Rogers, Shaw forge deal for spectrum, cableco, broadcast assets

Rogers Communications Inc. may have found the additional mobile spectrum it was seeking to better compete with rival carriers Telus Corp.and BCE Inc. in Western Canada, and at the same time added to its cable business in Ontario. In a deal announced after markets closed Monday, Rogers said it secured an option to purchase, in 2014, Shaw Communications Inc.’s AWS spectrum licences in British Columbia, Alberta, Saskatchewan and Manitoba, as well as in Northern Ontario. Under the deal, Rogers will also acquire Shaw’s Mountain Cablevision Ltd.—which operates in Hamilton, Ont., where Rogers does not currently have a footprint, press releases said. In exchange, Shaw will receive full ownership by taking Rogers’ 33.3 per cent interest in the TVtropolis General Partnership, which operates the TVtropolis specialty channel, and approximately $700 million in cash, the companies said in two releases. “The agreements will benefit businesses and consumers across the country and fit squarely within our focused, strategic game plan,” Nadir Mohamed, Rogers’ president and CEO, said in a release. “We're investing in spectrum to ensure our customers continue to enjoy the incredibly fast speeds and throughput they crave, while ensuring our continued network leadership. We're also strengthening our Cable portfolio by acquiring a valuable cable business which complements our existing Ontario cable system allowing us to deliver even more value for our customers and shareholders,” he said. Rogers, which has the single largest stock of wireless spectrum in the country, saw that advantage decline in recent years as Bell and Telus reached a mobile network-sharing agreement that reduced the costs of rolling out their own next-generation wireless networks. By gaining additional AWS spectrum from Shaw, Rogers’ can bolster its network capacity, Rogers said. “Data usage is exploding and additional wireless spectrum is needed to meet this growing demand by consumers and businesses for mobile Internet services. The acquisition of Shaw's unused spectrum will ensure Rogers maintains its network leadership position, particularly in Western Canada where Rogers has a significant share of the wireless market,” the company said. Shaw Communications Inc., which spent $190 million on spectrum licences in Industry Canada's 2008 wireless auction, said in September 2011 that it had dropped plans for a mobile wireless network and in its place would build out a WiFi network for its customers. According to existing Industry Canada rules, AWS spectrum purchased by Shaw during a 2008 auction cannot be sold to either Rogers, Telus or Bell—Canada’s three large, incumbent wireless providers—until five years after the licences were awarded. Rogers said Monday that its option to purchase Shaw’s spectrum requires approval from Industry Canada and the Competition Bureau, and that it “would likely take place in late 2014.” The option includes 20 MHz of spectrum in B.C., Alberta and Manitoba, and 10 MHz in areas of B.C., Alberta, Saskatchewan and Northern Ontario. Shaw said in its release that $400 million of the $700 million deal is related to Rogers’ purchase of Mountain Cablevision, including a $250 million payment up-front. “The acquisition of Mountain expands Rogers cable business in the southern Ontario area and is immediately adjacent to its already highly clustered cable network. This acquisition will allow Rogers to drive synergies through increased product penetration of its wireless services, as well as through cost efficiencies,” Rogers said. “Mountain delivers a full bundle of advanced cable television, Internet and telephony services over its recently upgraded hybrid fiber coax network. The Cable transaction is expected to close in the first half of 2013, pending regulatory approvals,” the release said. Rogers will also pay $50 million to retain its option to purchase Shaw’s spectrum, while Shaw will pay Rogers $59 million for a remaining one-third stake in TVtropolis. Shaw already owns the other two-thirds of the Category A specialty service, which primarily airs 1980s and 1990s era sitcoms and gameshows. Shaw CEO Brad Shaw said in a release that the company will use the proceeds from the deal to “accelerate various strategic capital investments in its core business as well as for general corporate purposes.” He added: “Key strategic investments that will be accelerated include the completion of our Calgary data centre, further digitization of our network, additional bandwidth upgrades, expansion of our Wi-Fi network in Western Canada and additional product development relating to Shaw Go and other applications that are focused on an enhanced customer experience.” Rogers will have until March 2015 to exercise its option to purchase the AWS spectrum, the Shaw release said. —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Simon Doyle at sdoyle@thewirereport.ca.

Rogers, Shaw forge deal for spectrum, cableco, broadcast assets

News | 01/14/2013 11:28 pm EST

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