TORONTO — Rogers Communications Inc. is selling a minority stake in a portion of its wireless network infrastructure for $7 billion amid a “pivot” in strategy as it seeks to pay down debt.
The transaction, which is expected to close in the fourth quarter, involves a “leading global financial investor” that will acquire a minority interest in the infrastructure that transports data from Rogers’ cell towers to its core network.
The company announced the deal Thursday as it reported its third-quarter earnings, with a profit of $526 million compared with a loss a year ago.
Chief financial officer Glenn Brandt said Rogers would maintain full operational control for its entire national wireless network under the agreement. Neither its cell towers nor spectrum holdings are involved in the deal, Brandt told analysts on the company’s conference call.
He added that Rogers plans to use the $7 billion received from the unidentified investor to pay down a “corresponding amount” of debt.
To further its savings, the Toronto-based telecommunications company had previously announced plans last year to sell up to $1 billion of non-core assets, primarily consisting of surplus real estate, by the end of 2024.
Brandt acknowledged that Rogers hasn’t yet reached its target on that front, but noted “we’re not desperate.”
He said the company has pivoted amid current economic conditions.
“(It) wasn’t ever going to be a fire sale in the interest rate environment,” he said.
“We’ve had to take a pause on that. I think what we’ve shown is strong flexibility around adjusting our strategy.”
Rogers, which also divested its stake in Cogeco in December 2023 for $829 million, is “showing a very dedicated, driven intent to de-lever and continue to invest and grow,” Brandt said.
“In terms of … the non-core real estate assets, that remains a work in progress. I’ve grown weary of explaining each quarter that we’re on it and it’ll come,” he said. “I’m not chasing a market that’s disinterested and so we will adjust accordingly.”
The magnitude of the backhaul infrastructure deal reflects “how valuable the assets that the Canadian telcos are sitting on,” Scotiabank analyst Maher Yaghi said.
“We have been very vocal about the need for Canadian telcos to shed assets to improve their (return on invested capital) which has been on a declining trend in the last 10 years,” he said in a note.
“We will likely see other deals in Canada from other companies going in the same direction in order to de-lever the balance sheets and transform the business toward a much more focused retail operation that is less prone to impacts from regulators.”