Rogers reports Q4 results
TORONTO — Calling the fourth quarter of 2015 "the most fiercely competitive quarter probably in the history of Canadian mobile," Rogers Communications CEO Guy Laurence talked up his company’s wireless and Internet success last year and discussed strategy for its TV and traditional media businesses during separate conference calls with financial analysts and media on Wednesday.
Overall consolidated revenue increased 3% for Rogers in Q4 2015, largely driven by 4% growth in its wireless business, which represents approximately 60% of the company’s total revenue and adjusted operating profit. Rogers wireless postpaid net additions increased 89,000 year over year, with 31,000 wireless postpaid additions in the fourth quarter alone. Laurence cited the popularity of Rogers’s Share Everything plans as a key contributor to the increase in subscriber numbers.
Internet net additions were also up for Rogers, with 16,000 more Internet subscribers added in Q4 2015. Internet revenue grew 10% in the fourth quarter, and Laurence called the Internet segment “a particular bright spot” in Rogers’s residential business. Customer uptake of the Rogers Ignite broadband service was good in 2015, according to Laurence. In addition, Rogers began to roll out its new gigabit Internet service, which is now available in 130,000 homes, and the company expects to complete the roll-out across its entire cable footprint of 4.1 million homes passed by the end of the year, Laurence said.
“Looking back on 2015, we established good momentum in wireless and Internet, the major growth engines of our business. We successfully repositioned (Rogers) Media to capitalize on sports…and made meaningful progress on customer experience,” he said during the call with analysts. “Looking ahead to 2016, we will address the core challenges facing both our TV and traditional media businesses. We will continue to tackle customer experience and begin to drive growth in enterprise.”
Rogers’s chief financial officer, Tony Staffieri, said during the analyst call that the company is coming out of a period of “elevated capital spending” following substantial investments in its networks and products. In addition, a strategic partnership with Vodafone has been contributing to ongoing technology cost savings, Staffieri said.
He went on to say that Rogers’s investments in its LTE network will start to taper off, as its LTE deployment now covers about 93% of the Canadian population.
During a conference call with media, Laurence explained further about Rogers’s multi-year agreement with Vodafone, in which the two companies jointly procure network and IT equipment. “It saves us some money, but then we reuse that money to invest in other areas in some cases, so it’s not a net saving to the company,” he explained. “It’s basically to give us economies of scale that we wouldn’t enjoy as a company on a standalone basis. Despite the fact that we’re quite big in Canada, we’re actually not that big on the global stage unless you combine with somebody like a Vodafone.” (Vodafone and its subsidiaries have over 440 million wireless subscribers around the world.)
Vodafone is also a strategic partner on roaming agreements, Laurence said, adding that the UK-based company (and his former employer) assisted Rogers as it put together its new Roam Like Home offering that has now been extended to more than 100 roaming destinations worldwide.
“If you think about how much work it takes to build, run and upgrade a national mobile network, trust me, it’s a lot more work than making a cup of coffee.” – Guy Laurence, Rogers
Despite recent indications from major players such as Apple that the market for wireless handsets may be plateauing at the moment, Laurence said demand for content will continue to drive wireless growth and profits. “For customers, the underlying demand for content and for Internet and data and so on and so forth, continues to increase,” he said. “The good news is that the unit price of that…the price of gigabytes is coming down over the years as we become more efficient, but your actual demand for the content is going up.”
With the news that Rogers is increasing some retail rates by $5 a month, Laurence was asked why, if wireless is such a “fiercely competitive” market and the company is achieving efficiencies and savings in its network investments, such as those provided by its partnership with Vodafone, are prices rising?
“I think we need to keep the price increases a little bit in perspective,” Laurence said. “It costs about $2.43 to use a mobile phone each day in Canada. I got a latte this morning that cost $3.62, 50% more expensive. If you think about how much work it takes to build, run and upgrade a national mobile network, trust me, it’s a lot more work than making a cup of coffee.”
Returning to Rogers’s financial results, the company’s cable business experienced a 2% decrease in revenue in Q4 2015, primarily due to the continued decline in revenue of its television and home phone segments. However, Rogers Media enjoyed a 3% increase in revenue in the fourth quarter, mostly thanks to growth at Sportsnet and the success of the Toronto Blue Jays last year.
On the downside, Rogers Media’s operating profit was negatively impacted by lower advertising revenues in the company’s traditional media business, Laurence said during the financial analyst call.
“It’s not a secret that traditional media companies around the world are struggling with softening advertising revenues,” Laurence said. “We’re facing the same pressure and that’s why we announced some job cuts primarily affecting conventional TV, radio, publishing and back-office divisions. These decisions are never easy, but they are right for the business long term.”
When asked how the introduction of pick-and-pay may soon impact Rogers’s cable business, Laurence said he expects customers to experiment with the new pick-and-pay options, but at the end of the day, Rogers has a lot of content that he thinks customers will be willing to pay for. He added that the new TV packages may be attractive enough to bring cord-cutters back to the fold.
“We may see the return of some people who left cable TV because they’re able to pick and pay genres and content that they desire,” Laurence said.
During the conference call with media, the CEO added Rogers has done several things to try to make its cable offering more attractive overall to customers, such as improving its user interface and navigator, and introducing 4K TV and gigabit service.
Nobody knows if pick-and-pay will bring cord cutters back to cable TV, but Laurence said he has “a gut feeling” that some people will consider having TV again, once they see the options available.
