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Morningstar | Wireless Network Investments and Continually Good Execution Lead to Our Improved View of Rogers

Rogers Communications is Canada's leading wireless service provider and has historically had arguably the best cable network in Canada's most populous province, Ontario. It also has media operations and owns several valuable sports assets, including the Toronto Blue Jays and the Sportsnet television stations. We think these businesses face greater competition going forward than they have in the past.After long having a superior wireline network to BCE, we no longer see Rogers as maintaining that advantage after BCE's fiber-to-the-home buildout. Rogers is upgrading its TV offering by licensing Comcast's product and moving toward a more IP-based service, which we think should reduce costs and be more enticing to customers. But we project fairly stagnant rates of penetration and only modest margin improvement as it faces a stronger competitor.In wireless, we expect Shaw's Freedom Mobile to lead to more competition and less pricing power throughout the industry. While we expect the fourth competitor will be a headwind, Rogers' wireless prospects now look better than they have for the last several years. In our view, the firm had been underinvesting in wireless as it focused its spending on its cable network. According to PCMag, Rogers' wireless network speed, once the best in Canada, has trailed Bell and Telus in recent years. But Rogers made up some ground in 2018, and we expect that to continue, as Rogers was the biggest purchaser of 600 megahertz spectrum and can now focus more of its capital spending on wireless, as the initial Ignite TV costs pass. We expect Rogers to remain a leader in a competitive Canadian wireless market. We think Rogers' media unit, or at least parts of it, likely has more value in a sale than it does as an operating business. According to Forbes magazine estimates, the Blue Jays are worth USD 1.35 billion, but the team generates no operating profit. Furthermore, we believe the move away from linear TV viewership and the shift to digital media content has weighed on advertising revenue and seriously impaired print publication and television and radio station holdings.