Canadian Companies Benefit from Major League Soccer Signings

NEW YORK (TheStreet) -- Rogers Communications (RCI) and Bell Canada (BCE) are two of three companies that have the majority of the market for wireline, wireless, and cable subscribers in Canada. However, with ownership of Maple Leaf Sports Entertainment, the two Canadian companies also have key sports assets that could be set to grow with a new focus on their MLS team Toronto FC and a pending television contract renewal.

If you're new to Major League Soccer, you should know that what Toronto FC completed over the weekend was monumental. The team signed Michael Bradley and Jermain Defoe, two players from European teams, to contracts that have soccer fans at a level of excitement last seen when David Beckham joined the league. Defoe is set to make over $8 million a season for the next four years. Bradley will be paid around $7 million for each of the next four or five seasons. Along with Bradley and Defoe, the team also signed Brazilian player Gilberto and got back former MLS MVP Dwayne de Rosario.

Toronto FC had the third-worst record in the MLS during the 2013 season. Despite the poor performance, Toronto's fan base continues to come out and support their team. The team had average attendance of 18,131 per game in 2013, a slight decrease from 2012's 18,681. However, when looking back, Toronto FC ha average attendance over 20,000 per game in each season from 2007 through 2011.

In Forbes' latest soccer valuations, Toronto FC was given a valuation of $121 million, which ranked fifth in the league. Toronto FC also ranked fifth in total revenue ($30.9 million) but fell to sixth in operating income ($4.5 million). For comparison's sake, the Seattle Sounders ranked first with figures of $175 million, $48.0 million, and $18.2 million for valuation, revenue, and operating income, respectively.

The value of Toronto FC is sure to rise if the team can obtain the success it should with its new stars. Attendance and stadium-related revenue should rise on the optimism heading into the new season. The team's valuation, along with other MLS teams, should also be helped by a new television deal. Currently the MLS sees $30 million annually in television contracts from ESPN (DIS), NBC (CMCSA) and Univision. Reports are that the league is looking for $40 million to $50 million in annual payments from a new deal.

The company that controls the MLS television rights also has the United States soccer rights, which gives more of an incentive for sports channels to pay a premium. This is also the big reason why Fox Sports (FOXA) is rumored to be one of the bidders as Fox has the rights to the 2018 and 2022 World Cups. The latest from Sports Business Daily is that ESPN and Fox are jointly bidding $70 million per year for the next eight years. This would more than double current television revenue and could prove beneficial for Toronto FC and the other MLS teams.

Toronto FC is a small piece to Maple Leaf Sports and Entertainment. While MLSE is a small piece for both telecommunications companies, it does offer potential growth from sports teams that perform well in attendance, playoffs, and merchandise sales. MLSE is 37.5% owned by both Rogers and Bell. The ownership includes Toronto FC, the Toronto Maple Leafs, Toronto Raptors, Toronto Marlies (The Leafs' AHL affiliate) and Air Canada Centre.

Both Rogers Communications and Bell Canada offer great media and wireless assets, and I believe Rogers is an especially strong play going forward. The company recently signed a huge NHL television contract to become the exclusive carrier of NHL games in Canada, paying $4.9 billion in the country's largest sports deal of all-time. These huge investments in both media and sports will pay off in the short and long term.

Rogers' shares are trading towards the lower end of their fifty-two-week lows, offering upside in 2014 for soccer fans and savvy investors alike.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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