Industry Committee on Dec. 2nd, 2024

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

If you're proud, why did you sell that critical infrastructure asset to an American hedge fund?

[Tony Staffieri]

We haven't closed that transaction yet. We announced our intent to enter into that transaction. The party is still undisclosed.

What I will tell you is that it's an asset that, under the structure, we will continue to manage and control. It was—

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

You won't own it, and the Telecommunications Act does not allow foreign ownership over 20%.

Why are you selling that critical telecommunications infrastructure, other than the fact that you ran up too much debt in your other businesses? Now you're selling off the kitchen table to pay for the bad debts you ran up in the other parts of your business.

It is incredible that you would sell such a critical piece of infrastructure to an American hedge firm. Quite frankly, I can't see how that is within the laws of Canada.

[Tony Staffieri]

We are very careful with the investments and financing transactions we enter into. We obviously comply with all of the legislation and laws of this country, first and foremost.

You should know that we are entering into that transaction with a view to increasing the amount of investment we continue to make in infrastructure and jobs in this nation.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

That's not what you said publicly. You said you're using the funds to pay off your debt—to reduce your debt-to-equity ratio. You're selling your Canadian assets to pay off your debt. One of those debts is the $4.7 billion you paid for more shares in Maple Leaf Sports and Entertainment. Now you're using the sale of telecommunications assets to pay off that debt.

That's not focused and proud Canadian.... That's selling our infrastructure to the U.S.

[The Chair, Liberal, Joël Lightbound]

That's all the time you have, Mr. Perkins. Thank you.

I'll now turn it over to MP Arya.

[Chandra Arya, Liberal, Nepean, ON]

I'm glad to see Mr. Tony Staffieri, the president and CEO of Rogers Communications, here today.

The telecom business, as my colleague said, is a privileged business, where foreign ownership is not allowed to be more than 20% if the market share of the Canadian company exceeds 10%.

My question for Mr. Staffieri is this. You are in a protected business. You have a very stable cash flow from your wireless and cable business. Last year, if I'm not wrong, the EBITDA for your wireless business was about $5 billion, and the EBITDA for your cable business was about $2.9 billion. That's about $8 billion in EBITDA. That gave you the opportunity to raise a lot of money and go to businesses that are not protected and should be open to competition. You bought Maple Leaf Sports and Entertainment.

Are you into banking or broadcasting? Why is it that you're using this protected cash flow to leverage it for buying other businesses? Doesn't it give you an added advantage, compared with other companies that may want to own the same assets?

[Tony Staffieri]

I should probably clarify a couple of points, if you're finished with the question, sir.

[Chandra Arya, Liberal, Nepean, ON]

Go ahead. I'll have other questions.

[Tony Staffieri]

I have a couple of items.

EBITDA is not cash flow. It's a financial metric that doesn't take into account a number of other factors, in particular—

[Chandra Arya, Liberal, Nepean, ON]

Mr. Staffieri, I'm sorry to interrupt.

I tried to find the net income of your wireless group and your cable. I could not find it, so I used the one figure that is publicly available.

[Tony Staffieri]

What that figure doesn't include is the substantial amount of investment we make back into the business, particularly for infrastructure. As I said, in the past 12 months alone, we set a record of $4 billion of investment in infrastructure, creating better—

[Chandra Arya, Liberal, Nepean, ON]

I'm sorry. I have limited time.

You said you're making investment in infrastructure—in the networks—but I'm saying you're making more investment in buying and promoting other businesses. You said you invested $4 billion this year. If you had invested more money in infrastructure and networks, we could have had quality service. I'm sitting here in the capital of a G7 country. Sometimes I have to go to different corners of the building I'm in to get good cellphone coverage.

Is that quality of service acceptable to you?

[Tony Staffieri]

We're proud, as a telecom operator in Canada, to have an industry and a company that have one of the best networks in the world. There are numerous independent reports that confirm Canada's status as a premier network country.

[Chandra Arya, Liberal, Nepean, ON]

Mr. Staffieri, the reason you jacked up the price for Canadian consumers, who already provide a great amount of your cash flow—the final reason—is that you incurred a lot of debt.

I don't know the latest numbers, but last year, your debt was around $45 billion, compared to $36 billion in the previous year, in 2022. You have incurred a lot of debt to buy other businesses, and because of the increase in interest rates and because interest payments keep increasing, to fund that, you have raised the prices for Canadian consumers.

What do you say to that?

[Tony Staffieri]

The way we fund our business is independent of the way we operate our business, to be clear. The increase in debt over the last little while relates predominantly to our acquisition of Shaw, which was largely financed through debt and really speaks to Rogers being willing to take the risk to invest in our businesses and in this country.

