Rogers CEO Joe Natale touts ‘rock-solid start’ to year as profit surges on wireless growth
Rogers Communications Inc. started 2018 with a surge in profit thanks to better-than-expected growth in its wireless division, rebounding from a rocky end to 2017 that featured a wireless price war between the Big Three carriers.
Canada’s second-largest communications company reported Thursday a profit of $425 million for the three months ending March 31, up 37 per cent from the same period last year.
It added 95,000 new postpaid wireless subscribers, nearly doubling analysts’ estimates of 55,000 additions and beating the 72,000 it added last quarter. At the time, it blamed the lower numbers on a “technical glitch” during the five-day promotional standoff in December that ultimately benefited its top competitors, BCE Inc. and Telus Corp. They added 175,000 and 121,000 subscribers, respectively.
“Overall, it’s a rock-solid start to the year,” chief executive Joe Natale said on a conference call with analysts after markets closed.
Natale credited the wireless performance to “good, healthy growth in the marketplace,” consumers signing up for premium smartphone plans and an improvement in churn, the percentage of customers who stop subscribing in a given period. It fell to 1.08 per cent, the best rate in 15 years.
The first quarter is typically slow for the wireless industry, as consumer spending tends to dry up after the holiday shopping season. But Rogers bucked the trend, along with smaller player Shaw Communications Inc.’s Freedom Mobile, which surprised analysts last week when it reported 93,500 new wireless customers in the period ending Feb. 28.
Natale said there’s “no real material shift” from Freedom’s push to be the fourth wireless player in Alberta, British Columbia and Ontario, adding that Rogers has been competing against new entrants for 10 years.
“It’s not something that’s intimidating whatsoever,” he said. “The key is to continue to invest in next-generation capability and networks.”
Rogers’ wireless revenue grew 9 per cent to $2.2 billion. It changed the way it reports revenue to comply with IFRS 15, a new standard that requires telecoms to record device revenue upfront instead of spreading it out over a two-year contract that includes a subsidized smartphone. Its average revenue per user increased 3 per cent to $53.68 when compared to past results restated under the new rules.
The traditional cable division, however, posted relatively flat results. It added 26,000 internet subscribers, down from 33,000 last year and just shy of Bay Street’s consensus estimate of 30,000. But it lost fewer television subscribers than expected. It lost 12,000, half of what it lost last year and better than analysts’ predictions of 23,000 losses.
Executives noted the internet additions came amidst strong competition. Bell started to advertise fibre internet in Toronto with speeds that can now match Rogers, which enjoyed a competitive advantage while Bell spent billions on network upgrades.
But Rogers has yet to upgrade its television product to match its competitor’s internet protocol TV offering. Natale said its new IPTV product Ignite TV, which uses Comcast’s X1 platform, has completed its employee trial and is on track for a full customer launch later this year. The product is a “truly premium service” that Natale said is part of Rogers’ smart home strategy.
Shaw already launched a TV product using Comcast’s X1 product. In its latest results, Shaw said it hasn’t attracted as many customers as expected given the changing television market.
Rogers’ media division posted a strong quarter thanks to the Toronto Blue Jays, with adjusted earnings of $23 million up from a $30-million loss in the same period last year. Revenue increased 12 per cent on a higher distribution from Major League Baseball and higher Sportsnet subscription revenue.
Rogers will hold its annual general meeting in Toronto on Friday morning.