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Rogers Beats BCE in NHL Rights Bidding Battle: Corporate Canada

Head Of Rogers Communications Inc. Nadir Mohamed
Head Of Rogers Communications Inc. Nadir Mohamed is betting that the broadcast rights, starting in the 2014-2015 hockey season, will provide additional revenue from advertisers and consumers as wireless users increasingly watch sports and follow their favorite teams on smartphones and tablets. Photographer: Brent Lewin/Bloombergd

Nadir Mohamed has been overshadowed for much of his tenure as head of Rogers Communications Inc. by the dealmaking of his main rival, George Cope at BCE Inc.

Just six days before he retires, Mohamed has struck back, outbidding Cope with a C$5.2 billion ($4.9 billion) agreement for broadcast and digital rights to National Hockey League games in Canada over the next 12 years.

Mohamed, 57, told reporters yesterday in Toronto that the deal, the biggest in his five years as chief executive officer of Canada’s largest wireless provider, will provide fresh revenue from sports content and be immediately accretive to earnings. It also deprives BCE’s TSN network of national rights to Canada’s favorite sport.

“It’s a spectacular deal for Rogers,” said Lee Berke, president of LHB Sports, Entertainment and Media, whose sports consulting firm is based in Scarsdale, New York. “Their competition from a telco standpoint, from a network standpoint - - TSN -- they’ve eliminated them. It’s total control.”

Rogers is betting that the broadcast rights, starting in the 2014-2015 hockey season, will provide additional revenue from advertisers and consumers as wireless users increasingly watch sports and follow their favorite teams on smartphones and tablets. In the U.S., sports broadcaster ESPN Inc. said 36 percent of its digital users in October only accessed content from such handheld devices.

Buying Spree

NHL hockey nets about C$100 million in advertising revenue for CBC in a year, a third of its total, Wade Rowland, a professor at York University in Toronto and author of a book on the public broadcaster’s budget, said today.

Montreal-based BCE has followed a similar strategy, investing more than C$7 billion to add assets including TSN, which it bought along with the CTV network for C$1.3 billion plus debt in 2011. Cope, who leads Canada’s No. 2 wireless operator, also added content by purchasing Astral Media Inc. for C$3.2 billion in July.

Mohamed had been less active on the deals front until he teamed up with BCE in 2011 to buy a majority stake in Maple Leaf Sports & Entertainment Ltd. That deal, which closed in August, 2012, gave Rogers joint ownership of the Toronto Maple Leafs, the NHL’s most valuable team, as well as the Toronto Raptors of the National Basketball Association.

Bell Outbid

Rogers and BCE each paid C$533 million for a 37.5 percent stake. Rogers then agreed to buy Score Media Inc. that same month for C$167 million.

The MLSE deal has probably already paid off for the two companies, said Richard Peddie, former CEO of Maple Leaf Sports.

“Pro sports broadcast rights continue to escalate,” he said in an e-mail. “Proves again why Bell & Rogers got a great deal buying MLSE.”

Rogers rose 1.9 percent to C$47.11 at 11:18 a.m. in Toronto today. BCE was little changed at C$46.67. Rogers has climbed 4.3 percent this year, compared with BCE’s 9.5 percent gain.

Bell, as the main BCE brand name is known, said yesterday it was outbid by Rogers for the NHL rights. NHL Commissioner Gary Bettman declined to comment yesterday on the competing bids that came up short.

Appropriate Bid

“We submitted a bid we believed was valuable for the NHL and appropriate for our business,” Scott Henderson, a spokesman for Bell Media, said in an e-mail yesterday. “We’re committed to TSN remaining Canada’s sports leader.”

Bettman, speaking alongside Mohamed yesterday, said Rogers’s ability to clinch the rights wasn’t just about price. “The Rogers people should be commended for their aggressiveness and strategy,” he said.

Rogers’s first annual payment to the league will be about C$300 million, climbing to the mid-C$500 million range in the final year of the deal. The Toronto-based company said that it reached separate sublicensing agreements with the Canadian Broadcasting Corp. to continue to broadcast its traditional “Hockey Night in Canada” program on Saturdays, and with Quebecor Media Inc.’s TVA for all French-language national broadcasting rights.

Rogers, which already owns Sportsnet cable television, said the cost of the payments to the NHL will be partly defrayed by the CBC and TVA sublicensing deals. Mohamed said that the agreement will be “accretive from the get-go” to Rogers’ profitability. Rogers had net income before one time items of C$1.73 billion last year, on revenue of C$12.5 billion.

Earnings Impact

Keith Pelley, the head of Rogers’ media unit who joined from CTV in 2010, told reporters that the deal is “self-financing” by creating fresh revenue that will cover the annual payments.

Advertising revenue will probably make up some but not all of those costs, said Peddie, the former head of Maple Leaf Sports. Rogers can make up the difference with higher cable subscriber fees, and by offering new premium hockey packages for hardcore fans, he said.

Still, Rogers is paying more than double what U.S. broadcasters paid the league for local rights. The NHL’s games are broadcast in the U.S. under a 10-year contract signed with Comcast Corp.’s NBC and Versus networks in 2011. That agreement was worth $2 billion, people with knowledge of the transaction said at the time.

‘Awful Lot’

“Five billion is an awful lot,” said Ian Nakamoto, director of research with MacDougall MacDougall & MacTier Inc. in Toronto. “I’m not sure if it adds that much warmth and comfort to me.” Nakamoto’s firm manages about C$4.7 billion, including Bell and Rogers shares.

“This NHL deal adds content to their assets, but I don’t see it as a big deal,” he said.

Bell and TSN will still broadcast 10 Maple Leafs games next season and 26 games starting in 2015 and has partnerships with teams in Montreal, Ottawa and Winnipeg, along with Hockey Canada and the World Junior Championships, said Bell’s Scott Henderson. In addition to its stake in the Leafs, BCE also has a stake in the Montreal Canadiens that preserve its regional broadcasting rights for those teams.

Guy Laurence, who used to run Vodafone Group Plc’s U.K. business, replaces Mohamed on Dec. 2, capping his tenure as CEO with a flourish.

“It’s remarkable and a testament to Rogers how quickly this came together,” said Bettman.

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