The top executive of Rogers Communications Inc. said the company “failed to deliver” on a promise of reliable service and as a result will spend at least $US250 million (US$194 million) to separate its wireless and wireline networks.
Rogers CEO Tony Saffieri faced questions from a Canadian parliamentary committee about a July 8 network collapse that shut down wireless and Internet services for 12 million people for almost 24 hours. The outage affected emergency services, financial payment systems, government offices and businesses, some of which were forced to conduct cash-only sales.
Separating the networks will help make them more robust, Saffieri told lawmakers. Industry Minister Francois-Philippe Champagne has ordered Canadian telecommunications companies to design an updated system so that if a provider suffers a major network problem, 911 calls and other critical services will still work.
The network incident has increased pressure on Saffieri as Toronto-based Rogers tries to win approval from Ottawa to take over rival Shaw Communications Inc. in a $20 billion ($15.6 billion) deal. Rogers also faces a legal challenge from the Competition Bureau to the proposed takeover.
The House committee is seeking answers about the cause of the network failure, its impact and future plans to avoid such problems from Rogers officials and the country’s telecommunications regulator.
Saffieri said in a letter this weekend that Rogers will invest C$10 billion over the next three years, including “more oversight, more testing and greater use of artificial intelligence” to improve network reliability.
“Network investment this year will be double what it was two years ago,” Saffieri told the House committee, without giving a specific figure. Rogers expects capital expenditures of about C$3 billion this year and more of that will go toward network improvements than in the past, he said.
Saffieri was criticized for not quickly informing government officials when the network went down. It started failing before 5 a.m. Ottawa time on July 8; Rogers didn’t tell Champagne’s office until shortly before 12:00 p.m. that day, the CEO told lawmakers.
“This was the failure of a company. This was the failure of Rogers,” Champagne said in separate testimony to the committee.
The cable and wireless company has repeatedly apologized, and Staffieri again defended the Rogers-Shaw merger as a way to free up capital to improve the communications system. Last week, Rogers replaced its chief technology officer.
JPMorgan analyst Sebastiano Petti cut his price target on Rogers shares to $80 from $90 on Monday, saying the company’s decision to offer customers a five-day billing credit will cost $175 million in the third quarter and could see an increase in customer turnover.
Rogers shares were little changed at $60.30 at 1:13 p.m. Toronto time.