Rogers Communications Inc. (RCI)

Executive Summary / Key Takeaways

• Rogers Communications has achieved a remarkable financial turnaround, reducing debt leverage from 5.3x post-Shaw to just over 3.5x nine months ahead of schedule, restoring balance sheet flexibility and removing a major overhang that had constrained strategic options and investor sentiment.

• The company's sports and media assets, now consolidated through the $4.7 billion MLSE acquisition, represent an estimated $15+ billion value that management explicitly states is not reflected in the share price, creating a potential near-term catalyst as monetization options are evaluated over the next 18 months.

• Despite intense competitive pressure, lower immigration headwinds, and a challenging regulatory environment, Rogers maintains industry-leading margins of 67% in Wireless and 58% in Cable, demonstrating operational resilience and pricing power that supports earnings stability through economic cycles.

• The CRTC's Third-Party Internet Access decision poses a material risk to capital investment and long-term competitiveness, forcing Rogers to cut $300 million from its 2025 CapEx budget and potentially stifling network expansion that underpins future growth.

• Trading at 4.36x earnings and 7.89x EV/EBITDA, Rogers appears inexpensive relative to its asset base and cash generation, but the investment thesis hinges on successful execution of the sports asset value unlock while navigating regulatory and competitive headwinds.

Setting the Scene: Canada's Communications Powerhouse

Rogers Communications, founded in 1960 by Ted Rogers and headquartered in Toronto, has evolved from a single radio station into Canada's largest wireless provider and a dominant integrated communications player. The company's recent history has been defined by two transformative events: the $26 billion Shaw acquisition that closed in early 2023, and the $4.7 billion purchase of Bell's 37.5% stake in Maple Leaf Sports & Entertainment (MLSE) that closed in July 2025. These moves created a three-pillar strategy—Wireless, Cable, and Sports & Media—that positions Rogers uniquely in the Canadian market.

The Canadian telecommunications landscape is an oligopoly where Rogers, BCE (BCE), and TELUS (TU) control the vast majority of wireless and broadband subscribers. This structure creates both opportunity and risk: pricing discipline can be maintained through rational competition, but regulatory intervention remains a constant threat. Rogers' acquisition of Shaw expanded its national footprint and spectrum holdings, but at the cost of taking leverage to 5.3x, well above its 3.5x target. The subsequent $7 billion equity investment from Blackstone (BX) and Canadian institutional investors in June 2025 provided the capital needed to accelerate deleveraging, demonstrating management's commitment to financial discipline.

What makes this moment particularly interesting is the convergence of financial repair with strategic transformation. While competitors focus primarily on connectivity, Rogers is building a sports and entertainment empire that includes the Toronto Blue Jays, Rogers Centre, and now controlling interest in MLSE's portfolio of iconic teams and venues. This creates a content moat that cannot be replicated by BCE or TELUS, but also introduces complexity in execution and valuation.

Technology, Products, and Strategic Differentiation

Rogers' competitive advantage rests on three technological pillars that directly support its margin leadership. First, the company launched satellite-to-mobile texting in Q2 2025, becoming the first and only Canadian wireless provider to offer this service nationwide. The beta trial generated over 1 million sign-ups, delivering three times more coverage than any competitor. This addresses Canada's vast geography where traditional cellular coverage remains uneconomical, creating a switching cost for rural and remote customers while opening a new $15-per-month revenue stream that will expand to data and voice by 2026.

Second, Rogers was the first Canadian Internet provider to begin rolling out Wi-Fi 7 nationally in Q2 2025, while also trialing DOCSIS 4.0 technology capable of 4 Gbps download speeds. This technological leadership in Cable supports the company's ability to charge premium prices for its Internet service, which is driving the segment's growth reversal. The 29,000 retail Internet net additions in Q3 2025, bringing year-to-date additions to approximately 80,000, demonstrate that customers are willing to pay for superior technology despite competitive promotional activity.

