Rogers Looks to Strengthen 5G Position with Acquisition of Canada’s Fourth Largest Carrier, Shaw Communications

Rogers Communications is to acquire Shaw Communications in a transaction valued at $20.8 billion. The 5G opportunity is the key focus of the merger. At present, Rogers is in the lead for 5G rollouts in Canada and remains well-positioned to monetize 5G while leveraging its premium subscriber base. The deal will allow Rogers to be more aggressive with its 5G investment and rollouts.

5G investments, Infrastructure and Existing Spectrum Assets

  • Rogers will gain access to Shaw Communication’s existing spectrum assets, especially in low-band and mid-band, which will be crucial for rural and suburban 5G coverage.
  • It will also solidify Roger’s position going into the mid-band, 3.5 GHz spectrum auction that is scheduled for mid-2021, and possible mmWave auctions towards the end of 2021.
  • For Shaw, the decision comes at a crucial time where it is required to make huge investments into 5G as the industry transitions.
  • The news comes amid the debate for a bigger role for MVNOs to make the wireless industry more competitive. Meanwhile, Shaw Communications remained the fourth largest wireless operator and a key facilities-based competitor for the big three Canadian carriers – Rogers, TELUS and Bell.

Regional Play for Rogers to Gain Subscribers

  • The deal will help Rogers gain more share in three key regions – Ontario, British Columbia and Alberta.
  • In Ontario, the deal will further strengthen Rogers’ position and allow it to further gain a higher share of premium subscribers, as Freedom mobile has a strong subscriber base in Ontario.
  • It will also allow Rogers to penetrate the Western provinces while tapping into Shaw Communications’ wireline and wireless subscriber base. At present, TELUS remains dominant in British Columbia.
  • There is also an emphasis on filling the connectivity gap that is currently in the rural regions of Western Canada, specifically with Alberta and its steadily growing population.
  • Shaw has a stronger presence in Western Canada, so Rogers gains access to a market where it can use its resources to improve network connectivity and the push for 5G rollouts in that region.
  • Rogers has already allocated $2.5 billion in investments to the implementation of 5G networks in Western Canada and an additional $3 billion on supporting additional network, services, and technology investments.
  • But the key challenge for Rogers is in maintaining its high ABPU (average billing per user) following the acquisition. Shaw Communications’ ABPU remains significantly lower than the big three Canadian carriers – Rogers, TELUS, Bell.

Drawing Comparisons with T-Mobile-Sprint, Deal Likely to Come Under Scrutiny

  • The deal is likely to see some resistance as competition in the wireless industry remains a hot topic in Canada. Shaw Communications (owns Freedom Mobile and Shaw Mobile brands) served as a key competitor and challenged the industry with aggressive wireless plans.
  • The transaction is similar to the T-Mobile-Sprint deal earlier in the US, where both companies pitched synergies, investment in 5G, focus on rural and creation of more jobs, as highlights of the deal.
  • On the retail side, we can expect some retail restructuring, but this will depend on the details of the Rogers-Shaw deal in relation to retail locations. Despite Sprint having a lot of brand recognition, and Sprint physical stores were transitioned to the T-Mobile incredibly quickly.
  • Overall, the deal is likely to be hotly debated in the coming weeks while it is under government review. It is also likely to draw some regulatory pressure with respect to the competitiveness of the industry.