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Rogers agrees to buy Shaw’s 2100MHz spectrum in 2014; rivals also agree cable, TV content swap

15 Jan 2013

Canadian quadruple-play operator Rogers Communications yesterday signed an agreement with rival triple-play cableco Shaw Communications to secure an option to purchase Shaw’s unused 2100MHz/1700MHz Advanced Wireless Services (AWS) spectrum holdings in 2014. TeleGeography’s GlobalComms Database says that Shaw won its 3G/4G AWS wireless frequency licences mainly covering the Western and Prairie provinces in July 2008, and was officially licensed in September 2009 after paying the CAD190 million (USD186 million) total bid price, but in September 2011 it ditched plans to build a mobile network, citing the level of start-up investment required to compete with existing cellcos, and opted instead to build out a Wi-Fi network to offer wireless broadband internet services at a lower financial cost.

Rogers announced that its acquisition of Shaw’s unused spectrum is aimed at ensuring it maintains its mobile market leadership position, particularly in Western Canada. Shaw’s AWS spectrum holdings include 20MHz across British Columbia, Alberta and Manitoba and 10MHz in selected British Columbia, Saskatchewan and Northern Ontario markets, under a total of 18 regional licences. Rogers has acquired an option to purchase this spectrum, which may be exercised only following receipt of Industry Canada and Competition Bureau approval. If approval is received, the purchase of the spectrum following an exercise of the option would likely take place in late 2014.

In other deals announced at the same time, Rogers has agreed to acquire Shaw’s cable business in Hamilton, Ontario, which operates as Mountain Cablevision, while Shaw has agreed to acquire Rogers’ one-third interest in the TV network TVtropolis, and will also enter into negotiations with Rogers for the provision of certain services in Shaw’s home territory of Western Canada. CEO of Rogers, Nadir Mohamed, said that the deal would strengthen the quadruple-play group’s cable portfolio by ‘acquiring a valuable cable business which complements our existing Ontario cable system.’ The acquisition of Mountain expands Rogers cable business in the southern Ontario area and is immediately adjacent to its already highly clustered cable network, with the additional aim of increasing synergies through increased product penetration of its wireless services, as well as through cost efficiencies. Mountain delivers cable television, internet and telephony services over its recently upgraded HFC network.

TVtropolis, a specialty TV network broadcasting across Canada, will be 100%-owned by Shaw following the sale by Rogers, although under the terms of the agreement Rogers will continue to have access to TVtropolis content for broadcast to all of its cable subscribers. The sales of Mountain and the TVtropolis stake are expected to close in the first half of 2013, pending regulatory approval.

Rogers’ net cash investment in the combined deals with Shaw is expected to total approximately CAD700 million once all aspects of the transactions are completed. Rogers said that the cash consideration for the combined transactions includes a CAD250 million deposit for Mountain, as well as a CAD50 million payment for the option to purchase Shaw’s AWS spectrum holdings. Upon the closing of the Mountain component, total cash consideration of CAD400 million will have been paid in respect of this cable business – an amount that includes not only the value of Mountain, but also takes into consideration the value of the bundle of transactions taken together, as well as consideration for the timing of cash payments between the parties. Rogers will receive CAD59 million for the sale of TVtropolis, to be received as a deposit on yesterday’s signing of agreements. Final consideration for the AWS spectrum will be payable if Rogers exercises its option and the spectrum licences are acquired, and will take into account the terms of the negotiable services agreement between Rogers and Shaw. The option will be exercisable from the date on which regulatory approvals are received, and the spectrum licences will be transferrable until a deadline of March 2015, subject to extension in certain circumstances.

Canada, Rogers Communications, Shaw Communications (owned by Rogers)

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