Third, management is deploying AI across three areas: customer experience, operational efficiency, and security. This initiative contributed to the 60 basis point improvement in Wireless EBITDA margin to 67% and the 70 basis point improvement in Cable margin to 58%. AI-driven efficiency gains are structural, not cyclical, allowing Rogers to maintain industry-leading profitability even as ARPU faces pressure from competitive intensity and lower roaming volumes.

The converged offering strategy—bundling wireless, Internet, and media content—creates additional stickiness. When customers can access Blue Jays games through their Rogers subscription or receive exclusive sports content, churn declines. The Q3 2025 postpaid churn of 0.99%, down 13 basis points year-over-year and the lowest in over two years, proves this strategy works. Each retained customer represents not just saved acquisition costs but also a platform for upselling higher-tier plans and add-on services.

Financial Performance & Segment Dynamics

Wireless: Margin Leadership Amid ARPU Pressure

Wireless service revenue was essentially flat at $2.1 billion in Q3 2025, while blended mobile phone ARPU declined 3% to $56.70. This reflects competitive intensity, lower immigration levels reducing subscriber growth, and reduced roaming volumes. However, the segment generated $1.4 billion in adjusted EBITDA at a 67% margin—up 60 basis points year-over-year and approaching the all-time high of 68%. This divergence between revenue and profitability is crucial: it demonstrates Rogers' ability to manage costs aggressively while maintaining customer loyalty.

The 111,000 total mobile phone net additions (62,000 postpaid and 49,000 prepaid) in Q3 brought year-to-date additions to 206,000. While this represents solid growth, management noted the wireless market size for net adds was down approximately one-third year-over-year in Q1 2025, with full-year 2025 market growth expected around 3% versus over 5% in the prior year. Rogers must compete more fiercely for fewer new customers, making retention and ARPU stabilization critical.

Management's commentary that Q3 2025 was the "trough quarter for Wireless ARPU" and expects gradual improvement over the next 5-6 quarters is significant. This suggests the competitive pressure, while intense, is not structural. The shift to tiered promotional discounting, implemented in late Q3, is already reducing net hardware costs and incentivizing customers to choose higher-tier plans. This is the beginning of a positive trend that should support both ARPU and equipment margins in 2026.

Cable: The Growth Reversal Story

Cable revenue grew 1% to $2.0 billion in Q3 2025, with adjusted EBITDA up 2% to $1.1 billion at a 58% margin—an industry-leading 70 basis point improvement. This represents a "clear reversal of the negative trends seen in previous years," driven by retail Internet subscriber growth and disciplined management in a competitive market. The 29,000 retail Internet net additions in Q3, building on approximately 80,000 year-to-date, show Rogers is taking share.

The strategic importance of this turnaround cannot be overstated. For years, Cable was a drag on growth as video subscribers churned and promotional activity pressured revenue. Now, with 5G home Internet technology expanding the addressable market and Wi-Fi 7 differentiation supporting pricing, Cable has become a stable contributor. The rollout of the Xfinity roadmap—including StreamSaver bundling popular streaming services and smart home devices—creates additional revenue streams while reducing churn.

The segment's margin expansion despite modest revenue growth highlights the power of AI-driven efficiency and cost management. CFO Glenn Brandt's acknowledgment that Cable capital intensity is "higher than it needs to be" and intention to drive it lower suggests further margin upside as the DOCSIS 4.0 rollout progresses over multiple years.

Media: The $15 Billion Hidden Asset

Media revenue surged 26% to $753 million in Q3 2025, driven by the strong Blue Jays regular season and consolidation of MLSE results. However, adjusted EBITDA declined to $75 million from $136 million last year due to MLSE's seasonally low third-quarter performance. This seasonal pattern is critical to understand: MLSE generates minimal EBITDA in Q3 when hockey and basketball are in off-season, but substantial profits in Q4 and Q1 during playoff runs.

