CIBC believes that Rogers is unlikely to sell its share of the 75% ownership in Maple Leafs Sports and Entertainment. However, BCE might be more inclined to sell its stake. (Photo by Roberto Machado Noa/LightRocket via Getty Images)
Canada's major telecom companies are facing financial pressure due to intense competition and slow growth. This has led them to consider selling off some of their non-essential assets. According to a report by analysts at CIBC, these assets could include anything from cell phone towers to ownership stakes in prominent sports teams like the Toronto Maple Leafs and the Raptors.
In a recent update, CIBC analysts suggested that this could be a smart move for these companies as they seek to reduce their debt and improve their operations in a challenging market. Specifically, they highlighted the potential for divestitures among the Canadian telecom giants, including Rogers Communications, BCE, Telus, Quebecor, and Cogeco Communications. These companies are dealing with high levels of debt, and with interest rates remaining elevated, selling off non-core assets could help ease their financial burdens.
The report revealed that the telecom companies collectively hold billions of dollars worth of non-core assets across various sectors such as infrastructure and real estate. For example, Rogers has already indicated that it plans to sell around $1 billion worth of non-core assets, primarily real estate. BCE recently made a significant sale by divesting Northwestel to a group of Indigenous communities for $1 billion.
Although Rogers is unlikely to sell its 50% stake in Maple Leaf Sports and Entertainment (MLSE), which it co-owns with BCE, the analysts suggest that BCE might be more inclined to consider such a move. Recent comments from BCE executives indicate that a sale could be on the table, especially since the valuation of MLSE has been estimated at around $10.3 to $10.9 billion, depending on the source. BCE's share of MLSE would be worth approximately $3.9 billion based on the lower estimate.
Rogers, however, views its sports-related holdings as core assets, particularly due to the strong synergies between its sports and media businesses. A Rogers executive was quoted in March, expressing confidence in the value and growth potential of these assets.
The CIBC report also suggests that the current Canadian policy landscape makes it unlikely for telecom companies to sell off their media assets. Since the major telecom companies are dominant players in Canada's media industry and the sector is heavily regulated, divestitures in this area may not be feasible.
On the other hand, selling off cell phone towers could be a more likely option. Globally, telecom companies have been moving toward selling their towers to infrastructure firms, and analysts note that a similar trend could occur in Canada. Rogers, BCE, Telus, and Quebecor collectively own around 80% of the approximately 25,500 macrocell towers in Canada. The value of these tower assets varies widely, with estimates ranging from $2.3 billion to $7.1 billion for Rogers, $1.4 billion to $4.5 billion for BCE, and $1 billion to $3.1 billion for Telus.
Data centres could also be on the chopping block. Telecom companies around the world have been selling data centres, with increasing demand driven by the rise of artificial intelligence. The CIBC report suggests that Rogers' 20 data centres could be worth between $0.6 billion and $1.7 billion, while Telus' seven data centres are valued at $200 million to $600 million.
Finally, CIBC highlights Cogeco’s U.S. assets, particularly those in Ohio and Florida, as potential candidates for divestiture. Although the telecom companies are primarily focused on their Canadian operations, selling off international assets could also provide a financial boost.
