It’s becoming a familiar tale for Canada’s largest communication company. In February, though Rogers’ fourth-quarter earnings rose, its lackluster performance in the smartphone segment emerged as major cause for concern.
And not much has changed since then – Rogers yesterday reported that its latest quarterly profit dropped by 16 percent as rising competition hurt its cable and wireless divisions. The company fell well short of analyst expectations.
Rogers’ adjusted profit came in at $356 million, down from $423 million in the same quarter last year. Revenue was lower at $2.95 billion compared with $2.99 billion in the same period last year. Analysts had estimated revenue of $3.05 billion for the first quarter of fiscal 2012. Adjusted diluted earnings per share for Rogers were down to 67 cents versus 76 cents on a YoY basis.
“Our performance in the first quarter was highlighted by strong postpaid wireless smartphone sales and customer retention metrics, as well as continued solid margins in both our wireless and cable businesses,” said Nadir Mohamed, President and Chief Executive Officer of Rogers Communications Inc. “Despite highly competitive markets, particularly impacting both the wireless and cable portions of our business, we continued to leverage our technology leadership to deliver new and innovative products and services while at the same time taking decisive action during the quarter to drive operational efficiencies.”
Though the carrier claims to have activated 35 per cent more iPhone customers, its overall performance in the wireless segment has been ordinary. Postpaid wireless net subscriber additions for the quarter were 47,000, compared with 45,000 in the same quarter of 2011. Rogers says the cost of subsidizing those devices impacted its revenue. The carrier’s ARPU was down 2.3 per cent to $57.65 in the quarter as a large number of customers are now opting for basic data plans. Roaming revenue went down due to the introduction of outbound data roaming packages. The wireless division posted an operating profit of $717-million, down 9 per cent from a year ago.
Rogers’ cable division suffered badly as well – losing almost 7,000 customers in the quarter. Though the company says it’s due to a “seasonally slow and highly competitive quarter”, there’s no doubt that the cut-throat competition from arch rivals – Telus and Shaw is hurting Canada’s largest cable company. Rogers’ cable division posted a $354-million operating profit for the quarter, down 10 per cent from a year ago. Revenue increased 1 per cent.
In a strategic move to cut costs, the company closed its video rental business last week and laid off almost 300 employees. Rogers is also planning to trim its professional services and outsource some of its IT work.