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    Rogers buys AT&T stake in cell unit  
    $1.8B for 34% holding: 'One step closer to merging the two companies'  

Kevin Restivo


Financial Post
Tuesday, September 14, 2004


Rogers 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 said.

Rogers, like archrival BCE Inc., the country's largest telecommunications company, is bent on selling telco bundles in future. The firms are rapidly expanding 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 said.

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.



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