Adds there will be further pursuit of Cogeco
By Ken Kelley
NEW YORK – Following last week’s big news which saw Altice USA and Rogers team up to try and buy Cogeco (a deal which was utterly and repeatedly rejected by Louis Audet, its controlling shareholder), it was little surprise the topic was first on the agenda when Rogers executives Joe Natale and Tony Staffieri spoke Wednesday at Bank of America Securities’ virtual 2020 Media, Communications & Entertainment Conference.
“We have immense respect for Mr. Audet and his family, and for the legacy of the company,” said Rogers CEO Natale. “At a time when connectivity and economic recovery are more important than ever, what we’re seeking is to it to be a partner with Quebec, investing in the ambition to build innovative communication infrastructure including across rural areas.
“And we think we can take the tech sector to the next level and create more high paying jobs in the province. Overall, we believe that this is a compelling transaction for all of Cogeco’s customers in Quebec and Ontario, and for all the company shareholders to create even more long-term value.”
The potential Rogers purchase of Cogeco’s Canadian assets was made in conjunction with a proposal from Altice USA, which offered to buy Cogeco Inc. and Cogeco Communications for $10.3 billion. Altice would have then entered into an arrangement to sell all of Cogeco’s Canadian assets to Rogers, which is a long-term, large shareholder of the cable company, for $4.9 billion.
Natale said the company looked at the potential behind the Altice deal and determined it could have been a great partnership. The CEO acknowledged a Cogeco purchase is something the company has considered at various times throughout its history (it has owned a significant chunk of Cogeco shares for more than 20 years), and that Rogers would soon provide further rationale behind its latest offer in the not too distant future.
(Altice CEO Dexter Goei told the same conference his pursuit of Cogeco isn’t over, calling it a “marathon” and not a sprint.)
Changing to other topics, Natale and Staffieri were asked about the impact which the Covid-19 pandemic has had upon the company. Natale acknowledged that Q2 was “very, very quiet” as the company’s retail distribution network essentially shut down, while the sports and media side of its business also saw drastic declines in business as ad revenue temporarily dried up.
“That has persisted throughout the whole summer, as people have continued to want to shop and see what’s out there and look for a new wireless device, or look at our TV service.” – Joe Natale, Rogers Communications
“But what we saw heading into the latter part of June is that the market woke up and we saw customers looking to transact as we opened up our stores,” Natale said. “That has persisted throughout the whole summer, as people have continued to want to shop and see what’s out there and look for a new wireless device, or look at our TV service… So the marketplace truly has come back to life and there’s a renewed energy, pretty much across all of our businesses.”
Rogers CFO Tony Staffieri said aggressive offers from wireless competitors continued from Q2 into Q3, and noted one area where the company has seen a decline is in wireless services among immigrants to Canada as the back to school season gets underway. There simply are far fewer foreign students coming.
“Around this time of year, it’s always been immigration and in particular, foreign students that have been a pretty big part of go back to school growth that we see,” Staffieri said. “We don’t see that this year. In Q2, we saw a market of total net adds for the industry down about 80% to 85% year-on-year. Our expectation for Q3 is that we’re probably seeing something that is still down, but by much less. If we had to put a number on it probably in the 10% to 20% range would be a rough estimate. But, again, it’s been a very good comeback from, from where we were.”
On the cable side of the business, Natale said Rogers has seen continued growth on the internet side of the business, but not to the extent a normal back to school season typically brings. But he also acknowledged the Covid pandemic has helped the company become more agile with respect to its offerings and operating models, including technical support via video for internet installations.
“The customer is more willing to accept these different operating models,” he said. “The number of customers that are upgrading, entering into a new contract, or getting a new phone via digital channels is tremendous. In the past, we would have seen customers wanting to go into the store after doing some initial browsing online, but what we’re seeing is the customer is willing to complete the transaction and have the phone delivered to their house, or opting in for our Pro On-the-Go alternative. Those types of solutions are really picking up in popularity. We’ve taken all these tools and put them on the table and re-architected what are the right journeys and approaches to serve different types of customers. We’re finding it’s working really well, and we’re getting some great responses and great customer satisfaction feedback.”
Asked if Shaw Mobile’s launch is having any sort of impact on Rogers’ business in Western Canada yet, both Natale and Staffieri noted the company has not seen any significant impact. Exclusive to British Columbia and Alberta, Shaw Mobile entered the market with an aggressive Unlimited Data plan which includes unlimited data (25GB/month at high speed, but slower if that cap is breached) for $45 per month for subscribers of the company’s home internet service.
“We’re doing well in Western Canada we have not seeing any remarkable shift or change from that perspective,” Natale said, “and bear in mind that we’ve got a strong presence in places like Vancouver and we feel we’re in a good place, and we’ve got the ability to compete.”
“You know when we look at those types of aggressions in the market, we always sort of debate to what extent do we follow or not,” Staffieri added. “And on closer inspection of that specific plan, that was the Shaw wireless brand focusing on the bundling with home internet – and when you look at the combined price, it really was the equivalent of the combined price on the Freedom Mobile plan and internet, and so it’s just a different way of putting in the price.
“While we aren’t seeing any tremendous or significant impact in terms of volumes, what we do notice is those types of plays having an impact on some of the competitive price dynamics that they cause, especially on the flanker brands.”