For calendar year 2025, management projects Media revenue of $4 billion and adjusted EBITDA of $250 million, including MLSE for the full year. The Blue Jays' successful MLB playoffs and World Series run are expected to provide further growth in Q4. More importantly, management estimates the collection of Sports and Media assets is worth "in excess of $15 billion," a value they explicitly state is not currently reflected in the share price.

This creates a clear catalyst. Rogers expects to acquire the outstanding 25% minority stake in MLSE in 2026 and anticipates a transaction to unlock value—either selling a minority interest or taking a separate company public—over the next 18 months. CFO Glenn Brandt stated, "I do know we have assets that are worth more than $20 billion once we combine it all and tremendous interest in buying in." Rogers could monetize a portion of these assets while retaining control, using proceeds for further debt reduction or shareholder returns.

Balance Sheet and Capital Allocation

Rogers ended Q3 2025 with a debt leverage ratio of 3.9x, up 0.3x from Q2 due to the MLSE acquisition but down from 5.3x at the Shaw deal closing. The company maintains strong liquidity of $6.4 billion, comprising $1.5 billion in cash and $4.9 billion under credit facilities. This represents a reduction from Q2's $12 billion liquidity, which included the $7 billion Blackstone equity investment, but remains more than adequate.

The Blackstone investment structure is elegant: Rogers pays approximately $0.4 billion annually to the fund over the first five years, reflecting an effective cost of roughly 6.25%, but this is substantially offset by lower interest expense from debt repayments. The net impact is approximately $50 million per quarter of distributions over net interest savings, making the true cost minimal while providing crucial equity capital that enabled accelerated deleveraging.

The definitive agreement to sell nine Rogers Business data centers to InfraRed Capital Partners, with proceeds earmarked for debt reduction, demonstrates continued focus on balance sheet strength. This asset-light approach allows Rogers to monetize non-core infrastructure while maintaining focus on its connectivity and content businesses.

Outlook, Management Guidance, and Execution Risk

Rogers' 2025 guidance reflects cautious optimism amid headwinds. Total service revenue growth was updated to 3-5% versus prior outlook of 0-3%, while adjusted EBITDA guidance remains unchanged at 0-3%. The divergence reflects the seasonality of MLSE results, which will be accretive to EBITDA in 2026 but dilutive in 2025 due to Q3 consolidation timing.

Capital expenditure guidance has been reduced to approximately $3.7 billion, a $300 million improvement from the high end of the initial $3.8-4.0 billion range. This reduction is directly attributable to the CRTC's TPIA decision, which management says "will force Rogers to cut capital programs." While this improves near-term free cash flow—now expected at $3.2-3.3 billion versus prior $3.0-3.2 billion—it raises long-term concerns about network competitiveness if the policy remains.

The wireless market outlook remains challenging. Management expects the market to grow around 3% for the full year 2025, down from over 5% in the prior year, with continued pressure from lower immigration levels. However, the company's focus on "product differentiation and network superiority" rather than price competition suggests confidence in maintaining margins. The satellite-to-mobile service, with its "terrific response" and threefold coverage advantage, provides a tangible differentiator that should support ARPU recovery.

The key execution variable is the MLSE integration and monetization timeline. Management's statement that a transaction could occur "over the next 18 months or so, likely coincident with or subsequent to acquiring the remaining 25% minority interest" sets a clear catalyst window. Success here could unlock $15-20 billion in value, while delays or valuation disappointments would represent a meaningful setback.

Risks and Asymmetries

The CRTC's TPIA decision represents the most material near-term risk. CEO Anthony Staffieri's warning that "billions of dollars in network investment in our sector are at risk" is not hyperbole. If large providers can resell services on competitors' networks, the incentive to invest in infrastructure diminishes. Rogers has already cut $300 million from its 2025 CapEx budget, and further reductions could impair long-term competitiveness, particularly against TELUS's aggressive fibre rollout. The asymmetry is stark: regulatory reversal could restore investment levels, while continued policy could structurally disadvantage Rogers versus competitors with denser legacy networks.

