Rogers Communications Inc.
Rogers Communications Inc.
Incorporated: 1920 as Famous Players Canadian Corporation
Sales: C$2.84 billion (US$1.83 billion) (1998)
Stock Exchanges: Toronto Montreal Alberta Vancouver New York
Ticker Symbol: RG
NAIC: 513322 Cellular & Other Wireless Telecommunications; 513112 Radio Stations; 51312 Television Broadcasting; 513211 Cable Networks; 51339 Other Telecommunications; 51112 Periodical Publishers; 53223 Video Tapes & Disc Rental
The largest communications company in Canada, Rogers Communications Inc. functions as a holding company for two main wholly owned subsidiaries—Rogers Cablesystems Limited and Rogers Media Inc.—and for the 51-percent-owned subsidiary Rogers Cantel Mobile Communications Inc. The publicly traded Cantel, which is 33 percent owned by a joint venture of AT&T Corp. and British Telecommunications PLC, is Canada’s largest wireless telephone company and the only company licensed to provide digital cellular, paging, and wireless data services nationwide. Cantel serves more than 1.7 million cellular subscribers and owns a national network covering approximately 93 percent of the Canadian population. Rogers Cablesystems is Canada’s largest cable company, serving more than 2.2 million subscribers, or 27 percent of the nation’s cable subscribers; it operates 29 cable systems clustered in four main urban markets: Toronto, Ottawa, the Guelph to London corridor in Ontario, and Vancouver and the lower mainland of British Columbia. The Cablesystems unit also offers a high-speed Internet access service via cable (Rogers®Home) and runs the country’s second largest chain of video rental stores (Rogers Videos). Rogers Media’s operations include broadcasting, publishing, and new media. In broadcasting, Rogers Media owns and operates 19 radio stations, one television station (CFMT-TV), and a home shopping service (The Shopping Channel); and owns minority interests in a pay-per-view television network (Viewer’s Choice Canada Inc.), and in two specialty cable programming services (Outdoor Life Network and CTV Sports Net). The publishing operations are handled within Maclean Hunter Publishing Limited, which Rogers Communications acquired in 1994 and which produces 16 consumer magazines and 45 business publications; it is best known for Maclean’s, Canada’s English-language weekly news magazine, with a readership of 2.3 million. Rogers’ new media activities center around investments in leading Internet brands, such as Quicken Canada and Electric Library Canada.
On three notable occasions, Edward S. Rogers, Jr., challenged conventional wisdom while orchestrating the development of his company, refusing to heed the advice of those purporting to know better. Each instance proved to be instrumental to the growth of Rogers Communications and greatly contributed to Rogers’s personal success, helping him earn the epithet most sought after by entrepreneurs: self-made billionaire. First, Rogers decided to enter the FM radio broadcasting business, which raised the eyebrows of disbelieving critics who declared that FM radio would never be popular. Next he made the decision to enter the cable television business, while onlookers proclaimed that consumers would never pay for television. Then, in the mid-1980s, Rogers set his sights on the nascent cellular telephone business, but the board of directors of Rogers Communications rejected his proposal. Rogers reacted characteristically: he went ahead anyway, using his own money to help launch the venture. By the turn of the millennium, despite all the pessimistic predictions, Rogers Communications was one of the largest communications companies in the world.
Rogers inherited some of his pioneering and entrepreneurial spirit from his father, Edward S. Rogers, Sr., who in 1921 was the first Canadian to transmit a radio signal across the Atlantic. At the time only 21 years old, Rogers went on to become much more than a historical footnote by inventing the radio amplifying tube, a device that revolutionized the radio industry by eliminating the need for cumbersome, leak-prone acid batteries, enabling consumers to operate their radios on alternating current. Rogers’s invention led him to found CFRB (Canada’s First Rogers Batteryless), which became the most popular radio station in the country, and Rogers Majestic Corporation, a manufacturing concern devoted to producing his invention. Rogers moved on to break ground in another direction in 1931 when he was granted the first license in Canada to broadcast experimental television, but eight years later, when Edward S. Rogers, Jr., was five years old, the elder Rogers died of overwork and a bleeding ulcer, leaving no one in charge to supervise his various business interests. The Rogers estate floundered and the popular CFRB station was lost.
