Rogers president and chief executive officer Tony Staffieri said he remains confident in the takeover’s underlying economics.DADO RUVIC/Reuters
Rogers Communications Inc. RCI-B-T reported solid gains in its fourth-quarter revenue and profit as it prepares to consummate its $20-billion takeover of Western Canadian cable company Shaw Communications Inc. SJR-B-T
The deal, which has been in the works for close to two years, has faced a number of regulatory delays, leading to higher financing costs for Rogers while providing more time for the telecom’s rivals, BCE Inc. and Telus Corp., to aggressively build out their fibre-optic networks in preparation.
But Rogers president and chief executive officer Tony Staffieri said he remains confident in the takeover’s underlying economics, noting the Toronto-based telecom and media giant has not been idle while its competitors ramped up their spending.
“More time has allowed us to focus on the execution within our core business,” Mr. Staffieri said in an interview Thursday after Rogers reported gains in wireless subscribers during the three-month period ended Dec. 31. “And so what you see playing out is a stronger company, every day, every week, and you see that playing out in our results throughout 2022.”
If the takeover is successful, Rogers could also face heightened competition from a growing wireless rival. Rogers has agreed to divest Shaw’s Freedom Mobile, Canada’s fourth-largest wireless carrier, to Quebecor Inc.’s Videotron Ltd. for $2.85-billion. That deal would double Videotron’s customer base and expand it into new markets as it steps into Shaw’s shoes in Ontario, Alberta and British Columbia.
“That’s our strong suit,” Mr. Staffieri said when asked how the prospect of enhanced competition factors in to the rationale for the takeover. “We’ve thrived in building our business based on competition. That’s how we grew up – it’s in our DNA – and we’re comfortable with continuing to compete in a four-player wireless market.”
Mr. Staffieri declined to comment on discussions with Federal Industry Minister François-Philippe Champagne, whose department still needs to sign off on the transfer of Shaw’s wireless licences to Videotron. Rogers, Shaw and Videotron owner Quebecor Inc. announced on Monday that they have extended the deadline for the deal until Feb. 17 as they await that approval.
Even though Rogers has had to pay its bondholders more than $800-million in fees to extend its financing until the end of 2023, Mr. Staffieri said the synergies expected to flow from the deal remain intact.
“When you look at our total financing on this transaction, it’ll still be just under 5 per cent. So in the overall scheme of capitalizing and funding the acquisition, we continue to see upside on this, in excess of that,” Mr. Staffieri said. The company has previously said it expects to generate $1-billion in synergies over two years.
Mr. Staffieri highlighted the steps he has taken to improve the company’s performance in his first 12 months since taking the helm after a dramatic power struggle that unseated his predecessor, Joe Natale. Mr. Staffieri has overhauled the company’s upper ranks and worked to clarify its priorities, he said. He has also ramped up network investments as the telecom looks to expand its coverage and improve reliability following a widespread outage last summer.
“I’m really proud of the way the whole organization just rallied around what our vision and our strategy was and executed on it very well,” Mr. Staffieri said as the company reported a fourth-quarter profit of $508-million.
The earnings, which amounted to $1.00 per diluted share, were up 25 per cent from a year earlier as the telecom generated more revenue from its wireless division and trimmed costs in its cable business.
The telecom’s fourth-quarter revenue grew 6 per cent to $4.17-billion, driven primarily by its wireless division, which benefited from higher roaming revenues associated with increased travel. The company also added 193,000 postpaid wireless subscribers – those who are billed at the end of the month for services – during the quarter, compared to 141,000 during the same quarter the previous year.
After adjusting for various items, Rogers had $1.09 of earnings per diluted share, up 14 per cent from a year ago when it had 96 cents of earnings. The results were ahead of analyst expectations of 99 cents a share of adjusted earnings and $4.16-billion of revenue, according to the consensus estimate from S&P Capital IQ.
Desjardins analyst Jérome Dubreuil called the wireless results solid, but noted that the cable business – which includes internet, video and home phone service – saw a net loss of 6,000 customers.
Rogers also announced its guidance for 2023, forecasting service revenue growth of between 4 and 7 per cent and capital expenditures of $3.1-billion to $3.3-billion. Its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) is expected to increase by 5 to 8 per cent.
“For reference, BCE guided to slightly lower EBITDA growth of 2 to 5 per cent,” Mr. Dubreuil said in a research note.