The Decibel - Inside the power struggle over Rogers’ telecom empire

Episode Date: February 15, 2024

Back in the fall of 2021, Canadian news headlines were dominated by the story of the Rogers family battling for control of Rogers Communications Inc. It was a very dramatic, and very public, power struggle that was frequently compared to the TV show Succession.The fallout from that saga is still playing out today. Alexandra Posadzki has been breaking news on this story since it started. She recently published a book, Rogers v. Rogers: The Battle for Control over Canada’s Telecom Empire. Today, she explains the saga that pulled the Rogers family apart, risked a $20-billion deal, and what it all means for Canada’s telecom industry now.Questions? Comments? Ideas? Email us at [e-mail]

It allegedly started with a butt dial. That led to a very dramatic and very public power struggle for Rogers Communications. It was compared to the TV show Succession, as family members fought for control and for the future of Canada's telecommunications empire. Rogers has more than 11 million customers and last year raked in over 19 billion dollars in revenue. Alexandra Pazadsky has been breaking news on the Rogers story since it started. She covers the telecom industry for the globe and she just published a book about this called Rogers vs. Rogers, the battle for control over Canada's telecom empire. Today, Alexandra joins us to talk about the saga that pulled the Rogers family apart,

risked a $20 billion deal, and what it all means for the industry today. I'm Mainika Raman-Wilms, and this is The Decibel from The Globe and Mail. Alex, thanks so much for being here and happy book launch week. Thank you. Thanks for having me. Always love to be on the show. So before we get into the story itself, there is a lot going on here. So I think we should maybe just set up who the main players are in this story. So who do we need to know about here? For sure. So the first person that we all need to know is Ted Rogers, the legendary founder of Rogers Communications, a visionary entrepreneur who built this company from essentially nothing into a massive telecom and media empire. And in addition to Ted, we have his wife, Loretta Ann Rogers, who bankrolled his business ventures and, you know,

personally paid for the first bits of cable to be laid. And then Ted and Loretta have four children. So the eldest of their children is Lisa Rogers, followed by their first and only son, Edward Rogers, followed by Melinda, and lastly, Martha. Okay. Okay. So that kind of sets out the family structure here. And of course, they've all been involved in the company somewhere or the other, some more than others. But big changes were kind of happening after Ted Rogers died. So this was in 2008. What did that mean for the company?

Yeah. So let's back up for just a quick second and talk about Edward and Melinda, because these are the two of the Rogers children who kind of took the greatest interest in the company. We're both working their way up through the company over the years, and many within the company's ranks sort of perceived there to be a rivalry between them. But there were always these questions kind of swirling around succession because Ted was this larger than life character. There were jokes within the company that there was no decision at Rogers too small for Ted to make. And what ended up happening is that rather than passing the reins to either of his children, Ted ended up leaving

it up to the board to decide who would be the next CEO of Rogers. But he indicated a very strong preference for the head of the wireless business, a man named Nadir Mohammed, who was not a Rogers family member. And that is indeed who the board selected to be the CEO. I think let's just take a second here and kind of establish some of the basics here again before we get into the heart of it. Since Ted Rogers died, how does control of the company work? Because I understand there's a control trust. How does this work? So Rogers has what's called a dual class share structure. And so there's two classes of shares. You've got your class A shares, which come with 50 votes each. And then you've got your class B shares, which come with no voting control over the company at all. And 97.5% of these voting Class A shares are held within trusts

that are all overseen by the master trust to the Rogers control trust, which is controlled by the Rogers family and close family friends. So this basically ensures then that the family will always have control then of the company. And that is exactly the goal that Ted had was to ensure that his family maintained control over Rogers for as many generations as Canadian tax law would allow. Okay. All right. So that's kind of the backdrop to what happened. And then we get to fall 2021 where things kind of begin here. And this whole thing apparently started because of an inadvertent call, a butt dial, if you will. So what happened there, Alex? And Natalia is the CEO at the time. to be Rogers General Counsel. His phone allegedly answers the call while it is in his blazer pocket, and he's unaware

of this, at the precise moment where he's discussing his plans for how he will remake the leadership ranks of Rogers Communications when he eminently becomes the CEO. Okay. So, I mean, I imagine that was pretty shocking to Joe Natale, the current CEO, to be hearing that then with this kind of inadvertent call. controlling shareholder and at the time the chairman of the board but you know he felt he had the support of melinda and loretta and other directors he had just uh gotten this big takeover this 20 billion dollar deal to acquire shaw communications inc which is you know the the deal of ted rogers's dreams and i guess i should say so there is another version of events which

