Rogers Stock Soars to Record as Subscribers Roll in Under New CEOBy
Wireless additions come in at 93,000, estimate was for 77,000
Joe Natale affirms commitment to media, sports team ownership
Rogers Communications Inc. posted strong second-quarter earnings, setting the bar high for its new CEO to keep up performance and vindicating investors who have pushed the telecom’s stock to a record.
Rogers added 93,000 new wireless contract customers, beating the 77,000 that analysts on average had estimated. Chief Executive Officer Joe Natale took over part-way into the quarter and has repeatedly said the company needs to improve service to keep people from switching to other carriers, like BCE Inc. or Telus Corp.
Canaccord Genuity Corp. analyst Aravinda Galappatthige called the wireless numbers “outstanding,” while Barclays Plc analyst Phillip Huang said the quarter was “impressive.” Rogers gained 1.8 percent to C$65.18 at 11:29 a.m. in Toronto.
So far, the year has been good to the Toronto-based company, which increased its revenue forecast in January. Then it worked out a deal with Telus, Natale’s former employer, to let him start early. Natale has already increased the fees users pay if they go over their monthly data limits in a bid to encourage more people to upgrade their plans.
All three of Canada’s major wireless carriers have benefited over the past year from a wave of people who’ve never owned smartphones, mostly teenagers and senior citizens, entering the market. With the forecast boost and Natale’s presence bringing stability, Rogers shares have far outstripped its rivals, gaining 24 percent this year compared with to BCE’s 0.5 percent and Telus’ 4.9 percent.
The strong wireless number pushed earnings to C$1 a share, compared with the average estimate of 94 cents. Revenue was C$3.59 billion ($2.85 billion), in line with analysts’ estimates. Monthly churn, which Natale aims to get below 1 percent, was 1.1 percent, also in line with estimates.
The wireless results suggest the trend of new subscribers entering the market is continuing, Galappatthige said. Both Telus and BCE’s shares were up about 1 percent after Rogers’ results came out.
With the wireless business performing well, attention shifts to Natale’s plans for Rogers’ cable, internet and media businesses. The company is in the midst of rolling out Comcast Corp.’s X1 cable system and plans to launch it in 2018. Getting X1 out to users will stem the flow of people dropping traditional TV packages in favor of services like Netflix, Natale said in an interview.
“There’s been a sentiment out there that we’re in the ninth inning of the cable business, I think that’s the furthest thing from the truth,” he said. Instead, giving people the ability to search Netflix, other streaming services and traditional TV channels through the X1 system will strengthen Rogers’ presence in the market, Natale said.
The other major question for Natale is what he plans to do with Rogers’ sprawling media empire, which includes television stations, magazines, the Toronto Blue Jays Major League Baseball team and part-ownership of Toronto’s other major sports teams. At Telus, Natale and his leadership team focused on building out high-quality networks rather than amassing content.
In the interview, Natale said he was firmly committed to the sports teams and Rogers’ roster of media properties.
“Content is critically important and fundamental to our sector as a whole. Owning content is the real advantage to our approach versus renting content,” he said. “I think the appetite for sports content will be unabated.”
— With assistance by Kristine Owram