Communications Inc. said yesterday it will buy back a 34% stake in
the company's cellphone division
for $1.77-billion from AT&T Wireless Services Inc., triggering speculation
the wireless subsidiary will be taken private.
The deal means the parent company would own about 90% of Rogers Wireless Communications
Inc. stock when the transaction closes on Oct. 13. The remaining 10% of the
wireless unit is publicly traded.
Taking the company private would give Ted Rogers, RCI's president and chief
executive, the opportunity to shake up the cable company's management ranks
and merge its two major divisions -- cable and cellphone, analysts said.
" They're one step closer to merging the two companies," said Brian
Sharwood, an analyst with the Seaboard Group consultancy.
Mark Goldberg, a telecommunications analyst, said such moves would give let
Rogers change management structure and offer subscription bundles of Internet
access, cable TV and cellphone services.
" If you're able to remove the minority shareholders ... you can operate
the business with far greater flexibility," Mr. Goldberg said. Merging
the companies might foster co-operation among Rogers management, Mr. Goldberg
Rogers, like archrival BCE Inc., the country's largest telecommunications
company, is bent on selling telco bundles in future. The firms are
product portfolios. For instance, Rogers is slated to launch local phone
service based on Internet technology in mid-2005.
Mr. Rogers indicated at the company's annual meeting this year RCI would begin
to function as a holding company.
Mr. Sharwood said Rogers Cable needs a "good shake up" so
it can better compete against Bell and Microsoft Corp., which are preparing
a TV service based on Internet technology. He said the cable division
could learn a lot by integrating with the fast-growing Rogers Wireless
unit, which continues to post double-digit growth under the stewardship
of Nadir Mohamed.
Rogers is aided by the fact it does not have a local phone service to
protect, which is a slowly declining business for Bell, Mr. Sharwood
Investors liked the news. Class B stock of Rogers Communications jumped
by 6.6% to $25.10 yesterday on the Toronto Stock Exchange, while Rogers
Wireless shares soared 7.2% to $40.
Moody's bond-rating service, however, reacted negatively, placing all
ratings of Rogers Communications under review "for possible cut."
Jan Innes, a Rogers spokeswoman, said the company had no plans to take
Rogers Wireless private at this time.
The deal, for $36.37 a share, ends a 1999 agreement that gave RCI the
right to first negotiate for the Rogers Wireless stake.
Earlier this month, RCI
waived that right and said it would help facilitate the sale of the
shares after other offers were rejected. David Caouette,
an AT&T Wireless spokesman, would not say whether other bidders emerged.
Rogers would not say why it raised the final price though AT&T Wireless
had threatened to dump the shares on the public market. Earlier this year,
AT&T Wireless rejected a $31-a-share offer from Rogers.
The Redmond, Wash.-based cellphone provider is being absorbed by Cingular
Wireless and wants to pay down about $10-billion in debt. Rogers said
it would fund the deal through a two-year bridge financing facility with
a group of Canadian financial institutions.
The transaction also clears the way for Rogers to make a bid for Microcell
Telecommunications Inc., a smaller cellphone rival that Telus Corp. is
trying to buy for $1.1-billion. Late last month, Rogers hinted it may
make a bid but has not committed either way. The two companies are thought
to be a good fit as they both run networks based on the same network
standard. Telus extended its offer three times but failed to convince
Microcell to tender shares.