is that natalie learned of this plan through some other means, perhaps by looking through Tony's emails, or perhaps it was leaked to him by another board member, for instance, Melinda. But through whatever means he learns of this plan, he learns of this plan, and he goes and takes this to the independent directors who sit on the Rogers board, as well as ultimately to Edward himself. And he says, well, I would like to fire my CFO because I do not trust Tony Staffieri, this guy who plans to take over my job. And in a meeting with Edward, this is where Edward says to him, well, don't blame Tony. This wasn't Tony's plan. This is my plan. And I do not agree to fire Tony. And Joe essentially gives a

middle to made him. He says, well, it's going to be either me or Tony. And Edward says, well, I would be happy to work with you on an exit package. OK. OK. So they're making moves to have Joe Natale leave his position at CEO. But then there's this really dramatic meeting that takes place. So what happens here, Alex? So several of the Rogers family members begin to have a change of heart, primarily Loretta Rogers, the Rogers family matriarch, and her youngest daughter, Martha Rogers, who initially seemed to be in agreement with Edward. And then they start to feel that the independent directors have a very different view of Joe Natale's performance as CEO than the one that they had been presented by Edward and one of Ted's longtime lieutenants. And so this all

comes to a head at this next board meeting where Edward is talking about, you know, moving forward and we're going to get Tony in this role. And then one of the independent directors says, hold on, we have a better idea. And he passes the floor to Martha, who reads out this resolution that essentially rescinds Joe's quote unquote retirement. Wow. And fires Tony Staffieri and puts a bunch of ring fencing around Edward to curb his alleged interference with the company's management. Okay, so this meeting is happening. Edward thinks this, you know, we've got the plan.

We're going to kind of make this announcement. But then somebody else stands up and says, wait a minute, let's do something different. And all these other people are backing this other plan. And so that's what ends up happening. That's right. And there's a press release that comes out saying Tony Stefieri is gone as CFO of Rogers, effective immediately. And Alex, this is really the first time the public is hearing anything about this, right? Exactly. So all of this has been kind of quietly brewing in the background. But it's this press release that kind of goes off like a grenade on Bay Street because

Rogers is in the midst of trying to get approval for this massive deal. And now all of a sudden, they're parting with their chief financial officer and they're not giving any reason for the departure. And it's not like a transition, right? It's not like this guy's retiring and it's going to be over the next six months. It's like, no, he's gone effective immediately. Somebody else is in his place. And so everyone's kind of going, what the heck just happened here? And it actually took us quite a while at the Globe to crack this open, roughly a week before we were able to report like what had really happened here behind the scenes.

So, I mean, this seems like a really big blow to Edward Rogers, right? His plan to oust the CEO didn't work. How did he take that? So Edward essentially struck back by deciding that he would fire the independent directors who had gone against him. And so he starts to put a plan in motion that will essentially remove them. And at the same time, as soon as the other family members learn of this plan, they decide that they're going to remove Edward as the chair of the board. And so these kind of two things are happening in parallel with one another. So, I mean, in essence, like, are there like two, like two boards happening here? Like, how is this working? So what ends up happening is that Edward decides that he's going to change the board through a written shareholder resolution, which has essentially never been done as far as we know in Canada. I don't know if it's really ever been done anywhere to have such a major restructuring of the board without holding a shareholder meeting. So there's a little doubt that Edward

as the controlling shareholder has the ability to reconstitute the board of Rogers Communications. But the part that's unusual is that normally you would have to hold a shareholder meeting, and then you would have to give a certain amount of notice to assemble all of the shareholders so that, you know, they can ask questions and they can, you know, hear the rationale for the decision. And so he says, well, no, I've reconstituted the board now. I've removed these five directors. I've replaced them with my own chosen directors. And the company is saying, we don't think that this is legally valid. And so for a period of time, Rogers effectively has, there's a lot of confusion around who is the board of Rogers Communications, because you have Edward saying, this is the board, and then you have the management