The younger Rogers, who preferred to be called Ted, was affected deeply by the death of his father. He followed his father’s footsteps in his first big business deal, purchasing radio station CHFI-FM in 1960 while studying for a law degree at Osgoode Hall Law School. Rogers used a life insurance policy as collateral to take out a $63,000 loan and paid $85,000 for the station, an intrepid move considering that only five percent of the Toronto market possessed FM receivers at the time. Undaunted by critics who dismissed the FM concept, Rogers plunged into the FM radio broadcasting business, establishing Rogers Radio Broadcasting Limited as the owner of CHFI. To help promote the station, Rogers, then 26 years old, approached Westinghouse Canada and convinced the company to manufacture inexpensive ($39.95) FM radios, which he then sold or gave away to listeners. Two years later, a year after earning his law degree, Rogers purchased CFTR-AM, then went on to win other radio licenses, initially using money from his parents’ estate and later soliciting financial assistance from the Bank of Montreal and Toronto business leaders.
Entering Cable Broadcasting: Mid-1960s
By the mid-1960s, Rogers was ready to steer the Canadian communications industry in a new direction. While his father had shown himself to be an ingenious engineer, the younger Rogers was carving his niche in the communications industry as a marketer, transforming existing but little-used technology into widely sought-after services. His entry into FM radio broadcasting had proved to be an insightful move, the first of his successful efforts to broaden the appeal of existing communications technology, but when he was awarded Canada’s first cable franchise in 1965 his abilities produced success of a much higher magnitude. Competing against industry stalwarts such as Gulf & Western and CBS for the first rights to broadcast cable, Rogers emerged victorious, registering one of the several key licensing coups that would carry him to the top of the communications industry.
After slightly more than a decade in the cable business, Rogers had established a formidable presence, constructing a cable network that had few rivals. In 1978 he made an aggressive move to bolster his company’s position further when he acquired Canada’s second largest cable company, Canadian Cablesystems Limited, in an unfriendly takeover. At the same time, Rogers began collecting cable franchises in the United States. The following year he took his company public as the largest cable operator in Canada. Another leading cable company, Premier Communications Limited, was added to Rogers’s stable of cable properties in two transactions during 1979 and 1980, extending the company’s coverage to British Columbia, where Premier served three urban centers. In 1981 Rogers targeted UA-Columbia Cablevision Inc. as his next acquisition, offering his family’s five radio stations, owned by a private company named Rogers Telecommunications Ltd., and his extensive cable television interests for a loan to secure UA-Columbia’s 450,000 cable subscribers. Rogers bid $152 million for 51 percent of UA-Columbia, teaming up with United Artists Theater Circuit Inc. to beat out competing bids offered by Knight-Ridder Newspapers and Dow Jones. When the deal was concluded in November, Rogers Communications’ cable properties served 1.75 million subscribers, making the company the largest cable operator in North America.
Rogers Communications’ frenetic growth slowed during the early 1980s after the acquisition of UA-Columbia, as an economic recession inflated interest rates to 20 percent between 1982 and 1983. Saddled with $750 million in debt it had assumed to finance its growth, Rogers Communications staggered through the early and mid-1980s, divesting assets and abandoning plans to expand into Europe. “We sold off everything we could, just to keep afloat,” Rogers reflected later to Forbes. “It was like flying a plane, and you’re just tossing stuff out of the plane just trying to keep above the trees.” The company paid its price for two decades of aggressive expansion, losing more than $100 million between 1982 and 1987, but the losses, although severe, were of secondary importance to Rogers. More important was securing commanding control over emerging communications technologies, even if that goal was achieved through lackluster financial performance.
As a “Made in Canada” communications organization, the Rogers Group of Companies are working together to ensure a strong Canadian presence on the national information, communications and entertainment services stage.
There are few companies that offer the breadth and diversity of opportunities that Rogers does. These opportunities exist because of the growth, change and transformation that is ongoing at Rogers, and in our marketplace. In this environment, it is those who adapt and welcome change, who excel.
The Move to Cellular: Early 1980s
Prompted by recent developments in cellular telephone technology, Rogers began exploring the possibility of entering the business in 1982. In February of the following year he approached the company’s board of directors, who, considering the financial condition of the struggling company at the time, rejected his proposal to obtain a cellular telephone license. Rogers persevered, looking elsewhere for financial support. Assistance was obtained from the Belzerg family of Vancouver-based First City Financial Corporation and Philippe de Gaspee Beaubien of Montreal-based Telemedia Inc. Rogers then invested $2 million of his own money to launch the venture, which was incorporated in May 1984 as Rogers Cantel Mobile Communications Inc. Over the next four years, after investing an additional $5 million, Rogers bought out his partners to become the sole owner of Cantel, giving his company a third leg to stand on.
