THE WHOLE BUNDLE

Nadir Mohamed, Rogers’ New No.2, Has Everything It Takes To Be Its Next CEO – Except The Surname

Jason Kirby, Financial Post, 09/09/05

The guy running the show at Rogers Communications Inc. steps off the elevator each morning on the 10th floor of Rogers' Toronto headquarters and heads down the hallway toward his glass-walled office. On the way, he passes a collection of photos, plaques and mementos commemorating the 80-year history of the Rogers dynasty, started when [Edward Samuel Rogers] invented the batteryless radio.

Running the $5.6-billion communications company is among the toughest jobs in Canadian business. This guy oversees one of the most tightly controlled family businesses in the country. The cable and wireless divisions are gripped by mutual distrust and resentment. RCI is struggling to fend off mammoth competitors like BCE Inc. and Telus Corp. in a fast-changing industry. At the same time, it's also trying to digest two major acquisitions -- Fido and Call-Net -- worth more than $1.7 billion. Then there's the company's debt, all $8 billion of it. True, these may be familiar challenges. But one thing is different: The man who's increasingly calling the shots at Rogers isn't a Rogers at all. Not even close.

Meet Nadir Mohamed, Ted Rogers' new right-hand man and a rising star in Canada's communications industry. As president and chief operating officer of RCI -- a post created in May just for him -- it's his job to turn Ted's visions into reality. As Ted says, "I love driving us into future things. Then Nadir has to make it work."

At 72, Ted is still the undisputed ruler of the cable, wireless and media empire he cobbled together from scratch, both by nature of his chief executive title and his control of 91% of Rogers' voting shares. But Ted isn't happy with how the company's running. "I'm dissatisfied with just about everything," he says in an exasperated tone during an interview from his Toronto office. Like what? "Have you got all weekend?" he replies, and then launches into a litany of things that irk him: poor customer service, complicated internal processes, old IT systems. Yet he knows he's not the guy to fix it. "I'm an entrepreneur and founder, not a manager. But I'm determined to be a manager in my last three years [before a planned 2008 retirement] and turn this company around."

If the key to successful management is hiring good people, then Ted is on the right track. Mohamed, a low-profile exec, has already proven an adept leader. Prior to ascending to his new role, he painfully wrenched the focus at Rogers Wireless (a separate operating company until last December) away from growth at any cost to growth with profits. He's universally liked and respected by telecom players, both for what he's done at Rogers and for his role in building what is now Telus Mobility. Within the company, he's heralded for his inclusive style. Most of all, investors love him. "He's obviously a star type of wireless executive," says Ted, "and there aren't many in this country."

Indeed, no exec has earned the old man's trust to such an extent. As president of RCI, Mohamed now sits directly between the CEO and the heads of the cable and wireless divisions. He will effectively run the entire operation under Ted's guidance. All signs seem to point to Mohamed taking over as the next CEO. By the time Ted retires, no one will be better qualified for the job.

But nothing is ever that simple in Mr. Rogers' neighbourhood. For one thing, Ted may not step down in 2008 as announced last year. Depending on who's counting, this is the third, fourth or fifth time he has proclaimed his intention to hand over the reins. In each case, he has flip-flopped as the date drew near. And he could very well add another act to his drawn-out finale. Barely five months after confirming his latest retirement date, he's already tossing out qualifiers. "Obviously when we approach that date, it will depend on the situation at that date," he says. "I intend to retire as CEO, but you never know. There's always a small chance."

There's another possibility: Ted could change his mind where Mohamed's concerned. According to company lore, Rogers hasn't retired an executive in 35 years. They've all quit, been fired or left "to pursue other interests." John Tory, now leader of the Ontario Progressive Conservatives, knows the risks of speculating on who will fill Ted's shoes. "I was written about that way for a period of time," says Tory, who quit as president of Rogers Cable after Ted changed his mind about retiring in 2002. "There was a guy named Stan Kabal who was written about that way. You can go back and find 10 or 12 names that have been written about that way."

And it's no secret Ted has long yearned to see his son Edward, now president of Rogers Cable, take over. There's almost no question Rogers fils will one day run his father's company. But the general consensus is that he isn't quite ready for the leading role.

