Rogers poised to become Canada's cable/broadband kingpin

With its proposed $20.8 billion deal to acquire Shaw Communications earlier this week, Rogers Communications stands poised to become the dominant cable and broadband player in Canada, giving it huge sway over the market.

Even without any help from Shaw, Rogers is already the largest combined cable and broadband provider in Canada, boasting nearly 2.6 million consumer broadband subscribers and 544,000 IPTV customers. The operator, which passes almost 4.6 million homes with broadband lines across the eastern half of the nation, no longer reports its legacy pay-TV customers from before its IPTV conversion, assuming it still has any left.

But now, with the proposed addition of Shaw, Rogers would come close to doubling its broadband and video consumer customer base. Shaw finished its fiscal first quarter 2021 on November 30 with almost 1.9 million broadband and 1.4 million cable video subscribers, along with about 650,000 cable voice and 617,000 satellite TV customers.

Even assuming large overlaps between its broadband, cable video and cable voice subscribers, that means the pickup of Shaw would add at least another 2 million subscribers to Rogers' wireline customer base, boosting the latter's total to at least 4.6 million subs. That would make Rogers the third largest cable provider in North America, trailing only US giants Comcast and Charter Communications. And it would far outstrip Rogers' two biggest remaining Canadian rivals, Bell Canada and Telus.

The deal would also give Rogers much more traction in the entire Canadian market than its failed bid to acquire Cogeco's Canadian assets would have given it last fall. In that hostile takeover attempt, Rogers teamed up with Altice USA to try to carve up Cogeco's Canadian and US cable holdings between them. But Cogeco flatly rejected the attempt and the offer expired in November.

Further, the prospective merger, which still needs to clear regulatory approval and will take about a year to close if it gets that approval, could jumpstart Shaw's broadband and IPTV progress in its regions by infusing the company with fresh funds and staffing. Shaw, which has been drastically cutting back its workforce over the last couple of years to slash costs, has been losing wireline customers across the board at an accelerating rate. In its fiscal first quarter, for instance, it shed about 107,000 revenue generating units (RGUs), substantially more than the 66,000 RGUs it lost in the year-ago period.

The third consecutive quarterly sub loss came despite the operator's rollout of its Fiber+ 1-Gig broadband service, a broadband-centric Shaw Mobile service and finally its newest Fiber+ 1.5-Gig broadband service over the past year. All three offerings were designed to make Shaw more competitive in its predominantly western Canadian markets, where the operator matches up largely against Telus. But they have not produced any measurable results yet.

In stark contrast, Rogers added 19,000 data and 71,000 Ignite TV customers in its fiscal fourth quarter of 2020, which ended Dec. 31. While both totals were down markedly from its year-ago gains, they continued the company's years-long streak of netting broadband and IPTV subs, even in spite of the debilitating effects of the COVID-19 pandemic over the past year.

If the merger goes through, it should not require many changes on the cable tech end. Both Rogers and Shaw now rely heavily on Comcast's IP-centric X1 platform, licensing it and the gateways and other equipment that support it through broad tech and product syndication deals with the big US operator. Rogers brands its version of X1 as Ignite while Shaw uses the BlueCurve moniker for its version.

Both cablecos have also deployed 1 Gig services throughout their regions using both DOCSIS 3.1 and fiber-to-the-premises links. But, as noted above, Rogers has reaped much more benefits from those deployments so far.

— Alan Breznick, Cable/Video Practice Leader, Light Reading