Sweetness
03-10-2009, 04:30 PM
http://www.financialpost.com/mba/story.html?id=1371587
One of the boldest moves in the late Ted Rogers' career came when he spent $3.2-billion cash one week in 2004, a massive amount of money for a company Bay Street tagged as "debt soaked."
Mr. Rogers later called the spending spree the "greatest surprise" of his business life because it ultimately turned Rogers Communications Inc. into a blue-chip, dividend-paying company; something he had promised for years but was doubted by Bay Street analysts for even longer.
He even went as far as calling it "lucky." But the facts -- and insiders involved -- indicate that the success of these transactions was due more to Mr. Rogers' management credo of meticulous preparation than it was to luck.
We're talking about the 2004 purchase of Microcell Solutions Inc., better known by the brand name Fido.
At the time, Fido was one of four Canadian wireless companies, and it was foundering financially.
Its creative advertisements involving dogs got tongues wagging across Canada, but it wasn't leashing enough customers to support its massive expenditures.
As early as 2002, Ted Rogers asked his wireless team, headed by Nadir Mohamed with his chief technology officer Bob Berner, to keep close tabs on Fido in anticipation that one day there would be an opportunity to pounce.
"They developed strategies and tactics over a two-year game of chess," Mr. Rogers wrote in his memoirs released just weeks before his death titled Relentless: The True Story of the Man Behind Rogers Communications.
In an interview, Mr. Mohamed acknowledges that he and his team moved pieces on the chessboard, but it was the grandmaster who set the game up.
"That was part of the genius of Ted: his thoroughness and steadfast belief in always being prepared to capitalize on any or every opportunity," Mr. Mohamed said.
Mr. Rogers, the legendary visionary of Canada's communications industry, believed it was only a matter of time before someone in wireless made a play for Fido.
All the while, Rogers Wireless was reviewing options on network optimization and branding with Fido and how to marry two wireless operations together.
What also made Fido attractive to Rogers was that it used the same technology platform, called GSM, which was becoming the international standard.
Both the other Canadian wireless companies, Bell and Telus, were and are still using a technology called CDMA, which has far fewer phones around the globe.
In an interesting twist, Rogers had migrated to GSM a few years earlier as had its minority owner AT&T on its U. S. network.
But now AT&T created the biggest roadblock to Rogers' Fido plans.
That's because as a 33% owner in Rogers Wireless, AT&T held veto power over any expenditure above $500-million, and Fido would be a lot more than that. (Rogers Wireless was a publicly traded subsidiary of Rogers Communications Inc. at the time.)
For months and months, Ted Rogers and his team tried to convince AT&T of the merits of a Fido deal.
AT&T would have none of it, consistently saying the financial models supporting the deal were out of whack because Fido customers would leave. Such lectures from the Americans got under Mr. Rogers' skin.
He writes in Relentless how he responded to AT&T: "Who the hell do you think you're talking to -- a bunch of rubes in Canada? We all work our asses off and we've been at this for quite awhile."
AT&T refused to budge. Another fly in the ointment: AT&T became a takeover target of Cingluar in the United States, pushing Rogers further down the priority list.
Then Telus sprung its $1.1-billion hostile bid for Fido on May 13, 2004.
With AT&T distracted by the Cingular takeover, it found it easier to ignore Rogers' pleas and simply wield its veto hammer or insist Rogers Wireless buy its stake at well-above market prices.
Now, where Rogers did get lucky was that Telus extended its bid three times, effectively buying Rogers time. And once-colossus Bell Canada refrained from jumping in and scooping up Fido.
All the while, the behind-the-scenes AT&T-Rogers histrionics turned into a game of chicken: As the clocked ticked, AT&T tried to get the highest price and Rogers sought to pay the least possible.
Finally, on the morning of Monday Sept. 13, 2004, AT&T accepted Rogers' all-cash offer of $1.8-billion for its stake in Rogers Wireless.
Its board would ratify it later that day.
At the same time, a couple of weeks before Nadir Mohamed had set up a dinner with Fido chairman Andre Bureau and president Andre Tremblay for that same Monday, Sept. 13.
He and Rogers executives had also lined up meetings with government officials in Ottawa earlier in the day.
All these meetings were originally meant to discuss hypothetical scenarios, not specifics of a Rogers-Fido deal.
But with AT&T finally stepping aside, it looked like Rogers could now ride in as Fido's "white knight."
Again, as an example of Mr. Rogers' penchant for preparation, he and Mr. Mohamed quickly changed gears and turned their Ottawa meetings into specific briefings with the CRTC, Industry Canada and the Competition Bureau of their plans to now bid on Fido.
After those meetings, they headed to Montreal for the dinner, where they talked about the powerful Fido brand and making the company an important cog in the growing Rogers wireless business.
The Fido executives liked what was said and Mr. Rogers and Mr. Mohamed returned to Toronto to run numbers and come up with financial terms.
A formal all-cash bid of $1.4-billion ($35 a share) was presented on Friday that was approved by Fido's board and recommended to shareholders on Sunday.
In one week, Rogers bought out a partner of eight years and turned a competitor of eight years into a partner.
Rogers did get some lucky breaks in landing Fido, especially when it came to the way Telus and Bell acted, but without all the preparatory work in advance and during the drama, Rogers would likely not have collared Fido.
"Without question, being prepared -- Ted making us prepared -- is the number one reason we got Fido," Mr. Mohamed said.
