Quad play attention in North America tends to focus on AT&T and Verizon but across the border, Rogers Communications of Canada is showing its larger counterparts how it’s done. The operator has taken multiple steps towards its goal of a full quad play, including its WiMAX-oriented joint venture with Bell Canada, Inukshuk, and an increasing focus on challenging Telus in its heartland in the rural west. Now the operator is to unite its cable, wireless and media units to more efficiently support the next move towards fully bundled services and billing, and to simplify its corporate structure and consolidate its debt.
The company, which is Canada’s largest mobile provider and MSO, says it will be assuming all rights and obligations of its cable and wireless divisions, canceling $1bn in cable debt, $700m from its wireless department, and the $600m debt from its media division. The debt will be replaced with a consolidated, unsecured loan of similar size that is currently being arranged. The new entity will be known as RCI and the transaction is expected to be completed on or around July 1.
Rogers says that amalgamating its three divisions will put the primary focus on to wireless, which accounts for the majority of its sales, and will make it easier to deliver more multimedia services over wireless networks, whether the current GSM and UMTS systems or future developments like WiMAX. Wireless revenue rose 22% year-on-year percent in the first quarter of 2007, faster than the other two units, which grew at 11% apiece. Overall sales climbed 16% to C$2.3bn (US$2.08bn).
Because of the success of wireless, Rogers has been increasingly shifting its focus in that direction and aggressively promoting a fixed/mobile bundle to cable and non-cable households. About 8% of its wireless subscribers now take its cable offering too and the company is looking to fill in coverage gaps, where it does not own cables, with broadband wireless. In particular, its Inukshuk venture with rival Bell Canada looks to eat into the Telus dominance in the west and offer a full quad play in many regions.
Rogers’ strategy has much in common with its neighbor south of the border, Sprint Nextel. Like Sprint, it sees WiMAX as a way to mobilize its broadband and multimedia services and even possibly as a 4G route. Like Sprint, it has large swathes of spectrum – more than any other company in North America – and so has bandwidth to spare to run a major MVNO and wholesale operation, which it targets at other cablecos, in particular. So far, its main customer in this area is Videotron, which is strong in Quebec.
Rogers is seeking to gain customer loyalty and differentiation by making its services highly customizable, especially for the needs of ethnic minorities – there are 100 ethnicities in Toronto, its largest city base, alone. Each element of Rogers’ quad play comes in a wide variety of flavors – customers can select from five internet access options and a range of mix-and-match digital video, digital phone and wireless products. Some features, including an assortment of in-language digital channels, are marketed specifically to ethnic customers. And next, Rogers is experimenting with user customizable interfaces in next generation devices, again echoing the preoccupations of Sprint.
Bundle subscribers get a discount whether they take two, three or all four services – 5% off the monthly rate for two items, 10% off for three and 15% off each if they get all four. Quad play subscribers pay an average of C$120-140 a month, although Rogers will not yet reveal how many users take the whole package.
It is important to move quickly as the regulator plans to auction up to 29 new satellite broadcast licenses by 2009, but Rogers is setting a quick pace and is “well ahead of what’s going on in the US, partly because all the necessary technology and support was developed and worked out in-house,” according to a research note from UBS Canada analyst Jeffrey Fan. He believes the bundling strategy, now a year old, will alone drive a 1% increase in customers in the saturated markets such as Toronto.