Rogers to Face Huge Loss


The joint acquisition of Toronto Maple Leafs (an ice hockey club based in Toronto, Canada) by Rogers Communications Inc. (RCI) and BCE Inc.(BCE) may lead to huge losses for both the companies as there is a chance of a lockout of National Hockey League (:NHL) in Canada, this season.

In a bid to boost its sports network, Rogers Communications, together with Bell Canada, a 100% subsidiary of BCE Inc., bought a 75% stake in Maple Leaf Sports & Entertainment Ltd., (a sports company that entails to popular sports like hockey, basketball and soccer).

NHL is a very popular ice hockey tournament in Canada that draws huge audiences. However, the tournament – that was slated to start from October 11 – appears to be a distant dream since the participating teams continue to face revenue sharing issues with the board.

Lockout of the NHL tournament may elevate the cost for Rogers Communications in terms of loss from ticket sales, merchandising and television advertising revenue totaling $C50 million during the quarter. In order to offset the potential loss, which the company may incur in case of a disruption of the tournament, Rogers Communications may put up concerts and organize basketball matches during that period.

Few days back, Rogers Communications also bought a sports television network – Score Media Inc., which is Canada's third largest specialty sports channel will also enable, Rogers Communications to gain an additional 6.6 million television subscribers.

Increased adoption of smartphones and tablets has completely changed the TV viewing options for customers. However, viewing of live sporting events is not available through these wireless devices. So in order to boost the streaming of live sporting events as well as to lure more subscribers, Rogers Communications is continuously adding these sports content to their network.

Rogers Communications Inc. has a Zacks #3 Rank, implying a short-term Hold rating. Considering the fundamentals in the long run, we maintain our Neutral recommendation on the stock.

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