Immigration levels pose a persistent headwind. With wireless market growth slowing to 3% and net additions down one-third year-over-year, Rogers' ability to sustain subscriber growth depends on population inflows. A policy shift toward higher immigration would provide upside, while continued restrictions could pressure both revenue and margins as competition intensifies for a smaller pool of new customers.

Competitive intensity remains a wildcard. While Rogers maintains industry-leading margins, ARPU pressure is real. The blended mobile phone ARPU decline of 3% in Q3, if sustained, would erode revenue growth despite subscriber gains. However, the tiered promotional discounting strategy and satellite-to-mobile differentiation suggest management has tools to stabilize pricing. The risk is that competitors match these initiatives, leading to a race to the bottom that compresses industry profitability.

The sports asset monetization timeline carries execution risk. While management expresses confidence in $15-20 billion of value, the actual proceeds depend on market conditions and buyer appetite. A failed or delayed transaction would leave investors questioning the strategic rationale for the MLSE acquisition and the associated debt increase. Conversely, a successful partial monetization that retains control while de-risking the balance sheet would validate the entire strategy.

Valuation Context

Trading at $38.96 per share, Rogers appears inexpensive on traditional metrics. The P/E ratio of 4.36x and EV/EBITDA of 7.89x are well below historical averages for North American telecoms, which typically trade at 8-10x EBITDA. The dividend yield of 3.66% with a conservative 16% payout ratio provides income while retaining substantial cash flow for debt reduction.

Compared to BCE, which trades at 4.87x earnings with similar leverage (1.80x debt-to-equity versus Rogers' 1.90x), Rogers offers superior margin profile (67% Wireless EBITDA margin versus BCE's ~46% overall) and a clearer growth catalyst in sports assets. TELUS trades at a premium 8.35x earnings, reflecting its diversification into health tech and superior customer satisfaction, but Rogers' 38.94% return on equity exceeds TELUS's 19.14%, demonstrating more efficient capital deployment.

The most compelling valuation argument is the unrecognized sports asset value. With an enterprise value of $52.1 billion and sports assets worth $15-20 billion, the market is effectively valuing the core connectivity business at $32-37 billion, or roughly 3.5-4.0x EBITDA. This is a significant discount to comparable cable and wireless assets globally, suggesting the market either doubts the valuation or the monetization timeline. The data center divestiture, while small, demonstrates management's willingness to monetize non-core assets at reasonable multiples, supporting credibility on the larger sports asset unlock.

Free cash flow yield of approximately 6% ($3.2-3.3 billion FCF on $52 billion enterprise value) provides downside protection, while the combination of deleveraging and potential asset monetization creates multiple expansion opportunity. The key is that valuation is not demanding at current levels, leaving room for upside if management executes on its strategic priorities.

Conclusion

Rogers Communications has engineered a remarkable financial turnaround while building a unique strategic asset in its sports and media portfolio. The accelerated deleveraging from 5.3x to 3.5x, enabled by the Blackstone partnership, removes the balance sheet overhang that plagued the stock post-Shaw and restores strategic flexibility. Simultaneously, the MLSE acquisition creates a potential near-term catalyst to unlock $15-20 billion in unrecognized value, representing 30-40% of the current enterprise value.

Operationally, Rogers is demonstrating resilience that belies its valuation. Industry-leading margins of 67% in Wireless and 58% in Cable, combined with the lowest churn in over two years, prove the company's ability to differentiate through technology and content rather than engage in destructive price competition. The satellite-to-mobile service and Wi-Fi 7 leadership provide tangible advantages that should support ARPU recovery and market share gains.

The central thesis hinges on two variables: regulatory policy and sports asset execution. If the CRTC reverses its TPIA decision, Rogers can restore capital investment levels and maintain network competitiveness. If management successfully monetizes a minority stake in the sports assets while retaining control, it will validate the strategy and provide capital for further deleveraging or shareholder returns. The current valuation provides a margin of safety that makes this an attractive risk/reward proposition for patient investors willing to bet on management's execution.