WITH THE CLOSING OF the Persona purchase by Bragg Communications (owners of EastLink) last last month, the Canadian cable industry lost one of its leading champions – and true characters.
Dean MacDonald worked his way up through the industry beginning at Avalon Cable in Newfoundland 25 years ago, evenutally rising to president of Danny Williams’ Cable Atlantic. The exploits of Dean and Danny are part of industry lore and this reporter once published a photo of the both of them dressed as Carmen Miranda, giant fruity headresses and all.
When Cable Atlantic was sold to Rogers Cable in 1999 for $260 million, MacDonald moved over to the big red machine, holding a number of positions, rising to executive vice-president and chief operating officer (earning high marks during his time there even as he and Williams fought over a portion of the deal in a lawsuit with Ted Rogers).
In 2004, when the former owners of Persona Communications were looking for a way out – and found one by selling it and taking it private with the leadership of Texas-based private equity firm Hicks, Muse, Tate & Furst, and some additional Canadian money – the new owners needed a CEO who could not only run the company (and sell a deal to the Commission where foreigners put up the majority of the cash but left board control in Canadian hands) but also to build it up to sell it off.
MacDonald was part and parcel of that purchase back then and in short order, rebuilt Persona with acquisitions, new marketing and new products and services (like VOIP) as he took a company that sold for $375 million three years ago to one that Bay Street insiders have told Cartt.ca actually went for more than $750 million.
On a personal note, and for full disclosure reasons, Dean (right) 
was also one of the first cable executives to take the time – and maintain the patience – to explain the industry and how it works to this then-newcomer/reporter back in the fall of 1997 when I first began covering this industry.
What follows is an edited transcript of our recent conversation.
Greg O’Brien: So you’re out?
Dean MacDonald: I’m history.
GOB: Well, what are you going to do now?
DM: I’ve had a bunch of irons in the fire. I mean I’ve got investments in about four or five companies – and they’re significant investments which I’ll pursue more. I’m sitting on a bunch of boards including three for Hicks Muse in the U.S. I’m also co-invested with them in some businesses.
As well, I’ve raised a pile of funds for a private equity company which I plan to pursue – which will basically aim to acquire companies that need good, sound management and TLC. And I’m in partnership with that with both Brian Tobin and Paul Hatcher.
GOB: What type of businesses will you be looking at and where would they be?
DM: We’re not going to limit ourselves geographically, although the intent is to concentrate on Atlantic Canada because there’s not a lot of private equity in this region of the country – and we think there’s a lot of family run businesses, etc. that are going to start transferring hands in the coming years.
And of course, we have a lot of contacts down here, so that helps. The other things is – we’re not going to do anything speculative, we’re looking for businesses that are generally mature and just need a change in management – or we see something in them that someone else hasn’t, you know?
To a great degree, it’s kind of like Persona all over again. Persona’s a company we purchased and brought some good governance and management too and over the course of three years changed it. So, we’re looking to apply that same kind of science to other businesses.
GOB: How would you say you’ve changed Persona? What did you do to change Persona the most during your tenure there?
DM: I think we attracted a lot of strong talent to the organization. We brought in a lot of new people, we completely revamped the marketing, we completely overhauled all the financial systems. We made it much more sound technically, investing a lot of capital and infrastructure and performance platforms. So that was big.
And then of course through our acquisitions that you know we made in the western region, which was probably the weakest region, when we came in. We gave it a much better story (purchasing Northern Cablevision in Grande Prairie Alta., and Delta Cable in Delta, B.C.) and a much better growth opportunity. So, you know, it was a bit of cleaning up what wasn’t being done properly, and then acquiring some key assets that gave us some scale.
So it’s a much different company than what we bought, that’s for sure.
GOB: But it’s still a hard company to run though isn’t it?
DM: I can tell you from my discussions with John (Bragg, the new owner) that it’s a lot of headends, a lot of moving parts, very complex. But, it has a lot of potential because a lot of the markets it operates in are maybe not as competitive as downtown Toronto.
But it required a lot of travel – you had to get out there and roll up your sleeves. And you know it is a bit of a Rubik’s cube in the sense that it’s very tough to apply standards in things such as pricing and packaging, just given different markets and different competitors.
GOB: Now, are any of your investments going forward in the cable business and what are you looking forward to most?
