This 5G Play Just Got a Lot Bigger

Here’s why Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI) could be the winner out of its deal to acquire Shaw Communications Inc. (TSX:SJR.B)(NYSE:SJR).

| More on:

Image source: Getty Images

5G technology is undoubtedly a major catalyst for the telecommunications sector. However, picking a 5G horse in this race is the real dilemma many investors are faced with right now, so investors in 5G, read on!

In my view, telecom companies need to formulate and implement a coast-to-coast strategy to make the most of the 5G rollout. Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI) has recently strengthened its position by expanding its footprint. Indeed, this is one of the key reasons I like this stock right now.

Let’s look at the company’s recent deal to acquire Shaw Communications Inc. (TSX:SJR.B)(NYSE:SJR.B) and why it’s such a big deal for investors.

$8.4 billion takeover bid for Cogeco group expires

Rogers collaborated with Altice USA to acquire Cogeco, a Montreal-based telecommunications company. However, the Audet family controlling the company rebuffed their hostile takeover bid. Although Rogers and Altice increased the offer, the family stood firm, and this deal did not materialize. As the bid worth $8.4 billion expired, Rogers revealed that it’ll still be considering the expansion of operations in Quebec.

According to a statement released on September 2, 2020, Rogers holds 41% of the subordinate voting shares in Cogeco. Furthermore, this company holds 33% of the subordinate voting shares in Cogeco Communications.

Although the Audet family rejected the bid to takeover Cogeco, there’s a lot of speculation pending that something could still be in the works by the Rogers’ management team.

Shaw acquisition is a big deal for 5G investors 

However, the big news of late is that Rogers is set to take over its Calgary-based rival, Shaw.

Shaw CEO Bradley Shaw revealed that the company would require a substantial amount of funds to upgrade to 5G. He accepted the fact that it would not be possible for Shaw to fund multi-billion-dollar investments. Hence, Shaw has finally accepted a takeover bid worth $20.4 billion from Rogers.

Indeed, this will transform the Canadian telecommunications sector. Furthermore, this deal will make Rogers the best 5G player in Canada as it will have ample scope to expand its operations in Western Canada. This acquisition is a part of a strategy formulated by Joe Natale, CEO of Rogers. He intends on creating a coast-to-coast platform by taking over all telecom businesses of its customers (over wireless 5G, etc.).

Rogers aims to roll out 5G network in four provinces by spending $2.5 billion if the acquisition deal materializes. Moreover, the company is set to invest another $3 billion to upgrade its networks to 5G in the West.

As two of the leading telecommunication companies are set to merge, I believe there’s nothing but positive for growth investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends ROGERS COMMUNICATIONS INC. CL B NV.

More on Dividend Stocks

Canadian Dollars
Dividend Stocks

1 Dividend Stock That Could Create $683.87 in Tax-Free Passive Income in 10 Years

You can earn massive passive income tax free from your TFSA. Here's how with your first dividend stock or GIC!

Read more »

Dividend Stocks

This 4.26% Dividend Stock Is My Top Pick for Immediate Income

Finding a great dividend stock is one thing, but growth in the near future is all but certain for this…

Read more »

edit Safe pig, protect money
Dividend Stocks

3 Dividend Stocks You Can Safely Hold for Decades

Are you looking for dividend stocks that can perform for the long term? These three stocks could earn safe and…

Read more »

sale discount best price
Dividend Stocks

3 Bargain Stocks You Can Buy Today and Hold Forever

Are you looking for some of the best bargain stocks you can buy today? Here’s a trio of options that…

Read more »

Senior couple at the lake having a picnic
Dividend Stocks

Have Room in Your TFSA? Start Earning Tax-Free Dividends With Just $15,000

Use the tax-sheltered status of the TFSA to hold quality dividend stocks such as Enbridge and create a stable income…

Read more »

stock analysis
Dividend Stocks

Better Buy for TFSA Passive Income: Telus Stock or TD Bank?

TD and Telus look cheap today. Is one stock now oversold?

Read more »

growing plant shoots on stacked coins
Dividend Stocks

Want Extra Monthly Cash? 1 Dividend Stock to Buy Now and Hold Forever

Simply buying and holding this top monthly dividend stock for the long term can potentially make you super rich.

Read more »

Financial technology concept.
Dividend Stocks

2 Dirt-Cheap Stocks to Build the Core of Your TFSA

Sun Life Financial (TSX:SLF) and another dirt-cheap TSX stock to buy this September as the TSX Index fades a bit.

Read more »