HAMILTON and TORONTO – Rogers Communications announced today in its third quarter results that it has purchased Hamilton’s remaining independent cable company, Source Cable, for $160 million.
Source Cable is a cable, Internet, and phone service provider with approximately 26,000 homes passed and 43,000 total service units, says the Rogers press release. For years it was known as Southmount Cable, before a rebranding effort in 2003.
The company has approximately 16,000 basic cable customers, however that figure is not in the press release. Using that number, the traditional cable valuation metric over the decades, means the company was sold for approximately $10,000 per subscriber.
According to Rogers executives, Source Cable was put on the block by its owners, Hamilton’s Campbell family, earlier this year and the sale process was run by an investment bank. Rogers CFO Tony Staffieri said the company simply “put its best foot forward” to win the deal,
“We’re really excited about being able to conclude that deal,” he told reporters in a conference call Thursday afternoon when asked by Cartt.ca how a company like Rogers evaluates a company like Source.
“If you look at homes passed, it’s 26,000 homes passed, so really good penetration of homes. Not only on the cable side, but the internet side as well and it has extremely good churn metrics for the industry. And then finally, when you look at the EBITDA margins that the business was generating, it’s very well run and a great addition to our asset pool.”
"The potential upside for this was pretty compelling for us." – Tony Staffieri, Rogers
It didn’t matter what metric the company used to evaluate the purchase, be it on a per sub basis, total service units (TSUs) or EBITDA. “The math ended up being in line with what you see in other transactions out there – and not inconsistent with what you would have seen with Mountain Cable as well,” said Staffieri. Rogers bought the former Mountain Cable asset from Shaw in 2013 for about the same per-subscriber price.
“They also, as you probably know, have access to the footprint adjacent to them which is about 50% underdeveloped as well, so as development in that area continues to expand, we have access to that area. So all-in the potential upside for this was pretty compelling for us,” he explained.
When asked about other potential acquisitions, CEO Guy Laurence said the company is always looking for other “tuck-in” types of purchases like Source. “When they become available we’ll look at them, depending on the price, but this one, as Tony said, has a lot of upside in the unbuilt area. I was driving around in that area and I think there is a lot of potential there, which will come over a number of years,” said the CEO.
“It was a very obvious one for us and we’ll have to see which other ones come up for grabs.”