Mohamed won't speculate on his career prospects at Rogers. In the long term, whether he gets the CEO job at Rogers doesn't really matter. If the company is foolish enough to let him slip away, Rogers' competitors would be happy to have him. In the near term, he's just too busy to worry about his own future. He has to knit together what have long been disparate businesses: cable, wireless, media and telecom (with the recent $330-million acquisition of Sprint's Call-Net phone business). The catchword is bundling, where customers get all their services from one supplier in exchange for a simplified (and cheaper) offering on a single bill.

That's the easy part. For years, Ted talked about the convergence of his divisions, but not everyone was keen to listen. His vision, though, is rapidly becoming reality. "It's a fallacy to talk about us being in the cable or wireless business. That's a historical notion," says Mohamed. "We're creating the road map to a world where we have services that will work on whatever network you want." The Call-Net deal rounded out Rogers' offering, giving it 600,000 local phone subscribers -- a ready base for its voice-over-Internet service, launched in early July. Rogers also just rolled out a mobile television service for its cellphone users. Eventually, the lines between wireless and cable will disappear. "One started in voice and is moving to video. The other started in video and is moving to voice," says Mohamed. "No question these technologies are coming together."

All this pits RCI directly against BCE and Telus, two very determined (and deep-pocketed) competitors. To beat them at bundling, Mohamed needs to get all of RCI's divisions marching in the same direction -- yet another major culture shift.

As an outsider, he stands the best chance of success -- he's not touched by the politics and messiness that are inherent at family-controlled companies. But when it comes time for Ted to bow out, Mohamed's outsider status might work against him.

"You never see me do this," says Mohamed as he slides his precious BlackBerry off his hip holster and turns it off. He slips off his impeccable dark-grey pinstripe jacket and throws it over a chair before sitting down to talk about his new job. The walls of his office ("just a 50-yard dash" from Ted's) are bare; a stack of framed pictures leans against the glass wall. Mohamed never quite seems to settle in at Rogers -- his office at Wireless, where he spent three years, was just as colourless.

And he was just as attached to his BlackBerry. First thing in the morning, before even his first cup of Starbucks coffee, Mohamed would receive a message detailing the previous day's results, including total sales by region and product, as well as the day's churn numbers, the key metric in telecom, which shows how many customers have switched providers.

His diligence paid off. In the quarter before Mohamed took it over, Rogers Wireless lost $42 million. Before he moved upstairs more than three years later, it was RCI's biggest money-maker.

It was that kind of focus that originally made him such a star at BC Tel in the early 1980s, where he'd landed thanks to a double fluke. Mohamed was born in Tanzania, part of the third generation of Indian Muslims who immigrated to Africa in the early 1900s. His parents sent him to England when he was 13, just before Idi Amin came to power in neighbouring Uganda. Eventually the family ended up in Vancouver, where his parents prepped him for life as a doctor. Mohamed got his first taste of surgery in Grade 12, dissecting a fetal pig. "My particular pig had a very long umbilical cord that kept flopping around, so I chopped it off," he says. The teacher flew into a rage. "Right there, I knew it wasn't for me." Instead, he earned a business degree from the University of British Columbia and went to work at an accounting firm, where he earned his CA designation.

In 1980, a friend of Mohamed's got an interview at BC Tel, but immediately took another job. Mohamed went in his place -- and got hired. His real break came in 1984, when BC Tel asked him to look into "this portable communications thing." For four months, 30-year-old Mohamed and a tiny team puzzled over the emerging cellphone industry. Rogers was gearing up a national service, through its stake in Cantel, and BC Tel didn't want to be left out.

Mohamed bought two black ledgers from a local stationery store. One would contain the financial statements; the other kept track of who owed what. "Those were the official records for the company that is now Telus Mobility for the first three months," says Mohamed, whose upstart operation would become one of the country's major wireless providers, after BC Tel merged with Alberta's Telus Communications in 1998.

In 2000, he got a call from a headhunter. Rogers was keen to poach him. He met with Charles Hoffman, then CEO of Rogers Wireless, and with Ted himself. Drawn by the prospect of working for an industry icon, Mohamed took the job as No. 2 at Wireless.

At one of Mohamed's first meetings, he watched in shock as a PowerPoint presentation detailed the growth of Wireless's customer base, and revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) over the past four years. "I will never forget it," he says. "At a time of 20% customer growth, revenue growth was half that, and EBITDA had not moved." What's more, the company had invested $2 billion. "We knew we had to change what we were doing going forward."

