Rogers Communications’ Q2 profit up, CEO predicts ‘heightened’ wireless churn across sector to persist

The chief executive of Rogers Communications Inc. says it will likely take the better part of a year before Canada’s telecommunications sector sees a calming of the competitive intensity prompting many wireless customers to change carriers.

Speaking Wednesday on the company’s second-quarter earnings call, Rogers president and CEO Tony Staffieri acknowledged his company’s overall churn levels have been “heightened” in recent quarters and would probably remain so in the medium term.

Rogers’ monthly churn for net postpaid mobile subscribers — a measure of those who cancelled their service — was 1.07 per cent in its most recent quarter ending June 30, up from 0.87 per cent during the same period last year.

“Long term, as we look out beyond the next three to four quarters, our expectation is we will see churn levels likely decline, but we think it’ll be some time before we enter that space,” said Staffieri.

Rogers’ mobile phone average monthly revenue per user rose to $57.24, marking a 0.79-per-cent increase from $56.79 in the second quarter of the prior year.

Meanwhile, the company said its net increase in postpaid mobile phone subscribers totalled 112,000 for the three-month period, down 34 per cent from 170,000 net additions recorded in the same period last year.

Staffieri added the increased churn comes “against the backdrop of a continuing growing market,” with gross additions up across the telecom sector.

He also noted that the company’s premium Rogers Wireless brand has seen improved customer loyalty compared with its discount subsidiaries such as Fido and Chatr, commonly referred to as flankers, where churn has been higher.

“The overall combined churn, most of that is happening in the flanker category, quite frankly,” Staffieri said.

“What we are seeing is customers moving around in that space as they are more price conscious.”

He said some customers have also switched from postpaid to prepaid billing. Rogers reported a net increase of 50,000 prepaid mobile subscribers in its second quarter, up from a loss of five thousand for the same period last year.

With the back-to-school season around the corner, Staffieri said he expects a similar environment as last year when Canada’s “four robust competitors” jostled for new customers through promotional offers.

“Our expectation is it’s going to be competitive and at least on par with last year, in terms of pricing dynamics and promotional offers,” he said.

The competitive landscape in the sector shifted last year when Rogers closed its purchase of Shaw Communications. As part of that deal and in a bid to ease competition concerns, Shaw agreed to spin off Freedom Mobile in a sale to Quebecor Inc.’s Videotron, which has been working to expand its offerings.

On Wednesday, Rogers reported its second-quarter profit rose to $394 million from $109 million a year ago, in part due to lower restructuring and acquisition costs related to the Shaw merger.

The company said the profit amounted to 73 cents per diluted share for the quarter, up from 20 cents per diluted share in the same quarter last year.

Revenue totalled $5.09 billion, up from $5.05 billion a year earlier, helped by growth in its wireless and media businesses.

Rogers said wireless revenue totalled $2.47 billion in the quarter, up from $2.42 billion a year earlier, while media revenue rose to $736 million from $686 million a year ago.

On an adjusted basis, Rogers said it earned $1.16 per diluted share in its latest quarter, an increase from its adjusted profit of $1.02 per diluted share in the same quarter last year.

That result was in line with forecasts, as analysts on average had expected a profit of $1.16 cents per share, based on estimates compiled by LSEG Data & Analytics.

“With very minimal variances to our estimates and consensus, we view the results as largely neutral for the shares at current levels,” said RBC analyst Drew McReynolds in a note.

Rogers’ cable revenue totalled $1.96 billion in the second quarter, down from $2.01 billion a year ago.

The company said it is committed to achieving organic revenue growth for its cable business by the fourth quarter of this year.

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