I’ve been waiting for the dust to settle with the situation at Rogers Communications Inc. (RCI) before writing the conclusion, and I’m glad I did.
The high drama seems mostly over for now, and we can say some things about the future of the company that runs Canada’s largest cell network.
If you want a refresher on what’s happening, you can read what I wrote a month ago, about the unfathomably messy Rogers family drama that threw RCI into crisis.
But actually, you should just read this excellent Toronto Star deep-dive, which pieces together the whole affair in painstaking detail, based on insider sources and a wealth of vicious affidavits filed in court.
Also, as a fun detour, you can read the most effective character assassination in a single news story I’ve ever seen:
Really though, read this Toronto Star piece. It covers all the bases. I can’t do a better job than Christine Dobby and Richard Warnica, and I won’t try. But for the purpose of the point I want to make, here’s some key background, very briefly.
Edward Rogers is the son of Ted Rogers, the dearly-departed patriarch who built RCI into the national telecommunications company it is today. Edward clearly wants to be CEO of RCI to prove that he’s every bit as good as his old man, but instead he had to suffer the indignity of simply being obscenely wealthy, and serving as the chair of the board of RCI, and the chair of the advisory committee of the Rogers Family Trust which holds 97% of the voting shares in RCI.
Edward Rogers now has a court ruling which says that because he controls nearly all the voting shares in RCI, he can write any names he wants on a piece of paper and those people will be the board of directors of RCI. Effectively, as long as he has control of the family trust, Edward has total control of RCI.
Edward’s mother, Loretta, and two of his sisters, all think that his moves are bad. But it takes a two-thirds majority to remove Edward from his controlling position, and he seems to have the support from his father’s old buddies.
Toronto Mayor John Tory is in the mix, which is an insane conflict of interest and people should be way angrier about this, but I digress.
Edward fired the board of directors who had the temerity to fire him, and then he named a new board of directors which named him chairman of Rogers.
With essentially unchecked power, Edward fired the CEO of RCI, Joe Natale, and moved to enact the plan that set all this unseemly drama into motion. Tony Staffieri, the former chief financial officer, who was ousted after a fateful butt-dial, is now the CEO.
Why make these moves whilst RCI is in the midst of a $26 billion deal to acquire Shaw Communications? Edward says he thinks Joe Natale was underperforming, whatever that means. But there’s also this, from the big Toronto Star piece: “The deal with Tony was he would elevate Tony, who has been seeking, and actively seeking, publicly, to become CEO of Rogers or any other company he could … but then Tony would have to put in (Edward’s) org chart, and his friends, so that he could then control the company and control the CEO. And that is everything to him,” said a source with knowledge of the opposition’s thinking.
Martha Rogers spent a lot of time tweeting about how the “Old Guard” of her brother and her father’s friends were the bad guys. And then, with what seems to be complete sincerity, she posted this astonishing picture on twitter.
Think how much time this must have taken. She had to get the flowers. Go to the grave site. Carefully lay them out. Line up the shot. Incredible.
It’s an obvious narrative, but based on all of my reading, it really seems like Edward has daddy issues and deep down he wants to be the CEO but Tony Staffieri is the best he can do.
So anyway, Tony Staffieri gets to be CEO and Edward gets a puppet CEO.
The thing that stands out to me is that there’s never much reason given for why Edward soured on Natale. All we’re really told is that Edward decided that the CEO was underperforming. I personally just means that Edward wants to be CEO and thinks he could’ve done a better job.
But for context, Joe Natale took over the job of CEO in April 2017, here are RCI’s profits and (the profit margin) for each year:
2017 - $1.84 billion (12.8%)
2018 - $2.05 billion (13.6%)
2019 - $2.04 billion (13.5%)
2020 - $1.59 billion (11.4%)
(but remember, the numbers in 2020 are all wonky because of pandemic stuff)
Also, in 2021 so far the company has recorded $1.31 billion in profits on revenue of $10.7 billion, for a profit margin of 10.7%. Again, wonky pandemic stuff, and not a full year of financial results, but it is what it is.
Now, professional financial analysts will tell you that the situation is actually much more complicated and you can’t get a true picture of the business by simply dividing the gross profits by the gross revenues of a massive telecommunication company.
The professional investor class pays attention to metrics like average billings per user and the rates of customer growth in individual segments of the business.
For my purposes though, I merely mean to demonstrate that whether Joe Natale was a great CEO or a terrible one, he ran a large telecommunications company for four years, and while he was at the helm, RCI earned billions of dollars in profits at double-digit margins.
If Edward thinks that Tony Staffieri at the helm might drive higher revenues, so be it. If Edward thinks that 13% profits isn’t enough, and maybe with a more shrewd manager they can get to 14%, the courts say he can do what he wants. He controls the company.
But the fact is that it seems like the Rogers situation is a mess, and the chairman of the board says that the CEO has been underperforming, and the company has still managed to rake in billions in profits on double-digit margins.
It’s almost enough to make you think that anybody can make huge profits in Canadian telecommunications, because there’s very little competition among the three biggest companies, and Rogers is currently in the process of trying to buy the fourth-biggest company for $26 billion, further stifling competition.