As a result, it's in our interest to make sure we're bringing the best products and services to Canadians, because we have to compete every single day with several competitors in every marketplace. We know that consumers have a choice—

[Chandra Arya, Liberal, Nepean, ON]

I understand. I'm sorry for interrupting, Mr. Staffieri.

Do you think that Canada should continue the same policy of protecting the telecom industries? Is it not time...? I know that globalization as we knew it is receding, with the foreign direct investment rules we had. I think we need to have a relook at the changing global landscape.

However, we can still have the same liberal rules among the allied countries—for example, the Five Eyes countries. What would you say if I suggested that we open up foreign direct investment into the telecom sector without any restrictions on foreign ownership, irrespective of the market share of the telecom companies? What would you say about opening up your company, Bell and Telus in terms of foreign direct investment?

[Tony Staffieri]

Sir, I'm focused on running our business today in what is already a very competitive environment, and consumers are seeing the benefit of that. You're seeing prices continue to come down in both wireless and wireline services as we try to bring better value for money to Canadians every single day.

[Chandra Arya, Liberal, Nepean, ON]

The thing is that top management is limited.... One thing that is limited is the number of hours a day you have. You are diluting your focus from serving Canadian telecom consumers by using your valuable time and resources in buying up media companies, buying up sports companies and setting up a bank.

Why should Canadians continue to protect a telecom company that is diversifying into so many other businesses? Also, to service the debt, you're selling part of your telecom business to a U.S. company.

[Tony Staffieri]

We make investments in assets and businesses that Canadians and consumers want. Wireless, wireline and cable are core, but they also want entertainment. We're a communications and entertainment company, as we have been. That's part of our DNA. We try to bring content that consumers want to watch, and we're willing to invest. We're willing to invest in sports ownership and sports distribution as part of that. It is the most-watched content across the nation today.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Staffieri.

Mr. Savard‑Tremblay, you have the floor for six minutes.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Mr. Chair.

I'd like to thank all the witnesses.

My first question will be for Mr. Staffieri, but Mr. Leech can add his comments. It won't be much different from the questions that have been asked by my colleagues so far.

Customers are telling us, in no uncertain terms, that they are misinformed about the fact that they have to pay additional fees for the digital box after paying for their subscription. Everyone agrees on that.

Why do you at Rogers seem to deny that? Why don't you seem to see a problem with that, when everyone is saying so? When a customer asks if monthly fees for television and Internet services are going to go up, why are the rental fees for the digital set-top box not mentioned?

[Tony Staffieri]

[Technical difficulty—Editor] in the way we structure our commitments and our term contracts with our customers. As I said earlier, we're very clear that the term commitments are on the base TV programming. We want to give consumers and our customers a choice in how many TVs they want to add or delete when it comes to set-top boxes.

We didn't do that in a vacuum. We worked to provide our customers with a choice. We implemented a TV app where customers can view their entertainment experience on any screen and on any device. They can do that for free. They have the opportunity. It was important to us to make sure they had a choice in how they do that. We upgraded the experience of the set-top boxes. The costs and the investments we continue to make through software upgrades are significant. If customers choose to have that premium experience, then that comes with the fee for the set-top box.

I could have Bret spend a moment to talk about what some of those additional features are that are included in this.

[Bret Leech]

In terms of customers choosing us, I will give a few observations, if I may.

Customers in fact have used our Emmy award-winning voice remote over two billion times in the last year. Customers are watching more content year over year than ever before. In fact, on average, customers are watching approximately 36.4 hours of content.

In order to serve those customers, we need to make sure we have the very best network. We've been investing, as Tony said. One example I would like to provide is the investment in doing additional mid-splits in our network. That has increased our ability to use our megahertz, going from 42 megahertz to approximately 85 megahertz. From a customer perspective, that allows them to have the premier experience and to consume our entertainment and content.

We continue to invest across the country so that we can continue to expand even more. As customers are consuming the very best of a combination of linear and OTT, we're investing in both the physical network and the technical software network behind the scenes. As we deploy and invest in Canada, we do that not just through the physical construction and investment. We also create multi-tenant stacks of information that allow for absolutely the best experience through the set-top box, which is actually a gateway to a broader set of software and services that enables a very premier experience for Canadians who choose to have it.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

You say it's clear, but it doesn't really have to be. We heard testimony from a number of people who said that there were a lot of complaints about this, because it wasn't mentioned at the outset.

That said, what is the justification for the varying rental cost?