Cogeco, meanwhile, awaits CRTC’s new wireless policies
By Greg O’Brien
TORONTO – Rogers Communications CEO Joe Natale on Tuesday explained a little more about why his company is pursuing the purchase of Cogeco Cable so hard (and why he’s not intending to back off), while a senior executive of its intended target insisted that pursuit will be fruitless.
“The bid is really about answering some basic questions as we look at our investment into the future,” Natale told BMO telecom and media analyst Tim Casey at the bank’s annual Media and Telecom conference, held virtually. The $10.3 billion bid for the company, as we reported, was made by Altice USA, which wants Cogeco’s American network assets while Rogers wants its Canadian operations.
“As we looked at our investment plans and infrastructure and networks and digital capability, we’re looking at what we’re doing in every province across the country, and the relevance here is ‘what are our plans in Quebec and what are our plans in the parts of Ontario where Cogeco operates?’”
“We’re at a critical juncture in the history of our industry in Canada. We’re in stage one of the biggest generational cycle in technology and network capability,” Natale continued, referencing the next generation of wireless technology.
“You’ve heard me talk in the past about how 5G will change every industry, fuel innovation, and create an even more enhanced and capable digital economy. We’ve talked about connectivity being critical. Now more than ever, we’ve seen it in every aspect around Covid, and especially for rural Canadians or rural Quebecers – and it’s going to take billions of dollars of investment over the next five, 10 years to provide the world-class connectivity that will matter.
“More than ever, at a time when economic recovery and connectivity are more important, we’re looking to establish that partnership with Quebec, with Ontario, with all the provinces across the country to figure out what is the best approach to play a role and build up that innovation, to build up that communications infrastructure,” Natale said.
Since 5G (not what has launched already which is barely a speed boost over 4G, but real 5G, which will drop latency to nearly nothing and hopefully spur new opportunities and growth fueled by its capabilities to drive more AI and IoT devices and services), when it launches on mid-band spectrum such as the 3500 MHz bands which are being auctioned in 2021, and higher spectrum after that, will require many, many more transmitters – and all kinds of wired backhaul – it makes enormous sense for Rogers, which is a dominant southern Ontario brand, to own a far broader wired footprint in the Golden Horseshoe from Oakville to Niagara Falls, which is the bulk of Cogeco’s operating territory in Canada.
Even at $4.9 billion (the proposed cost to Rogers in the Altice offer), it’s cheaper to buy Cogeco than build new fibre connections all over Hamilton, Burlington, Windsor and so on.
“We’re asking a very fundamental question, ‘do our plans include Cogeco territory or not?’” – Joe Natale, Rogers
“So as we sit here, Tony and I and with our board, and make our capital plans for the medium and the long term, we’re asking a very fundamental question, ‘do our plans include Cogeco territory or not?’” Natale continued, referencing Rogers’s CFO Tony Staffieri.
“It’s a question we certainly have asked over the years… As you know, we have roughly a 33% economic interest in combined companies and it’s the largest stake by far, so we’re asking ourselves the question as we enshrine our capital plans and look at driving innovation, ‘is that with Cogeco inside as part of a partnership here or is it not?’ So I hate to miss this technology investment cycle and not have answered the question. That’s the dialogue we’ve had at the leadership table and with the board, and it’s been a question 20 years in the making.”
Later on Tuesday morning, Cogeco’s CFO Patrice Ouimet told Casey that Rogers and Altice got their answer to the hostile takeover bid right away, noting they were told no immediately on submitting the bid after the markets closed on September 1st.
“A hostile offer for a family-controlled company was something that was surprising to us. Not the interest, but the way it was done. Especially since the family had indicated the night before that they would not sell that in the transaction,” he said referring to the two companies going public with the offer.
While it’s not surprising Altice and Rogers want Cogeco’s assets, now is not the time, Ouimet continued. The company wants into wireless and is hopeful the CRTC will release its new wireless policies soon that will mandate mobile virtual network operators – or better, Cogeco’s hybrid model.
“As you know, we are attempting to get into the wireless space… and we’ve proposed the hybrid MNO framework to the CRTC… so we’re expecting some response from the CRTC. So obviously, taking Cogeco out for Rogers is probably part of the equation right now.”
“The Audet family has made clear statements they’re not selling and they want to see the company continue to play its role in the development of leading broadband services in regional and rural parts of Ontario, Quebec, and the 11 states we operate in.”