The future of the communications industry, as Rogers and others perceived it, entailed all communications services being transmitted via a single wire into businesses and individual residences, preferably by one company with broad communications capabilities. As a result, Rogers Communications sought to become a communications conglomerate capable of bundling telephone, television, and paging and wireless services in one monthly bill to consumers throughout Canada.
One important branch of the communications field was missing from this growing empire, however: Rogers Communications did not maintain a stake in providing telephone service. Rogers attempted to fill this void in 1985 by making a bid for CNCP Telecommunications Limited, a subsidiary of Canadian Pacific Limited, but the attempt was rejected. Four years later Rogers tried again, but first he made an uncharacteristic move by selling his U.S. cable properties to Houston Industries, Inc., in February 1989 for $1.58 billion. Instead of using the money to support an aggressive expansion program, he plowed the money back into Rogers Communications, with $525 million earmarked for refurbishing the company’s cable operations and another $600 million dedicated to strengthening Cantel, which by this point had captured more than 50 percent of the Canadian mobile telephone market.
Unitel, Maclean Hunter, and the Early 1990s
One month after Rogers Communications sold its U.S. cable properties, Rogers made another bid for CNCP Telecommunications to end what he referred to in an interview with the Globe and Mail as “Soviet-style communications monopolism.” This time around Rogers was successful, acquiring a 40 percent stake in the company from Canadian Pacific Limited and spawning a new business arm for Rogers Communications, which was later named Unitel Communications Holdings Inc. In June 1992 Unitel received permission from the Canadian Radio-Television and Telecommunications Commission to compete against the telephone companies in the public long-distance market, making the company one of the largest of the longdistance companies in the country, trailing only Bell Canada.
Unitel, however, proved to be a drain on Rogers Communications’ profits, losing a total of $600 million between 1992 and 1995. Rogers Communications had experienced its fair share of losses, sacrificing annual earnings for market share and for financing entry into new business areas, leading Rogers to casually note in a 1994 Maclean’s interview, “All this company has to do to make money is stop growing.” Nevertheless, more than $500 million in losses racked up between 1990 and 1994 were cause for concern, and by 1995 Rogers was beginning to pin some of the blame on Unitel, confiding to Rogers Communications shareholders that year, “Our policy is to be in longdistance, but not necessarily in Unitel.” Earlier, the company’s interest in Unitel had been dropped to 32 percent after AT&T signed on as a partner in January 1993 when it purchased a 20 percent stake.
Despite mounting losses, Rogers Communications concluded a pivotal deal in 1994 when it acquired Maclean Hunter Limited for an enormous $2.5 billion. Financed largely by bank loans, the acquisition of Maclean Hunter, a cable and publishing conglomerate, gave Rogers Communications a 62 percent stake in Toronto Sun Publishing Corporation, which owned the Toronto Sun, the Financial Post, tabloids in Edmonton, Calgary, Toronto, and Ottawa, and nearly 200 other publications, including Maclean’s, Chatelaine, and Canadian Business. These properties were organized in late 1994 under the newly named Maclean Hunter Publishing Limited, which was set up as a subsidiary of the newly created Rogers Multi-Media Inc. (soon renamed Rogers Media Inc.), which was a direct subsidiary of Rogers Communications. Rogers Media was also responsible for Rogers Broadcasting Limited, which included Maclean and Rogers radio stations, in addition to Rogers’ television stations and other broadcasting interests.
Maclean Hunter’s numerous cable properties ranked the company as Canada’s fourth largest cable operator. With 700,000 cable subscribers in Canada (compared to Rogers Communications’ 1.9 million), Maclean Hunter also owned U.S. cable systems in Florida, New Jersey, and the Detroit area that served more than 500,000 subscribers. The Canadian cable systems were folded into Rogers Cablesystems, while the U.S. properties were quickly sold off. Other Maclean Hunter properties that were sold in 1995 and 1996 included several radio stations, magazines in the United States and Europe, and some printing operations. To gain regulatory approval, Rogers also had to divest Maclean Hunter’s CFCN-TV, which was sold to Shaw Communications Inc. in September 1995. Maclean’s paging operations were subsumed by Rogers Cantel. In 1996 Rogers sold off several additional operations acquired with Maclean Hunter, including printers Davis & Henderson Ltd. and Transkrit Corporation and the 62 percent interest in Toronto Sun Publishing. All told, the divestments of Maclean Hunter properties generated nearly $3 billion, much of which was used to pay down Rogers’ massive debt.
