Thursday, April 15, 2021

Rogers Acquisition of Shaw is Not Mostly About 5G

The proposed acquisition of Shaw by Rogers Communications in Canada is touted by Shaw as benefiting 5G deployments. As with all acquisitions, participants say what they believe regulators want to hear. 


Some would argue the deal is about revenue growth in a tough market, not 5G. 


Growth in the fixed networks business is slower than that in the mobility business and most of the revenue is now earned in the mobility business, not the fixed business. Revenue growth in the global business now is around one percent per year, with capex tracking revenue, also growing at about one percent per year. 


Global connectivity supplier capital investment (mobile and fixed) is projected to grow at a one percent compound annual growth rate between 2019 and 2022, according to the Dell’Oro Group. Other forecasts call for a decline in capex after 2022, as 5G and fiber investments to support 5G and fixed network broadband projects are completed. 

source: Orange


source: Dell'Oro Group


Shaw is not a player in mobility, nor is its growth upside in the fixed networks segment so favorable, either. There comes a time to sell an asset, and Shaw executives clearly believe now is the time. 


So 5G deployment is pitched by Shaw as the rationale behind the deal. 


The Covid-19 pandemic has generally had a depressing effect on connectivity service provider revenue globally, with a few exceptions in a few markets. But the underlying trends were in place before Covid hit. 


Longer-term trends remain at work, namely slow growth rates. 

source: IDC 


And that is why Shaw executives have made the decision to sell.


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