Rogers Communications Inc. lost its founder, Ted Rogers, who died of heart failure Dec. 2 at the age of 75. As the board of directors searches for a successor, it raises the question of what’s next for the 49-year-old company.
One analyst says the company could try going after the business market.
“They’ve been riding such a great wave of success in the consumer space, especially with all of their smart phone offerings,” said Jon Arnold, Principal of J. Arnold and Associates in Toronto. “There’s no reason why they couldn’t go after the business market.”
Rogers officials would not comment on the future direction of the company.
Alan Horn, a former chief financial officer and currently head of Rogers Telecommunications Ltd., took over as temporary chief executive officer following Rogers’ death. The board of directors is searching for a permanent CEO.
Possible successors include one of Ted Rogers’ children. Edward Rogers is president of Rogers Cable and Melinda Rogers is the company’s senior vice-president for strategy and development. Another possible successor is Nadir Mohammed, currently president and chief operating officer of Rogers’ communications group.
Edward and Melinda Rogers effectively control the company now through the Rogers Control Trust, of which Edward is chair and Melinda is vice-chair.
Rogers Control Trust now owns 90.5 per cent of voting shares of Rogers Communications, which operates three business units. In addition to the cable company, which provides television and telecom services, Rogers publishes Medical Post, Marketing, Maclean’s, Canadian Business and other magazines. Rogers Media also owns the Toronto Blue Jays major league baseball team, Toronto’s Rogers Centre domed stadium (formerly known as the SkyDome), five television stations and 53 radio stations.
The firm has also been a wireless carrier for nearly 25 years, and the cellular division, formerly known as Cantel, accounts for about half the company’s revenue. Rogers Wireless reported revenues of $1.7 billion during the quarter ending Sept.30, 2008, up from $1.4 billion the same period in 2007.
Revenue for Rogers Business Solutions dropped over that period, from $140 million during the quarter ending Sept. 30, 2007, to $131 million for the same quarter in 2008.
In its financial reports, the company attributed the decrease to “a decline in lower margin resale and long-distance businesses,” and reported it has “suspended most sales and marketing initiatives related to acquiring new medium and large business customers other than purely on-net opportunities within cable’s footprint.”
Three years ago, the company bought long distance and local telecom provider Call-Net Enterprises Inc. for $330 million. This was not Rogers’ first foray into telecom. In 1989, it bought a 40 per cent stake in CNCP, which was later re-named Unitel and provided long-distance service in competition with Bell Canada. Rogers sold Unitel in 1995, after the company lost $500 million.
Sprint Canada launched local service 10 years ago. Soon after, the company was in trouble over its $2 billion-plus debt, and was put up for sale, only to be taken off the market in early 2000.
Though it continued to have financial trouble, it fared better than other competitive local exchange carriers (CLECs) by surviving. Ted Rogers predicted the Call-Net acquisition would give a “dramatic kick start” to local competition in Canada.
But in its quarterly results announced Oct. 28, Rogers said its circuit-switched local telephony customers generate lower margins for the company, so it has been migrating circuit-switched customers to cable telephony. Although the number of telephony customers grew 35 per cent (from 591,000 at the end of September, 2007 to 800,000 a year later), the number of customers on circuit-switched lines dropped about 25 per cent, from 338,000 to 255,000, during the same period. By the end of the year the company lost an additional 40,000 circuit-switched phone customers, though 60,000 had actually switched to cable, not to another provider.
Although Rogers says it already offers telephony services to business, Arnold said the company could get more corporate customers.
“For any cable company, the business market is a green field opportunity for them,” Arnold said. “Their cable plant is already passing by. They don’t have to build out a lot of infrastructure to tap into these environments. That’s the easy part. The hard part is to get businesses to think of a cable company as a partner for communications services, because that’s not their native strong suit.”
On the wireless side, Rogers offers BlackBerry wireless e-mail devices for business users, along with smart phones such as the Nokia E71 and Motorola Corp.’s Extreme VA76r, a ruggedized device designed to withstand rain, sub-zero temperatures and drops from more than a metre.
Rogers Wireless is now the only national carrier offering High Speed Packet Access (HSPA) over Global System for Mobile Communications (GSM), though rivals Bell and Telus announced last year plans to build their own HSPA network and some new carriers who bought spectrum last year will likely use GSM. Five years ago, Rogers bought the other national GSM competitor, Montreal-based Microcell Telecommunications Inc.
Though the BlackBerry devices cater to business users, the BlackBerry 8900 also targets the consumer market, with a camera, music player and support for Facebook and iTunes. But perhaps Rogers Wireless’s most publicized product launch last year was Apple Inc.’s iPhone 3G, including Canadian voice and data plans.
Rogers was initially criticized for its data plans, perceived as expensive, but in its latest quarterly results, the company said iPhone activations had a “dilutive impact on Wireless’ operating profit growth.” But it also said the iPhone has “resulted in a significantly higher than average postpaid” revenue per user, due to expensive data plans.
Wireless revenues in 2007 were $5.5 billion, which is not bad considering Rogers’ Board refused to invest in Cantel 25 years ago. This forced Ted Rogers to invest his own money.
Whether Rogers succeeds in the business market remains to be seen, Arnold said.
“The (small to mid-sized business) market in Canada is quite challenging, because most businesses are really small,” Arnold said. “We don’t have the kind of mid market the U.S. has to support more viable offerings. None of the operators has had a lot of success doing it.”