He soon got the chance. Six months after Mohamed arrived, Hoffman, an American, left Rogers to return to the United States. In July 2001, Mohamed took over as CEO of Rogers Wireless.

As with other carriers, Rogers had built its customer base by pushing pre-paid cellular service. Coupled with discounted prices for handsets, the company found it hard to eke out a return. It cost $160 to get a customer, who paid an average of $10 a month -- and had no loyalty to the carrier. The answer: Convince customers to sign contracts. Wireless increased its pre-paid prices, and cut back free evenings and weekends. "He really challenged the culture of the company, which was all about adding customers," says Dvai Ghose, an analyst with CIBC World Markets. "I doubt consumers were happy, but investors sure were."

Though Ted was an early proponent of convergence, Rogers' divisions were run as separate businesses. As far back as 2002, Tory says Ted talked about creating a new office to oversee all the divisions. "That position had never existed before," says Tory, "and for good reason: Ted Rogers did not want to share responsibility."

Then things changed. Rogers bought AT&T's minority stake in Wireless last year and took it private. And there was Mohamed, who seemed like the perfect point man for the aging CEO.

So in May, Ted handed Mohamed the presidency. He faces a formidable task in his new role. First off, Ted is desperate to get back on the acquisition trail (though Rogers hasn't fully absorbed Fido and Call-Net). There's tons of speculation over what Rogers might want to buy, from Cogeco Cable to Shaw Communications. But before investors let Rogers gobble up any more targets, Mohamed will have to get the company's notorious debt under control. How? "I don't know," Ted says. "Anyway, I'm the leader. I don't have to know. We have people here quite competent to do it." Publicly, RCI has said it's aiming to reduce its debt-to-EBITDA ratio to a multiple of four by the end of 2006, from its current five. But privately, the chief executive says his target is a multiple of 3.5 by 2007. Mohamed is shocked Ted blurted out his personal goal. "He told you that?" he says with a nervous laugh.

Ghose, for one, isn't that worried. Mohamed has a record of cutting costs to boost EBITDA and generating positive cash flow that can be used to pay down debt. "His biggest challenge and opportunity is to cut the cost structure at cable and create a bottom-line-oriented mentality like he did at Wireless," says Ghose. "Since he has the authority of the guy who really counts, I think he has the authority to do that as well."

No doubt cable needs an overhaul. Just a few years ago, it drove the growth at Rogers. But in 2004, Wireless accounted for 49% of the company's $5.6 billion in revenue and more than half of its operating profit; cable contributed just 35% and 28% respectively. That has added to the animosity between the two divisions, which have long been locked in a battle over resources.

Bringing them together would be messy enough without the added strain of swallowing Fido and Call-Net. It helps that Mohamed is liked by the rank and file. And he's been through this before, when BC Tel and Telus entered into their awkward marriage. Telus remains divided to this day. "Getting people together on one view is part of the game," he says. "The more you have people looking outside rather than inside, the better you can succeed."

To help spread Rogers' new message of harmony -- all in the name of selling more services to more customers -- Mohamed is telling everyone, from executives to call-centre workers, to focus on the competition. "It's great to have your sights set on who you need to compete against to capture the spirit of wanting to be better," he says. "We don't want to be beaten by the big guys."

Beyond that, Mohamed needs a long-term plan. To help craft his strategy, he's relying on the same team he built at Wireless, including Rob Bruce, the former head of marketing at Bell Mobility who took over Mohamed's job, and Bruce Burgetz, whom Mohamed poached from Shoppers Drug Mart to oversee IT. With each issue, the team follows the same process. "Debate, discuss and eventually agree on where we'll be in three years," says Mohamed. "If the team were here, they'd say Nadir always knows what he wants anyway. But I find the process of having people come to an agreement the most important part of commitment."

But Mohamed's close-knit team has rubbed some employees the wrong way, especially after his recent promotion. "Mohamed has moved his executive team to the new level with him, and the cable people did not obtain many senior positions," says one former exec. "There were a lot of people in cable who were very upset."

Edward Rogers, as head of cable and future heir to the Rogers empire, is part of Mohamed's team. But there could be trouble. When Edward replaced Tory as head of cable in 2002, it was seen as a big step up the corporate ladder. Now there's yet another level between him and the CEO's office. And one former exec says that, eventually, Mohamed's office will take over responsibility for cable marketing, sales and service. "The question is whether Edward will give up those functions to allow the integration," he says. "It's definitely a sticking point."