"The importance of being prepared to seize an opportunity is a significant part of the legacy he has left us at Rogers Communications."
One of the boldest moves in the late Ted Rogers' career came when he spent $3.2-billion cash one week in 2004, a massive amount of money for a company Bay Street tagged as "debt soaked."
Mr. Rogers later called the spending spree the "greatest surprise" of his business life because it ultimately turned Rogers Communications Inc. into a blue-chip, dividend-paying company; something he had promised for years but was doubted by Bay Street analysts for even longer.
He even went as far as calling it "lucky." But the facts -- and insiders involved -- indicate that the success of these transactions was due more to Mr. Rogers' management credo of meticulous preparation than it was to luck.
We're talking about the 2004 purchase of Microcell Solutions Inc., better known by the brand name Fido.
At the time, Fido was one of four Canadian wireless companies, and it was foundering financially.
Its creative advertisements involving dogs got tongues wagging across Canada, but it wasn't leashing enough customers to support its massive expenditures.
As early as 2002, Ted Rogers asked his wireless team, headed by Nadir Mohamed with his chief technology officer Bob Berner, to keep close tabs on Fido in anticipation that one day there would be an opportunity to pounce.
"They developed strategies and tactics over a two-year game of chess," Mr. Rogers wrote in his memoirs released just weeks before his death titled Relentless: The True Story of the Man Behind Rogers Communications.
In an interview, Mr. Mohamed acknowledges that he and his team moved pieces on the chessboard, but it was the grandmaster who set the game up.
"That was part of the genius of Ted: his thoroughness and steadfast belief in always being prepared to capitalize on any or every opportunity," Mr. Mohamed said.
Mr. Rogers, the legendary visionary of Canada's communications industry, believed it was only a matter of time before someone in wireless made a play for Fido.
All the while, Rogers Wireless was reviewing options on network optimization and branding with Fido and how to marry two wireless operations together.
What also made Fido attractive to Rogers was that it used the same technology platform, called GSM, which was becoming the international standard.
Both the other Canadian wireless companies, Bell and Telus, were and are still using a technology called CDMA, which has far fewer phones around the globe.
In an interesting twist, Rogers had migrated to GSM a few years earlier as had its minority owner AT&T on its U. S. network.
But now AT&T created the biggest roadblock to Rogers' Fido plans.
That's because as a 33% owner in Rogers Wireless, AT&T held veto power over any expenditure above $500-million, and Fido would be a lot more than that. (Rogers Wireless was a publicly traded subsidiary of Rogers Communications Inc. at the time.)
For months and months, Ted Rogers and his team tried to convince AT&T of the merits of a Fido deal.
AT&T would have none of it, consistently saying the financial models supporting the deal were out of whack because Fido customers would leave. Such lectures from the Americans got under Mr. Rogers' skin.
He writes in Relentless how he responded to AT&T: "Who the hell do you think you're talking to -- a bunch of rubes in Canada? We all work our asses off and we've been at this for quite awhile."
AT&T refused to budge. Another fly in the ointment: AT&T became a takeover target of Cingluar in the United States, pushing Rogers further down the priority list.
Then Telus sprung its $1.1-billion hostile bid for Fido on May 13, 2004.
With AT&T distracted by the Cingular takeover, it found it easier to ignore Rogers' pleas and simply wield its veto hammer or insist Rogers Wireless buy its stake at well-above market prices.
Now, where Rogers did get lucky was that Telus extended its bid three times, effectively buying Rogers time. And once-colossus Bell Canada refrained from jumping in and scooping up Fido.
All the while, the behind-the-scenes AT&T-Rogers histrionics turned into a game of chicken: As the clocked ticked, AT&T tried to get the highest price and Rogers sought to pay the least possible.
Finally, on the morning of Monday Sept. 13, 2004, AT&T accepted Rogers' all-cash offer of $1.8-billion for its stake in Rogers Wireless.
Its board would ratify it later that day.
At the same time, a couple of weeks before Nadir Mohamed had set up a dinner with Fido chairman Andre Bureau and president Andre Tremblay for that same Monday, Sept. 13.
He and Rogers executives had also lined up meetings with government officials in Ottawa earlier in the day.
All these meetings were originally meant to discuss hypothetical scenarios, not specifics of a Rogers-Fido deal.
But with AT&T finally stepping aside, it looked like Rogers could now ride in as Fido's "white knight."
Again, as an example of Mr. Rogers' penchant for preparation, he and Mr. Mohamed quickly changed gears and turned their Ottawa meetings into specific briefings with the CRTC, Industry Canada and the Competition Bureau of their plans to now bid on Fido.
After those meetings, they headed to Montreal for the dinner, where they talked about the powerful Fido brand and making the company an important cog in the growing Rogers wireless business.
The Fido executives liked what was said and Mr. Rogers and Mr. Mohamed returned to Toronto to run numbers and come up with financial terms.
A formal all-cash bid of $1.4-billion ($35 a share) was presented on Friday that was approved by Fido's board and recommended to shareholders on Sunday.
In one week, Rogers bought out a partner of eight years and turned a competitor of eight years into a partner.
Rogers did get some lucky breaks in landing Fido, especially when it came to the way Telus and Bell acted, but without all the preparatory work in advance and during the drama, Rogers would likely not have collared Fido.
"Without question, being prepared -- Ted making us prepared -- is the number one reason we got Fido," Mr. Mohamed said.
"The importance of being prepared to seize an opportunity is a significant part of the legacy he has left us at Rogers Communications."