team and the five directors saying, no, we're still the board, to the point that one of my sources referred to this situation as Schrodinger's board because you don't know who the real board of Rogers is. Ultimately, what ends up happening, it lands in court in B.C. and the court ends up deciding that what Edward has done is legally valid. And now the new board is in place. OK. OK. So after all of this happens, Edward Rogers is the chair. He's got his new board. He's got the approval of the B.C. courts. What happens to Joe Natale, though? So as soon as Edwards' new board is in place, everybody thinks, OK, so I guess that's it for Joe, because obviously this whole fight started over Joe. But, you know, a number of directors and family members had raised the issue of, you know, how destabilizing it would be to the company to have the CEO exit in the midst of the Shaw deal. And so immediately in the aftermath of this B.C. court decision,

this press release comes out saying Joe Natale is the CEO of Rogers and he has the board's support. However, what Joe ends up doing through a series of meetings with Edward and their various allies and legal representatives is putting forward this list, this document of his principles, basically things that he needs to be in place for him to feel like he can run Rogers effectively. It sounds like a list of demands almost. This is certainly how several of the directors viewed this list. But the board ends up deciding after, you know, seeing this list and hearing from Joe, he actually speaks to the board, that this isn't going to work. And they end up deciding ultimately

to fire Joe and put Tony Staffieri in first on an interim basis, run a CEO search. Of course, Tony emerges victorious and is currently the CEO of Rogers. That's amazing. So that's like really a 180. So the board comes out first in support of Natalia and then actually, you know, he's out and Stefani is back in. So, I mean, I'm starting to understand why people compare this to succession, right? This is so dramatic. And the other thing is it's so public, Alex, right? I mean, is this often happening behind the scenes and we don't see it?

Or, like, is this a really kind of a different situation where we're seeing this kind of family drama play out this way? It is, in my experience as a business reporter, and I've been on this beat for four years and have covered other business beats over the past decade. And this is, you know, the most dramatic public family and corporate feud that I have personally ever covered. I think it's quite unusual. You know, Canada's business community is seen as very buttoned down and proper and honestly, sometimes quite boring. And this was this dramatic fight that really shook the business community. We have a lot of these dual class share structure, like family controlled companies in this country. We have a lot of them. And a lot of these other, you know, families who

control public companies were watching this, I'm told kind of biting their nails, because this is a perfect example of what can go wrong when you have this type of share structure. And, you know, shortly after this whole leadership change had played out around Christmas, Edward gets this video message from Brian Cox, of course, the patriarch from HBO's hit show Succession, essentially congratulating Edward on his real life succession. Edward, this is from Suzanne. Congratulations on your real life succession at Rogers Communications and also having Joe Natale to f*** the f*** off. And for me, when this video surfaced, this was kind of like the moment where the walls between fiction and reality

just came crashing down. I was just completely stunned. We'll be back in a minute. Okay, so the backdrop to this whole struggle was the deal for Rogers to take over Shaw Communications, which did end up happening in the end. But I think we should touch on this a little bit, Alex, because how does this, I guess, fit into the family power struggle? Of course. So the one thing that the family was all united on throughout all of this was the importance of Shaw. Shaw was the company that Ted always would have wanted to acquire. And this was kind of the coming together of these two legendary cable families. And one of the things that has come out is that Edward essentially had

reservations about Joe Natale's ability to complete that deal and to integrate the two companies. And this is why he felt that he wanted to enact a management change quickly rather than waiting for after the deal had closed. Meanwhile, other members of the board felt that, you know, right in the middle of the deal was the worst time to change the CEO. And Shaw actually, you know, stayed very much out of it throughout because, you know, stayed very much out of it throughout because, you know, this was a Rogers family situation. They felt they didn't want to intrude. But, you know, they had they had another offer for an acquisition. They had an offer from Bell and they had turned down that deal in favor of the Rogers offer. And so you can just imagine the Shaw family

sitting there biting their nails, being like, oh, my gosh, can these guys just stop fighting and get this deal done? Yeah. I mean, this is an important point because when a company kind of seems to be in chaos, that, of course, has other ramifications. Right. And there was a lot of talk at the time, too, about how damaging this this family saga, this family drama could actually be for the company Rogers. Was it damaging? Like looking back at it, Alex, how did how did it affect the company? I mean, there was a lot of noise in terms of effect on the stock price. Like we did see big jumps in the stock price, but it's always a bit hard to tell exactly what is responsible because at the same time, you had a lot of uncertainty over whether the Shaw deal would close. And, you know, usually when you're a company acquiring another company that also affects your stock

price and then there's other issues macroeconomic. But at the end of the day, I mean, you look at Rogers financial results, and you know, looks like the company is doing just fine. They're acquiring wireless customers, they're still a very profitable company, their revenues are growing, they were able to close the deal. So and all of this in spite of the fact that they suffered a massive nationwide outage to all of their services in July of 2022. Oh, yeah, that's right. Freedom Mobile. Freedom, you know, is Canada's fourth largest wireless carrier and was this kind of scrappy upstart that was sort of seen as the challenger to the status quo, was credited with driving prices lower or at least creating competition for consumers. And so there was a lot of concern about whether we would allow