Family is important to Ted Rogers. And not just his own. On May 25, the day he was set to announce Mohamed's promotion to president of RCI, Ted surprised him by inviting his wife to the boardroom. Mohamed hadn't said much about the upcoming meeting to Shabin, whom he married in 1982 (they were blessed by the Aga Khan, spiritual leader of the world's 20 million Ismaili Muslims). "I believe in under-promise, over-deliver, and that's equally true at home," he says.

Ted praised Mohamed's achievements, including 10 straight quarters of improved earnings at Wireless. "He was dumbfounded when I said the things I said, which obviously were very warm and appreciative," says Ted. "Shabin was there and heard it all. We're a family company here, so we try to be very focussed on the needs of not just the management, but the wives as well."

But family companies have their own special problems -- namely, succession. Of Ted's four children, only two work for dad. Melinda Rogers, Ted's second-oldest daughter, is said to aspire to the top job. But she's been relegated to a strategic planning position, though some former execs believe she'd make a great CEO.

Meanwhile, Ted and Edward are said to have a sometimes volatile relationship. "They had very opposite views about the business, which made it particularly difficult for anyone to work between them," says a former exec. "There was a period when Ted wanted to integrate the business and compete with BCE head-to-head. Edward wanted to sell Wireless, sell all the media companies and buy all the cable companies in Canada to be sort of top dog -- a cable king, if you will."
Obviously Edward lost.

Still, RCI's share structure dictates that the CEO's job will eventually be his to turn down. But Ted himself foresees several years of outside, professional management before a family member takes over. He's no doubt aware of the risks that come with handing a family business to the next generation. That other Edward, Edward Bronfman, wiped out much of the Seagram empire trying to build an entertainment juggernaut.

Many see Mohamed as a potential mentor to the younger Rogers. "Ted says, 'Edward, I love you dearly, but you have to learn from this guy because he's a lot more experienced than you,'" says analyst Ghose. "Nadir is one of the most unassuming people I've ever met. His ability to alienate is almost zero."

Talk like that embarrasses Mohamed, who prefers to stick to profits, s-curves and convergence. "I don't worry about too much beyond what I have to do -- deliver profitable growth," he says.

But he'll have to get used to speculation. Investors breathed a sigh of relief after he was promoted because it seemed to indicate there'd be somebody to take over in case something happens to Ted. "I don't think Ted had any choice," says a former executive. "His not having a successor is not acceptable. And his putting Edward in would be just as unacceptable. So he has to bide some time to help Edward build some credibility with management."

There is, of course, the chance that Mohamed will be more than a seat warmer for Edward. Corporate governance advocates have put succession plans under the microscope. Ted insists there is a plan and that the job will go to the best candidate.

If Mohamed delivers over the next three years, investors will lean on the board to put him in charge. Still, you never know. "We have a couple family members in the business. We've got Nadir, Tony Viner, and we've got Alan Horn," says Ted. "But Mohamed's record is impressive, before Rogers and at Rogers. He would be an attractive candidate for CEO in a number of situations in this country."

But if Ted lets Mohamed slip away, as he has so many other executives, he might end up facing him again as a competitor.
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NADIR MOHAMED'S PROFILE:

Postion: President and chief operating officer, Rogers Communications Inc.

Born: Tanzania, 1956

Family: Married wife, Shabin, in 1982

Education: Graduated from the University of British Columbia in 1978 with a Bachelor of Commerce. Earned his CA designation in 1980

Lucky Break: Landed a job at BC Tel in 1980

Highlights: Helped launch BC Tel's wireless division (now Telus Mobility) and its high-speed data networking division. He was named senior vice-president of marketing and sales at Telus in 1999. Joined Rogers Wireless in August 2000 as president and COO, and was promoted to CEO six months later, where he pulled off 14 consecutive quarters of double-digit operating profit growth. Promoted to current position May 25

Interests: Jogging, squash, tennis, jazz

Quote: "The germ in every one of Ted's thousand ideas is really good. One thing you learn quickly is that they all have gold in them that you just can't dismiss. It's just a matter of crafting the ones that get us to our goal"

Note: I have been working at Rogers for more than 5 years since August 2000.