Canada’s largest cable MSO and wireless operator – Rogers Communications Inc. (RCI) and the country’s leading telephone operator – BCE Inc. (BCE) have reached an agreement to jointly own Canadian retailer, Glentel Inc. Per the deal, BCE will divest 50% of its ownership stake in Glentel to Rogers, following which both the companies’ will have equal possession of Glentel's Canadian retail operations.
Glentel, with roughly 500 wireless outlets in Canada, sells a wide variety of wireless products and services from different carriers, including Rogers. This agreement thus makes it convenient for customers to purchase Rogers’ products and services across the country.
In return, Rogers has agreed to pay BCE 50% of the Glentel transaction value in cash. This should significantly trim BCE’s cost to take over Glentel and help the company successfully complete the pending acquisition.
Initially, Rogers had sought to block BCE's acquisition of Glentel. As per Rogers, its agreement with Glentel required that the Canadian retailer obtain Rogers’ approval before divulging its control to another company. However, under this newly formed venture, Rogers has agreed to withdraw its application and not pose any further challenges to BCE’s acquisition plans for Glentel.
Notably, on Nov 28, 2014, in an effort to enhance its retail presence in Canada, BCE had agreed to purchase Glentel for $586 million. The deal is expected to be sealed by the end of the first quarter of 2015, subject to consent from shareholders and regulators. We believe BCE’s decision to acquire Glentel will help the company ramp up its wireless revenues, increase average revenue per user (ARPU) and curtail churn rate.
Stocks that Warrant a Look
Vonage Holdings Corporation (VG) and Liberty Global plc (LBTYA) are some of the better-ranked stocks worth considering in this sector over the near term. Both the stocks carry a Zacks Rank #2 (Buy).
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