pressed the CEO for answers on why the deal would be a win for shareholders if it’s also so good for Vidotron.
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Barden noted that Rogers has struck agreements with Vidotron meant to help the Quebec company expand and compete outside of its home province, a key factor in the Competition Tribunal’s decision not to block the merger (which the Federal Court of Appeal upheld last week).
“You’re making the argument that Quebecor — and whatever you’ve done in your agreements with them — it’s going to make them a more effective competitor in the Canadian wireless market, which sounds like a terrible thing if you’re an equity investor in Rogers,” Barden said. “I just need a refresher on how this all makes me excited about the Rogers transaction.”
Innovation Minister Franois-Philippe Champagne told the Star last week he’s in no hurry to approve a transfer of wireless licences from Shaw to Vidotron. Earlier this week, the companies extended the deadline to complete the transaction to Feb. 17.
Champagne is facing swirling political pressure over the decision: a group of Conservative MPs has mounted a renewed campaign against the transactions; independent internet provider TekSavvy has filed a regulatory challenge over Rogers’ agreements with Vidotron; and Anthony Lacavera’s Globalive alleges it was thwarted in its efforts to buy Freedom Mobile at a higher price.
Even Champagne’s fellow Liberal MP, Nate Erskine-Smith (who is considering a run at Ontario’s Liberal leadership), has been sharply critical of Rogers being able to pick its own competitor by striking the deal with Vidotron.
In his prepared remarks on the analyst call Thursday, Staffieri emphasized that two levels of court have now “unanimously and decisively ruled in favour of these pro-competitive transactions,” again returning to his message that Vidotron will be a disruptive player.
Rogers reported a fourth-quarter profit of $508 million, up from $405 million in the same quarter a year earlier as its revenue rose six per cent to $4.2 billion.
Profit excluding some items was $1.09 a share. Analysts estimated 98 cents, on average.
Rogers added a total of 193,000 wireless subscribers on contracts and the mobile division recorded revenue of $2.58 billion, exceeding analysts’ projections of $2.5 billion.
The cable business, on the other hand, lost TV and home phone customers and added only 7,000 internet subscribers, with revenue flat at just over $1 billion. But the media division, which includes the Toronto Blue Jays, saw revenue increase by 17 per cent to $606 million.
Staffieri said the quarterly results are evidence of a turnaround, a year after he took the helm following a divisive boardroom fight.
“We have made significant progress, and we did it with a backdrop of a lingering pandemic, new executive team, and one of the largest proposed mergers in Canadian history.”
Rogers’ chief financial officer, Glenn Brandt, said the company has all the funding needed in place to close the deal, and that they have extended the $13-billion funding from issued bonds to the end of the year.
“We have plenty of runway there,” he said.
In the year ahead, Rogers expects revenue growth of between four and seven per cent and adjusted earnings growth before deductions of between five and eight per cent. It expects to spend between $3.1 billion and $3.3 billion on capital expenditures, compared with $3.03 billion last year.