DM: I’m on the board of a Puerto Rican cable company, Choice Cable, which is owned by Hicks Muse. I’m on the board and have invested in a company called Unitech, which is based out of Philadelphia and basically is a contractor to the industry. It’s one of DirecTV’s installers. They do fibre builds and telecom builds, etc. all throughout the United States. I think they’re in 14 or 16 states altogether. So, I’ve invested in that company – and that’s a fair sized organization actually.
I’m also on the board and invested in a company called Canpages, which is basically phone directories, a yellow page business, which we have mostly out in western Canada, Vancouver, Calgary, but now we’ve got books in Toronto and all throughout Ontario.
That’s a company’s that really grown a lot in the last two years, which I’ve been very active in. So, those are the main things in what I guess what you consider the related space.
GOB: What about the unrelated space?
DM: Well in our new company we’re working on two acquisitions now that couldn’t be any further away from the telecom space. One’s in aerospace and the other’s in the food industry. So, that’s going to be interesting to say the least. But you know, they’re all things we can bring value to.
GOB: So, you’ve got more pies than fingers?
DM: Yeah, you throw Hydro in on top and it’s getting that way.
GOB: That’s right, because you’re chairman of the board of Newfoundland Hydro
DM: Yes.
GOB: Well, going back to the cable industry for a minute – this is a question I meant to ask earlier – but do you think we could be approaching the end for independent cable operators – where they now need to be under a large umbrella like EastLink? Can you continue as a little guy?
DM: I certainly wouldn’t try to justify our sale of Persona by saying the little guy can’t make it. I look at the Compton Cables and guys like that: They’re innovators. And they seem to be circling the wagons quite well and defending their territory. And very often with an operator who’s small… because he knows everyone in town and he’s a contributor back in the community more significantly than say, big, bad, Bell or whomever.
They’ll survive – and I suspect that you find a lot of these guys have done quite well for themselves over the years and have healthy cash flow and there’s not a big incentive to sell. I’m not saying it’s easy, but I’m not saying its an impossibility. It really depends on the operator and what he puts back into his system and how close of a relationship he has with his customers.
Certainly the technology is changing now. The biggest competitor may not be the big ugly monsters that we’ve always identified and it may be more insipid in terms of where video over the Internet goes.
GOB: And that’s still to be determined I suppose is the best way to put it.
DM: Yes, but I think a decade ago or 15 years ago we were worried about satellite dishes and how they would be a competitor, and then we were worried about telcos and whether they’d be a competitor. And I think the safe bet is always to go with your gut and you can assume that all these technologies are going to get to some stage of maturity so that they’ll be a competitor.
GOB: And then wireless as well. I don’t think we’ve talked about wireless. I mean that’s a competitor someday – or perhaps an add-on for cable companies. You know intimately one cable company that’s done exceptionally well at it.
Had you hung onto Persona, was wireless something that you were looking at?
DM: Definitely. And in fact as part of the acquisition of John Thomas’ Delta, they had already started the foray into the wireless side and we were working with them closely to build on that. We were actively pursuing whether or not the CRTC was going to license us as a provider.
I mean I think it’s kind of come to pass where everyone accepts that it’s probably not a bad business proposition to have the quadruple play.
GOB: No kidding.
How long did you spend in the cable industry in Canada?
DM: I started in ’82, so 25 years. I guess I’m old.
GOB: You’re a geezer right?
DM: I know, holy smokes. Who would have thought?
GOB: What about some favorite memories, you know looking back at your history. What springs to mind first?
DM: I would say the relationship with Danny (Williams, the former owner of Cable Atlantic and current Newfoundland & Labrador Premier) and the guys that we put together at Cable Atlantic. We worked hard, but God we played hard and had an awful lot of fun over the years – and somehow managed to balance out the two. You know, I don’t think anything will ever compare to just that kind of camaraderie and what we accomplished. Because we were actually the first guys in the phone business back in Cable Atlantic when we got the government contract.
GOB: Right. When was that?
DM: That would have been 1998. We had a Nortel switch installed and got into that and we were one of the first guys in the Internet business. We were the first jurisdiction in North America to have all the schools connected to the Internet.
That was all done through Cable Atlantic. So, I thought we blazed some trails and at the same time had an awful lot of fun and made life long friendships as a result.
Also, I’d say working with Rogers was probably best education you could ever receive. And I made lots of great friends there.
I guess my memories are basically the friends I’ve made all the way through, you know? I’ve been so fortunate.
