Rogers aims to pay down debt with a $7bn sale while securing majority control of top sports franchises
Rogers Communications Inc. announced it is selling a minority stake in its wireless network infrastructure for $7bn as part of a shift in strategy to pay down its debt.
According to BNN Bloomberg, the sale involves a “leading global financial investor” acquiring a stake in the infrastructure that transports data from Rogers' cell towers to its core network.
The deal, expected to close in the fourth quarter, was disclosed alongside Rogers’ third-quarter earnings.
The company reported a profit of $526m in the third quarter, a significant turnaround from the loss it experienced during the same period last year.
Glenn Brandt, Rogers' chief financial officer, confirmed the company will retain full operational control of its entire national wireless network.
He clarified that neither Rogers' cell towers nor its spectrum holdings are part of the agreement. The $7bn received from the transaction will be used to reduce an equivalent amount of the company's debt.
In addition to this deal, Rogers previously announced plans to sell up to $1bn in non-core assets, mainly surplus real estate, by the end of 2024.
However, Brandt acknowledged that the company had not yet met this target, noting that “we’re not desperate” and emphasizing that the economic environment required a strategic pause.
He assured investors that the company’s pivot is aimed at adapting to current economic conditions.
“We’ve shown strong flexibility in adjusting our strategy,” Brandt said, referencing the broader shift that has included the sale of its stake in Cogeco in December 2023 for $829m.
Brandt emphasized the company’s commitment to reducing its debt while continuing to invest in growth, saying Rogers is “showing a very dedicated, driven intent to de-lever and continue to invest.”
While progress on selling non-core real estate remains ongoing, Brandt explained that the market dynamics have been challenging, adding that “I’ve grown weary of explaining each quarter that we’re on it and it’ll come.”
He noted the company would not rush to sell in an unfavourable market.
Scotiabank analyst Maher Yaghi highlighted the size of the backhaul infrastructure deal, describing it as a reflection of “how valuable the assets that the Canadian telcos are sitting on.”
He suggested that more Canadian telecom companies may pursue similar deals to de-leverage their balance sheets and refocus on core retail operations.
Yaghi pointed out that investors have not properly valued assets like sports franchises, fibre networks, and backhaul infrastructure, which could be worth much more to private equity investors if structured correctly.
He also suggested that other companies in Canada might follow Rogers’ lead to shed assets and streamline operations.
Additionally, in the past quarter, Rogers announced a $4.7bn agreement to acquire BCE Inc.’s 37.5 percent stake in Maple Leaf Sports & Entertainment.
This acquisition, expected to close next year, will give Rogers a majority control of major sports teams, including the Toronto Maple Leafs, Toronto Raptors, Toronto Argonauts, and Toronto FC.
Tony Staffieri, Rogers’ president and CEO, said, “As Canada’s communications and entertainment company, live sports and entertainment are core to our business strategy.”
For the third quarter ending September 30, Rogers posted revenue of $5.13bn, up from $5.09bn in the same period last year.
On an adjusted basis, the company reported earnings of $1.42 per diluted share, compared to $1.27 per share a year earlier. Analysts had expected $1.36 per share, according to LSEG Data & Analytics.
Rogers also reported a net increase of 101,000 postpaid mobile phone subscribers during the quarter, though this marked a 55.1 percent drop from the 225,000 net additions in the same period last year.
The company’s postpaid mobile churn rate rose slightly to 1.12 percent, compared to 1.08 percent in the previous third quarter.
In contrast, the prepaid market performed better, with a 93,000 net increase in subscribers, up 158.3 percent from the 36,000 added in the third quarter of 2023.
Staffieri attributed this growth to the company’s Chatr brand, which successfully attracted new customers, particularly those new to Canada, during the competitive back-to-school season.
Rogers’ average monthly revenue per user for mobile phones fell to $58.57, a small decline from $58.83 in the third quarter of the previous year.
