Rogers and Bell Face Off for Canada’s Wireless Lead

Originally Published by Inside Towers
Author: John Celentano

The Canadian wireless market is like the North Division of the National Hockey League – just the Canadian teams playing against each other in the same game with the same equipment as their mobile network operator counterparts in the U.S. and internationally.

Canada’s two biggest MNOs are Rogers Wireless’ division of Rogers Communications Inc (NYSE: RCI) and the Bell Wireless business segment of BCE (NYSE: BCE). Telus (NYSE: TU) is the third national MNO.

Rogers’ wireless service revenues were $6.6 billion, down 8 percent from 2019, while Adjusted EBITDA came in at $4.1 billion, down 6 percent on a year-over year basis. Similarly, Bell Wireless reported $6.2 billion in service revenues and Adjusted EBITDA of $3.7 billion, a 3 percent decline YoY for both metrics.

The declines were due to reduced roaming charges with extended lockdown and travel restrictions across the country, and lower mobile data overage charges as many people working from home relied on WiFi connectivity.

Both companies are on a power play to expand their 5G coverage footprint in 2021.

Rogers invested $1.1 billion in its wireless network in 2020. That figure is down 17 percent from $1.3 billion in 2019, but capital intensity stayed high at 17 percent, indicating expansion mode.

The company claims to have the largest geographical 5G coverage compared to Bell and Telus. Rogers now offers 5G to 160 communities across Canada.

At year-end 2020, the company reported 10.9 million 4G and 5G postpaid and prepaid subscribers, up 1 percent from year-end 2019.

Rogers owns and operates its own 4G and 5G networks across Canada. It leads in 5G deployments, having started with dynamic spectrum sharing on its 4G LTE network. With Ericsson as its prime vendor, Rogers recently turned up one of the world’s first 5G Standalone networks. (see, Rogers Activates One of North America’s First Standalone 5G Networks)

The company is not providing financial guidance for 2021, citing persistent pandemic uncertainties. However, it expects its 2021 wireless capex to be ahead of 2020 levels as it enhances both its cable and 5G networks. Rogers anticipates consolidated 1Q21 capex will be on par with 1Q20 then ramp up each quarter throughout the year.

“The core of our capex is going to continue on the 5G front,” comments Joe Natale, Rogers President and CEO. “We have done a good job of negotiating great agreements with our vendors, both vendors of technology [Ericsson and Nokia] and the vendors of the civil engineering efforts around that. The best thing you can do when it comes to network build is to keep it going.”

With renegotiated supply agreements, the company believes that it can expand its 5G network cost-effectively without increasing capex.

Unlike Rogers, Bell Wireless operates its own network in the eastern half of Canada but shares Telus’ RAN in the west to give Bell national reach. Bell in turn shares its RAN in the east with Telus. (see, Wireless Network Sharing, Canadian Style).

Accordingly, Bell’s capex is less than Rogers’ each year. However, Bell recognizes the importance of its fiber and wireless platforms to increase market share through advanced services to its subscribers.

Bell’s full-year 2020 wireless capex was $916 million, up 37 percent over $671 million in 2019. Capital intensity grew to 15 percent from 11 percent with the 2019 capex level.

The company closed 2020 with 10.2 million postpaid and prepaid subscribers, up 3 percent from year-end 2019.

In its 4Q20 earnings call, Bell took a slapshot, announcing a capex acceleration program with an incremental investment of $1.0-1.2 billion over the next two years. Of that, roughly $700 million will be applied in 2021 and the balance in 2022 with two-thirds on fiber builds and one-third for 5G expansion.

This capex boost puts Bell’s aggregate 2021 capex at nearly $5 billion. Of that, wireless capex grows to roughly $1.2 billion at a capital intensity ratio of about 15 percent.

Mirko Bibic, BCE President and CEO says, “We will accelerate capital spending in 2021 to forge ahead even more aggressively on our successful broadband strategy, expanding our all-fiber connections, opening up wireless home internet to even more rural communities and building our wireless 5G network faster.”

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