Shoppers walk outside the internet, television, home phone provider, Cogeco location in LimeRidge Mall in Hamilton on Sept. 2, 2020.The Globe and Mail
Joe Natale seems convinced he can overcome deep-seated resistance to a bid for Cogeco Inc. and Cogeco Communications Inc. by promising a better future for Quebec than his Montreal-based rivals.
The chief executive at Rogers Communications Inc. all but wrapped himself in the Fleur-de-lis on Wednesday as he made his first public appearance since teaming up with New York-based cable company Altice USA to table a hostile $10.3-billion bid for Cogeco and its subsidiary. At a Bank of America Merrill Lynch conference, Mr. Natale raised the prospect of Rogers being a “partner with Quebec, investing in the ambition to build innovative communication infrastructure."
Most CEOs would use this sort of stage to talk up the compelling economics of their offer – Altice and Rogers are offering Cogeco’s controlling shareholder, the Audet family, $800-million for their stake in the company. By contrast, Mr. Natale sounded like he was running to be Quebec’s next premier. He highlighted the possibility of creating high-paying jobs in the province if Rogers wins the company, and taking the telecom sector “to the next level.”
Mr. Natale’s no dope. He’s known Cogeco executive chairman Louis Audet for years. Rogers is the largest shareholder in both Cogeco companies, and its investment dates back decades. Mr. Natale said Wednesday that combining forces “is something we’ve contemplated for a long time.”
So what’s Rogers' game plan? It’s obviously not about putting more money on the table. While analysts say Altice and Rogers could increase their offer, the tone of Mr. Natale’s remarks shows that, as this takeover continues to unfold, the real battle will be over who can best position Cogeco customers for a digital future in la belle province and other markets. If Mr. Natale can convince the Audet family that Rogers is a better steward of their company, he may win the day.
Rogers pointed out last week it has more customers in Quebec – two million wireless users – than Cogeco, which has the bulk of its operations in Ontario and the United States. And in case anyone in Montreal missed it, Rogers talked up the fact that it kept the Fido head office in the city after acquiring the mobile brand in 1996. Rogers now has 3,000 employees in the province. Cogeco has a total of 4,500 employees across North America.
Mr. Natale said yesterday his company would have more to say on Cogeco in the near future. If I were the Rogers CEO, and not concerned about falling off Mr. Audet’s Christmas card list, I would point out that just about every available Cogeco dollar is earmarked for expanding its U.S. cable network, rather than upgrading the network for customers in Quebec and Ontario suburbs and farms.
Mr. Natale can ask how Cogeco plans to keep buying U.S. cable operators – which trade at far higher valuations than Canadian peers – while also investing in the 5G network that is considered essential infrastructure for Quebec’s economy. Canadian telecom companies are expected to spend $26-billion building 5G networks over the next five years, according to a recent study by Accenture.
The Rogers CEO is going to have something of a credibility problem if he tries pitch this takeover on current customer service, rather than what Rogers is planning to roll out with 5G. Consumer surveys done by J.D. Power show Cogeco ranked second as a cable supplier in eastern Canada last year, behind Videotron. Rogers placed fourth – in a field of four. The same rankings apply to internet service: Cogeco was No. 2, Rogers was back of the pack. However, Rogers has far deeper pockets when it comes to investing in technology, and introduced 5G in Montreal back in January.
And while there is always a risk for a CEO in a glass house to start throwing stones – both Cogeco and Rogers are family controlled through dual-share structures – Mr. Natale can ask what gives the Audet clan the right to turn down a takeover bid for a public company within hours, despite only owning just 10 per cent of the equity in Cogeco and a tiny fraction of Cogeco Communications. That argument may carry weight with Cogeco minority shareholders such as Montreal-based Letko, Brosseau & Associates Inc., which holds a 9-per-cent stake.
Mr. Natale and his partners will be heard from again on Cogeco. As Altice USA chief executive Dexter Goei said Wednesday at the investor conference: “This is a marathon, not a sprint.”
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