Rogers Extends the Reach of Cable Net

TORONTO (03/03/2000) - Rogers Communications Inc. and Quebec's Le Groupe Vidéotron ltée recently agreed to a $25 billion joint merger, creating a massive Canadian broadband communications enterprise which, according to Rogers CEO and president Ted Rogers, will hopefully compete with communications giant Bell Canada.

"How can we compete with Bell when they are unified and we are fractured and split?" he asked at a press conference, acknowledging that Bell is "one of the best run companies in North America."

The Yankee Group in Canada's director of research, George Karidis, feels that "Vidéotron is the only real threat to Bell Canada...and is the only threat they even worry about."

The new company will combine Vidéotron's cable, telephony and video services with Rogers publications and wireless products.

Vidéotron's telephony technology is one of the most important parts of the deal, according to Jordan Worth, a telecommunications analyst with IDC Canada Ltd. in Toronto.

"The most important thing it (the merger) brings, at least in the shorter term, would be the technology for delivering voice over cable, which Vidéotron will be launching in late spring/early summer," said Worth. "A year later Rogers is going to take that (technology) out to their network."

Rogers said that "through this agreement we plan to offer our customers and Vidéotron's the benefits of bundling; combining cable, telephony and video services with publications and wireless product, as well as the benefits stemming from our alliances with AT&T, Microsoft, and British Telecom."

But Karidis suggests the merger will not affect the business sector, basing his comments on Rogers' prior sale of its business telecom infrastructure unit, Rogers Telecom.

"If we look at what Rogers did about a year ago, [they] actually got rid of their business telecom infrastructure, which was Rogers Telecom at that time. I would suspect that Videotron's business network - their CLEC business - might not be a core asset and might not mean anything to the broader acquisition or merger with Videotron," said Karidis.

The new company will be the largest cable company in Canada with 3.7 million cable customers, 260,000 high-speed Internet users and $5.6 billion in revenue and operating income for fiscal 2000.

According to Rogers, "These two companies (Rogers and Vidéotron) happen to be large in Canadian terms, but are becoming more and more insignificant in North American terms - so by joining together we will be seventh-largest in North America."

Rogers admits the recent AOL-Time-Warner deal inspired the merger, saying, "If there had to be a single event that probably got us all thinking about the future, (it) was the AOL-Time Warner merger, which I think most people agree has transformed the communications industry."

Before the benefits of the merger are felt by the business community, Worth believes Rogers will have to buy more, smaller cable companies, so it can "cover most of the country and be, essentially, a national cable/telephone provider."

The merger comes at a time when Bell Canada and other phone companies are diversifying and inching ever-closer into the cable and high speed Internet markets. Rogers plans to enter into a trust agreement with Vidéotron prior to the transaction, allowing the merger to go ahead prior to Canadian Radio and Television Commission (CRTC) review.

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