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Rogers Communications (TSX: RCI.B)(NYSE: RCI) is Canada’s largest wireless service provider. This company’s subscriber base of more than 10 million equates to one-third of the entire Canadian market. Shaw Communications (TSX:SJR.B)(NYSE:SJR) is a Canada-based cable company that is one of the largest providers of landline telephone, Internet and television services in Manitoba, northern Ontario, British Columbia, Alberta and Saskatchewan.
Last year, news broke that these two companies were coming together in a billion-dollar deal. Lately, this acquisition agreement is again in the news, which makes several investors speculate on the acquisition of the shares of Rogers.
Let’s take a closer look.
Rogers-Shaw deal gets conditional green light
A few days ago, Rogers Communications’ takeover of Shaw Communications cleared one of three significant hurdles. The CRTC (Canadian Radio-television and Telecommunications Commission) said in a statement that it approved the $20 billion transaction, subject to certain modifications and conditions.
The CRTC applied several requirements to this agreement. Among them, Rogers Communications is to pay benefits worth $27.2 million to the broadcasting system, about five times the original proposal. Additionally, the regulator has asked Rogers Communications to provide annual reports on its promises to boost local news coverage.
In addition, given the nature of this transaction, the CRTC has put in place safeguards to counter potential risks to the broadcasting system for both programming services and consumers.
Takeover bid: positives to consider
The acquisition of Shaw Communications will bring together the largest cable companies in Canada. Rogers Communications leads the eastern region of the country, while Shaw dominates the western part of the country.
Announced in March 2021, this takeover agreement will make Rogers Communications Canada the second cable and cellular operator of Rogers Communications Canada through this acquisition.
Rogers will also likely benefit from Shaw Communications’ strong presence in sparsely populated western Canada. It will also help this company to increase its efforts for the rollout of 5G nationwide.
At the end of the line
While this deal comes with significant concessions that will need to be made, it’s hard to deny that Rogers won’t benefit from this increased scale. The continued consolidation of this oligopoly, which is the Canadian telecommunications sector, should continue to concentrate profits for investors.
I’ve often thought of Rogers stocks as one of the best ways to gain exposure to this sector. This company is as large as it is diverse. As a result, investors looking for growth and cash flow stability should like what they see. To boot, Rogers shares offer a rather hefty 2.9% dividend yield.