Rogers Profit Meets Estimates Amid Turnaround PlanChristina Pellegrini and Gerrit De Vynck
Rogers Communications Inc., Canada’s largest wireless carrier by subscribers, met analysts’ profit and sales estimates as the company initiated a turnaround plan to try to return to growth.
Second-quarter earnings fell to 84 Canadian cents a share, excluding some items, matching the average of analyst estimates. Revenue was little changed at C$3.21 billion, the Toronto-based company said today in a statement. Analysts had projected C$3.21 billion ($3 billion), according to the average of estimates compiled by Bloomberg.
Chief Executive Officer Guy Laurence, who took over in December, announced an effort two months ago to create long-term value by cutting costs and improving service in the face of mounting customer dissatisfaction. For now, he has said he’s more focused on boosting revenue than reversing the trend of trailing subscriber growth. The wireless operator is also confronting the threat of new competition as Quebecor Inc. aims to become the fourth national carrier.
“The CEO is still fairly new and we’ve seen some restructuring and new strategies, but it’ll likely take some time before we see any real changes there,” Troy Crandall, a Montreal-based analyst at MacDougall, MacDougall & MacTier Inc., said in an interview before the earnings statement.
The restructuring plan, including cuts to management positions, is expected to be completed by September, Laurence said on a conference call with reporters.
Rogers signed up fewer long-term customers as Laurence shunned discount promotions. Still, the company made more money from each user, on average, than analysts projected.
Rogers added 38,000 wireless contract customers in the second quarter, compared with the 43,000 estimated by seven analysts surveyed by Bloomberg. Average revenue per contract customer was C$66.40 a month, compared with the C$64.93 expected by analysts.
“Rogers’ decision not to pursue aggressive wireless promotions since the start of 2014 is clearly having an impact,” Dvai Ghose, a Toronto-based analyst with Canaccord Genuity Group Inc., wrote today in a note to clients. “All in all we see some signs of progress.”
The bulk of revenue growth per customer came from users jumping to bigger data plans, said Anthony Staffieri, the company’s chief financial officer.
“Pricing had a smaller impact, and it’s really the migration to higher buckets that’s driving the improvements you’re seeing there,” he said on a separate conference call with analysts.
Rogers rose 1.1 percent to C$42.88 at the close in Toronto. The shares have fallen 11 percent this year, the worst performance among Canadian telecommunications companies. The industry has gained the least among 10 on the benchmark Standard & Poor’s TSX/Composite Index, missing a rally in Canadian stocks.
Laurence said the poor performance was because of “nervousness in the marketplace” as investors weigh the potential of a fourth carrier. He questioned the government’s push for a bigger competitor, saying that in eight provinces, there are already four wireless companies competing for business.
“The government seems to continue to be very focused on having a fourth facilities-based player. They’re entitled to their opinion,” Laurence said during the conference call with analysts. “I’m not sure it’s the wisest strategy.”
Rogers reported second-quarter net income of C$405 million, or 76 Canadian cents a share, down from C$532 million, or 93 Canadian cents, a year ago.
The company is the first Canadian telecommunications provider to report second-quarter earnings, with rivals Telus Corp. and BCE Inc. both planning to release results on Aug. 7.
Both have been outpacing Rogers in subscriber additions as Laurence reduces promotions. In the first quarter, Rogers drew 2,000 new contract customers, compared with 33,964 for BCE and 48,000 for Telus.