Background
On March 23, Rogers Communications and Shaw Communications announced that they would swap certain cable TV properties resulting in Rogers controlling most cable customers in Eastern Canada while Shaw will dominate the west. Rogers Communications Inc. announced on February 7, 2000 that it will acquire Groupe Videotron Ltée. This resulted in the creation of Canada’s largest cable company and the seventh largest in North America, with Rogers providing service in Canada’s four largest cities (Toronto, Montreal, Vancouver and Ottawa) as well as two other top ten markets (London and Quebec City). The new arrangement transfers Vancouver to Shaw while Rogers picks up the former Fundy Cable territory in New Brunswick owned by Shaw as well as Shaw’s ownership position in Cogeco (roughly 10%), allowing equity based interest for Rogers in the portions of the Toronto/Niagara region that it does not own. Shaw picks up Rogers’ stake in satellite operator CanCom. Rogers ends up with about 3.5 million customers clustered together in Canada’s two most populous provinces, all interconnected by fiber. Shaw will have close to 2 million clustered customers in Western Canada.
Feeding Internet Content
The companies are merging @Home Canada and Excite Canada to form Excite@Canada – a broadband portal for 500,000 Canadian cable modem customers. Rogers and Shaw will jointly build a national broadband internet backbone company, using Shaw’s newly acquired cross Canada dark fibers acquired and Rogers plans to share in the Shaw investment in 360 Networks.
Competing with the phone companies
The move will permit greater consistency of network offerings for the former islands of franchises. By consolidating their territories, both Rogers and Shaw will improve their ability to broadcast marketing messages over mass media. As both companies move to increase the level of bundled services – combining offerings from the various operating units (such as @Home internet, Rogers AT&T Wireless) – the geographic consolidation eases the work for both firms in reaching their core customer bases. The role of AT&T Canada in adding voice services remains the open question for analysts. We expect to see AT&T reaching out to touch Shaw in the near future.