Rogers to acquire Freedom. And then we would be going down from four carriers, four major carriers to three. Obviously, there's still other regional wireless carriers I want to acknowledge, but they ended up being forced to divest it. So they sold Freedom Mobile to Quebec OR, the owner of Videotron. And so as we all know, the deal did go ahead. And you know And what we've seen since then has been kind of a mixed bag. We have seen some increased pricing competition in the market in terms of promotional offers around the Christmas holiday and back to school season. We've seen churn in the industry elevated. So churn is this metric of customer turnover on a monthly basis. And so we've seen that tick up a bit. So that's always an indication that there is increased competition. But at the same time, we've also seen both Rogers and Bell come out with some price increases. And also, honestly, at the end of the day, when you have a major deal like this, like it can take years to really see what impact on

competition it's going to have. And so we haven't even been it hasn't even been a whole year since this deal has closed. And so I think much still remains to be seen. OK. Yeah. So the Roger Shaw deal did go through, though. They kind of the internal drama was kind of settled. But how has this played out then, Alex, since then with the rest of the Rogers family?

So what we saw quite recently was that Melinda and Martha, two of the key voices of dissent, actually going to court. I should actually mention quickly that Loretta Rogers passed away. But so Melinda and Martha ended up in court saying that they've essentially been iced out of board meetings. They're not being given the same access to board documents. And that case is now essentially settled because there has been a private settlement in the Rogers family. And Melinda and Martha have agreed to step down from the board. So they are no longer directors of Rogers because the terms are confidential. We don't know what they got in exchange for giving up their board seats. Okay. Wow. Just lastly here, Alex, I mean, when you step back and look at all of this,

how it played out, I guess I'm just wondering how you reflect on it. Like, what does all of this say about this telecom empire and I guess Canada's telecom industry more broadly? Yeah, look, I think this story raises some really critical questions about, you know, there's a very, very important industry about, you know, corporate governance in family-controlled companies. And quite honestly, about transparency, I mean, one of the things that I personally find to be so interesting is the fact that you do have in this story a company that is controlled majority by a family. And yet there's a very little transparency around the Rogers Control

Trust itself. And of course, you know, Canadian laws allow for this. But as a journalist, I'm always in favor of transparency. And so when you have a company where 97.5% of the shares are controlled by this family, and we've now seen, you know, what that can lead to when you have discord in the family, and yet, the family itself is not actually required to disclose, you know, even who are the advisors to this Rogers Control Trust. But you would think that this is something that maybe the investors, you know, the class B shareholders of Rogers would want to know. And so I think that for me is one of the key takeaways, because, you know, we do here have this very critical company controlling, you know, critical infrastructure in this country. And it's essentially in the

hands of one man. And it's something that affects a lot of Canadians, right? People have their cell phone service through this company. People own shares of this company. So it affects a lot of people. That's right. I mean, Rogers touches millions of people's lives, not just through wireless and cable services that they offer, but also as the owners of the Blue Jays, as the owners of MLSC, as the owners of the Rogers Center, where Taylor Swift is going to be performing later this year. So this is like a company that really touches a lot of people's lives. And it's a critical service that they provide, which is communications. And you do essentially have one guy kind of in control of it all. And that is

Edward Rogers. We don't have a lot of books, Canadian business books that look at some of these players. Not a lot of people know very much about the Rogers family, and they are this extraordinarily powerful and wealthy family that, you know, has a lot of control over our lives. Alex, thank you so much for being here today. Thank you so much for having me. That's it for today. I'm Mainika Raman-Wilms. Our producers are Madeline White,

Cheryl Sutherland, and Rachel Levy-McLaughlin. David Crosby edits the show. Adrienne Chung is our senior producer, and Angela Pachenza is our executive editor. That succession theme you heard was actually performed by the Globe and Mail's band. Yes, we do have a band. Fun with discipline. Thanks so much for listening, and I'll talk to you tomorrow.