In its 3Q24 earnings release and subsequent conference call, Rogers Communications (NYSE: RCI), headquartered in Toronto, announced it had entered into a non-binding agreement to sell a portion of its wireless backhaul network. Rogers operates 4G and 5G cell sites from roughly 11,000 towers across Canada, according to the Inside Towers Database. The company uses both fiber optic transmission and microwave radio systems for backhauling voice and data traffic from cell sites on these towers to the company’s core network.
Rogers values the backhaul portion of its Rogers Wireless nationwide network at roughly $5 billion. This type of transaction creates a stand-alone business out of internal operations and generates consistent cash flow. The winning bidder will take a minority stake with Rogers retaining controlling interest. The company says its backhaul network generates fees from carrying data which Rogers claims is growing at 30-40 percent a year.
During the earnings call, Tony Staffieri, Rogers CEO, commented, “This structured financing transaction is the first of its kind in Canada.” At the time of the announcement, Rogers did not disclose the name of the investor, though subsequently identified as New York-based Blackstone (NYSE: BX), The Globe and Mail reported. Blackstone will initially earn close to $290 million a year from its investment, with the payout rising over time as data traffic increases.
Several months ago, the company offered large asset managers including Blackstone, New York-based firms Apollo Global Management (NYSE: APO) and KKR & Co. (NYSE: KKR) along with Toronto-based Brookfield Asset Management (NYSE: BAM) an opportunity to invest in the Rogers Wireless backhaul business.
Rogers plans to use the money raised from Blackstone’s investment to pay down debt after borrowing over $14 billion to buy Shaw Communications, Inside Towers reported, along with recently announced plans to acquire BCE Inc.’s (NYSE: BCE) stake in Maple Leaf Sports & Entertainment Inc. for $3.4 billion, without taking on new loans. Rogers said selling the stake in its wireless infrastructure puts the company a year ahead of schedule on debt reduction targets. Paying down debt will save Rogers about $200 million in annual interest costs, the company says.
Though not requiring regulatory approval, according to sources, the transaction closing is subject to the finalization of definitive agreements and is expected to take place by the end of the year. Rogers says it will continue to control its backhaul operations after Blackstone invests in the business.
While on the earnings call, Glenn Brandt, Rogers CFO, pointed out, “We maintain control, we de-lever and the impact on our free cash flow and ability to continue to invest in our business carries on unrestricted by this transaction.” Brandt added that the company will have the right to buy the division back in the future, if it chooses.
By John Celentano, Inside Towers Business Editor
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