… (A)nd, you know, I enjoyed my time as CCTA chair – that was interesting to say the least, and it gave me a lot of perspective. So, I would say I’ve learned an awful lot in 25 years and been lucky enough to be in positions to set up some very interesting board tables and see how different cultures and organizations work. It’s been hard to complain because at the same token, it’s been an industry that’s certainly taken care of me and my family.
GOB: What was your first job?
DM: Marketing manager of Avalon Cable… a few moons ago, yeah.
GOB: How many subs?
DM: We had about 28,000 subs, and my first day on the job, my fondest memory is I almost started a riot in the organization. My first day on the job, I found that at lunch time, they closed and locked the doors for lunch, so customers couldn’t get in to pay their bills or buy services. I said this is changing. We’re going to stay open through lunch and we almost had an employee revolt over that. But I managed to convince them it was not a bad way to go.
And the industry’s come a long way from shutting the doors down for lunch time.
GOB: Talk about a different time. I remember in my home town the business core was totally closed on Wednesdays.
DM: Exactly, yeah.
GOB: Now, everything’s open all the time… I wanted to ask you about the battles too. I mean there’s got to be some not-so-pleasant memories or even some fun battles. Can you describe some of those?
DM: You know, I can honestly say that every war or every battle – and maybe this is a result of having worked with Danny as long as I did – they were tough, but they were just part of the turf, right? It made it interesting and did make it fun, even though sometimes there were blood baths. But certainly the various wars against Bell, particularly in Newfoundland, where we really had a tough go with NewfoundlandTel at the time in terms of getting access to poles, etc.
That was like survival kind of stuff where you’re really fighting for your survival. And you know we won that battle, which you know was very gratifying. And I think when we won the government of Newfoundland telephone business, that was a huge battle and we were the underdog.
That felt really good to win that, you know? When you’re a long shot at best and we pulled it off — I felt really good about our efforts there.
And certainly when I went to Rogers and I had my lawsuit with Ted, that was a bit of fun.
GOB: How was that fun?
DM: Well, it was fun in just how unusual it was because from the outside world everyone was saying “my God this must be terrible.” And yet Ted and I had no problems of understanding that that was just a side item that would be dealt with and didn’t really affect our working relationship day-to-day. I understood that about Ted and I think he understood that about me. Other than that, it was business as usual and we would figure out a way to solve it and of course we did.
GOB: You managed to go on even though that was looming overhead?
DM: I can honestly tell you I didn’t give it too much thought. Obviously I thought about it, and felt one way about it and Ted felt another, but we kind of arm wrestled for a while and figured it out.
GOB: That didn’t go to court right? That was settled.
DM: Yeah, it was settled through a mutual friend which was Gar Emerson who you know was the chair of the board of Rogers and who also had provided legal guidance to Hydro over the years. So he’s someone that we both trusted immensely. And that was really a good solution.
I had a lot of fun at Rogers obviously and you know certainly enjoyed working with Edward an awful lot, someone who I have an awful lot of respect for and who treats people extremely well.
GOB: Some people have varying opinions of Edward, whom I like.
DM: Well, you can quote me on this because I’m sure I’ve stated it elsewhere. Edward doesn’t have the fairness of – say you or I walk into a job, we’re judged on who we are. When he walks into a job, he’s judged on who his father is – and man, that’s a tough act to follow.
By any measure, Ted is one of the most successful businessman on the planet, whether ranking by wealth as a judge or whatever. However you judge it, you can only admire what Ted has accomplished.
Edward in his own right is a very, very smart person. He isn’t Ted but I can tell you he has a lot of characteristics that I would define as as strong or stronger than Ted. I found him incredibly intelligent. He knows every facet of the business. He knows where every dollar’s being spent, what it’s being spent on. And he really treats people well.
He’s just not Ted – and things were written about Edward when he was in his late 20s that he was not up for the task. Well, Jesus, find me someone in their late 20s that’s up for the task of taking on what Ted was doing at the time.
I mean, I was chasing basketballs and drinking beer in my late 20s. I wasn’t necessarily thinking about running a corporation. It’s like some people are looking for him to fail when it’s just not a fair comparison.
It’s interesting because when I first showed up on the doorstep at Rogers, Edward and I used to once a month meet with the analysts. They’d pepper you with a thousand questions and my sense was that Edward was a moderating factor with the analysts who were all worried about what Ted is going to do next.
Edward continued to pound the mantra of we’re all about metrics, we’re going to drive down our ratios to acceptable levels, we’re going to become investment grade… So, he probably did more for the stock price there than people know.
