Rogers Communications well-positioned for growth in wireless business

The chief executive of Rogers Communications Inc. says the company is well-positioned to capitalize on a growing Canadian wireless market in large part due to its acquisition of Microcell Telecommunications Inc. last year. Ted Rogers, chair and CEO of Rogers Communications, made the comments at the Credit Suisse First Boston Media and Telecom Week conference on December 6. Describing the Microcell purchase as "probably the best acquisition that we’ve ever made," Rogers noted the benefits arising from the transaction are becoming "even more clear." He cited the enhanced spectrum position, a strengthened distribution channel with the Fido brand, and substantial operating and capital expenditure benefits. The substantial spectrum holdings that Rogers Communications now has should be considered one of its greatest assets, the CEO said. The company holds either 75 MHz or 85 MHz of spectrum, depending on the geographic region, of contiguous spectrum across the country. "What this does is two-fold," said Rogers. "It allows us greater flexibility in network planning and the ability to squeeze out additional capacity efficiencies and provides us with ample spectrum to deploy HSDPA 3G in a cost effective manner. The more spectrum you have, the less expensive your capital plan need be in wireless." Being able to deploy HSDPA will be key to driving greater wireless data revenue. Voice revenue is declining or stagnating while data services such as text messaging, email and ringtones are increasing. And for some carriers, this increase is measurable. According to Rogers, the company has the "deepest and most comprehensive suite of wireless data services in Canada" ranging from consumer applications such as text messaging, picture phones, multiplayer games to more advanced applications such as wireless email, Internet access and information portals. He also mentioned the business-focused devices such as the BlackBerry and the Treo as well as other applications such as wireless solutions for fleet management and field force automation. "Wireless data is now running at 9% of service revenue," said Rogers. " has grown rapidly and continuing to grow at nearly 100% year-over-year. We expect that will continue to be a driver of growth. In other words as voice becomes more competitive the share of data will be tremendously significant to the future profitability of telecom companies." When asked what level wireless data could be within the next five years, Rogers said, "A quick guess would be 30% to 40%, wild guess." Wireless opportunities are also translating into significant bottom line improvements, said Rogers Communications CFO Alan Horn. The acquisition of Microcell, the buyback of AT&T Wireless’ stake and other financial transactions have shifted the financial power of the company to the wireless business "with wireless playing a much more predominant role." He noted that over the past year earnings before interest, taxes, depreciation and amortization (EBITDA) from wireless will go from about 40% of the entire organization in 2004 to being approximately two-thirds this year and into 2006. " very much a shift from being a cable company with a large wireless to a wireless company with a very large cable operation," Horn said. Trying to become third dominant providerThe investments in Microcell and the more recent purchase of Call-Net Enterprises Inc. (now operating as Rogers Telecom) are for one goal, said Rogers: to become one of the top three telecom suppliers in the country. He added the company is well on its way of achieving that goal. Although Rogers didn’t mention it, Rogers Communications’ recent agreement to pool its spectrum with that of Bell Canada in Inukshuk Internet Inc., is also a key part of the company’s strategy to become one of the top three dominant telecommunications providers in the country. (The deal is currently on hold due to spectrum cap limitations. Please refer to RoW, Dec. 1/05 for more information.) As for future investments, Rogers said the obvious choice would be to expand the cable part of the business. He noted, however, "That is something that we would only pursue, only pursue, when the debt-to-EBITDA is below where it is today and I’d like to get us back to below 3.5." Rogers added that when this and other issues such as attracting an "armada of senior management people" and a proven track record have been met, then the company will expand.

Rogers Communications well-positioned for growth in wireless business

News | 12/14/2005 5:00 am EST

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