By Ahmad Hathout
Rogers said Thursday it has entered into an agreement to sell to a “leading global financial investor” a minority equity stake in a newly formed subsidiary that will include parts of its wireless traffic transport network from one region of the country.
The minority stakeholder will get paid periodic distributions based on the net income made by that subsidiary. Wholesale fees to use the network will maintain it, while consumer use of the network, which Rogers CFO Glenn Brandt said is in the range of 40 to 50 per cent growth per year, will ensure distribution stability.
The investment, worth $7 billion, is expected to help the cable giant reduce debt – including interest obligations in the hundreds of millions on that $7 billion – and therefore free up cash to plow into growing its sprawling 5G network.
When asked whether Rogers has the option to buy back the equity, Brandt said on a third quarter conference call Thursday: “We will have full control over how long this investment remains in place and we’ll determine that in the fullness of time with the needs of our balance sheet, yes.”
The cable giant has, in the meantime, been selling off some of its non-core assets, including in real estate, to pay down its debt following the purchase of Shaw Communications, completed in the spring of last year. Late last year, it agreed to sell all of its shares in Cogeco to pension fund Caisse de dépôt et placement du Québec.
Earlier this year, the cable giant made another splash by purchasing the rights to the brands and trademarks of Warner Bros. Discovery and NBCUniversal. And more recently, it purchased Bell’s stake in Toronto sports empire Maple Leaf Sports & Entertainment (MLSE) for $4.7 billion.
Also Thursday, the federal government announced its plan to pause population growth in the short term, which includes controlled targets for temporary residents, specifically international students and foreign workers, and permanent residents.
While the increased population influx, according to the government, put pressure on housing, infrastructure and social services, it was seen as a boon for the service providers because it meant another opportunity to grow their subscriber bases.
“You look at the foreign students, our estimate … that category is down in the third quarter [by] 40 per cent year on year; foreign temporary workers is down 20 to 25 per cent,” Rogers CEO Tony Staffieri said Thursday.
“But what you see in our results for the third quarter is that we execute across all segments of the market and perform extremely well,” he added. “Our estimate is that we once again have leading market share in the third quarter in both postpaid and total mobile phones. And so that’s really attributed to our focus on the Rogers premium brand.”
Rogers said the vast majority of its net new subscribers are on that Rogers premium brand, which includes access to its 5G network. That has been attributed in part to what Staffieri said is successful upselling from prepaid brands including Chatr, which Staffieri said has been able to compete with regional price competitor Videotron on average revenue per user (ARPU).
That said, on postpaid, the cable giant added 459,000 gross subscribers, down by 97,000 year-over-year. Net additions were down by 124,000 over the year, with the company adding 101,000 for a total base of 10.7 million, which was up by 367,000 over the year. Postpaid churn was also up slightly to 1.12 per cent compared to the 1.08 per cent it had in the same period last year.
On prepaid, the company added 185,000 gross subscriber, down by 78,000 over the year. Net additions were 93,000 in the quarter, up by 57,000 compared to the equivalent quarter. The total base by quarter-end was 1.16 million, down by 117,000 year-over-year. Prepaid churn was down dramatically, to 2.8 per cent compared to six per cent in the same period last year.
Staffieri has said the prepaid segment is the gateway to getting people on the premium Rogers brand, so keeping customers in makes it easier to facilitate that.
Monthly mobile phone ARPU was down 26 cents to $58.57 for the quarter.
On internet, Rogers added 33,000 new subscribers, an increase of 15,000 compared to the same period last year. But the total base fell by 55,000 over the year to 4.25 million.
On video, net losses were 39,000 in the quarter compared to a gain of 23,000 last year. The total video base was also down by 103,000 to 2.65 million.
Landline net losses were lower by 7,000 to 29,000 this quarter, with the total base declining by 114,000 to 1.54 million.
Home monitoring net additions were 19,000 in the quarter, up by 21,000 over the year for a total base of 120,000 – which is 30,000 better than the same period last year.
Wireless revenue was up one per cent to $2.6 billion, cable revenue down by one per cent to $1.97 billion, and media revenue up 11 per cent to $653 million. Total service revenue was up one per cent to roughly $4.6 billion.
In total, Rogers saw revenue increase by one per cent year over year to $5.1 billion, with higher net income of $526 million – an increase by $625 million after suffering a loss of $422 million in the same quarter.