Alliances Key Strategy in the Consolidating Late 1990s
Despite the divestments, Rogers’ debt continued to increase, nearing $5 billion by 1996, then hitting $5.6 billion in 1997. Throughout the mid-1990s and into the late 1990s, the company also continued to post losses every year. Like other players in the cable and cellular industries, Rogers was spending massive sums on capital expenditures ($800 million in 1996 alone) to build up a customer base of cable and cellular subscribers which would hopefully pay off handsomely in the long run. Ted Rogers had viewed the acquisition of Maclean Hunter as a step toward turning his company into the Time Warner of Canada, a media conglomerate controlling both content and the networks that deliver the content. But the mounting debt, a falling stock price, the prospect of continued losses for several more years, and increasing competition for Rogers Cantel from such newcomers as Clearnet Communications Inc. and Microcell Telecommunications Inc., forced the founder’s son to at least temporarily pull back from his vision. This situation led to the divestment of Toronto Sun Publishing and its impressive content collection. Rogers Communications also gave up on the money-losing Unitel operation, taking a $99 million writedown to bring the value of its investment to zero. In late 1996 Rogers sold cable systems serving about 303,000 subscribers in Ontario to Cogeco Cable Inc. for $350 million.
In addition to asset sales, Rogers increasingly turned to alliances in an attempt to secure a significant position in the rapidly consolidating, deregulated communications world of the late 1990s. In April 1996 Rogers entered into partnership with RadioShack Canada Inc. to open and operate about 100 shopping mall stores across Canada which would sell Cantel products and services along with RadioShack products and accessories. In November of that year Rogers Cantel and AT&T entered into an alliance whereby Cantel would cobrand its wireless services as “Cantel AT&T,” and Cantel would gain access to AT&T’s services, technology, and marketing—a potential leg up over Cantel’s phone company rivals and the wireless newcomers.
By this time, Rogers Communications had also entered the local telephone business through an entity called Rogers Network Services, which was renamed Rogers Telecom Inc. in 1997, and had become an Internet service provider through the cable-based Rogers WAVE. In April 1997 Rogers joined with At Home Corporation in a venture through which it began offering high-speed cable Internet access under the name [email protected] In support of its Internet ventures, Rogers began replacing its cable systems with upgraded two-way cable, which was available to 78 percent of Rogers Cablesystems customers by year-end 1998.
In June 1998 Rogers Communications exited from the local phone market by selling Rogers Telecom to Calgary-based MetroNet Communications Corp. for $600 million in cash and 12.5 million nonvoting shares of MetroNet worth an initial $400 million. The company used the cash to pay down debt. Also in 1998 Rogers Cantel began a turnaround, thanks to streamlining, reducing costs, improving customer service, and introducing new simplified rate plans.
Rogers stepped up its alliance strategy in 1999, entering into deals with some of the biggest names in communications. In a deal announced in July and closed the following month, Microsoft Corporation paid C$600 million (US$400 million) for a 9.2 percent stake in Rogers Communications. The deal provided Rogers with much needed cash for paying off debt and funding capital projects, in return for the company agreeing to use Microsoft’s software in a minimum of one million set-top boxes for digital television. Rogers also deepened its relationship with AT&T in 1999. Earlier in the year AT&T had entered into a joint venture with British Telecommunications PLC (BT) that combined the two companies’ international operations. In August this joint venture spent C$1.4 billion (US$934 million) for a 33 percent stake in Rogers Cantel, providing Rogers Communications with another opportunity to pay down debt. Cantel, AT&T, and BT also said that they planned to work together on the next generation of wireless technology and would develop global calling plans for a single set fee. The deal reduced Rogers Communications’ stake in Rogers Cantel to 51 percent.
The late 1999 deals helped to reduce the combined debt of Rogers Communications and Rogers Cantel from C$5.1 billion to C$3.1 billion, moving Rogers closer to having investment grade debt—rather than junk bond level—and paying dividends (the company had paid only one dividend in its history, in 1979). Aligning itself with AT&T, BT, and Microsoft positioned Rogers for eventually being able to offer its customers a bundle of long distance and wireless telephone services, paging services, cable television, and Internet access. The company appeared to be poised to be a major force in the converging world of 21st century communications.
Rogers Cantel Mobile Communications Inc. (51%); Rogers Cablesystems Limited; Rogers Cablesystems Ontario Limited; Rogers Media Inc.; Maclean Hunter Publishing Limited; Rogers Broadcasting Limited.
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—Jeffrey L. Coveil
—updated by David E. Salamie