Rogers Q3 Profit Slumps 24%

by Gaurav Kheterpal on October 27, 2010

Rogers Communications Inc. Q3 profit slumped 24% in the third quarter as the company managed fewer subscriber additions and lower average revenue per user in the midst of a highly competitive wireless market. Wireless network revenue grew by 4% and overall revenue increased slightly by 3% to $3.1 billion. Rogers said it added a record 529,000 new smartphones – a third of which represented customers new to Rogers’ wireless services.

In Q2, Rogers managed to beat analyst expectations and reported a 21% jump in quarterly profits. Clearly, the new entrants have started to make their presence felt in the last quarter and Canada’s largest provider of wireless voice and data communications services is now feeling the heat of increased competition.

Though Chief executive Nadir Mohamed played down the role of new wireless players as “fairly limited impact”, it would be foolish to write them off so early.

Net income for Rogers Communications Inc. weakened to $370 million or 64 cents per share in the three month period. That’s a significant decline from $485 million, or 79 cents per share, at the same time last year. On an adjusted basis, earnings fell 6% to $476 million or 83 cents per share. Though it managed to beat the analyst expectations of 79 cents per share, there’s no way that Rogers can sit back and relax on its current laurels as the third-quarter represented the seventh straight period in which sales growth failed to exceed five per cent.

IMO, the most worrying aspect for Rogers would be the dip in net new user addition. The company managed to add 125,000 new postpaid customers in the last quarter, versus 167,000 in the same quarter last year. The total postpaid and prepaid wireless net subscriber additions improved 1% mainly due to increased prepaid subscriber additions thanks to the company’s new discount brand “chatr”, offset by an increase in the level of postpaid churn associated with competition from new entrants.

The carrier’s ARPU dipped as well – $64.80 a month on wireless services in the third quarter of 2010, down 2.5% from $66.45 in the same quarter of 2009. Interestingly, smartphone demand hurt Rogers’ profit margins for the quarter as it subsidizes the sale of these devices.

The silver lining for Rogers is that its wireless division did continue to grow despite increased competition. The company also benefited from a major internal reorganization during the year to reduce costs.

A quick peek at these figures makes me wonder if the Chatr experiment is going as per plans. Will the LTE launch help Rogers ride this storm and reinforce its position as the dominant player in Canada’s wireless industry? Only time will tell.

Did you like this post? TheTelecomBlog.com publishes daily news, editorial, thoughts, and controversial opinion – you can subscribe by: RSS (click here), or email (click here).

Written by: Gaurav Kheterpal. www.digitcom.ca >. Follow TheTelecomBlog.com > by: RSS>, Twitter >, Identi.ca >, or Friendfeed >

{ 2 comments… read them below or add one }

Jordan Richardson October 27, 2010 at 4:30 am

According to the Wall Street Journal, Rogers had its best quarter yet for smart phone activations (529,000 additional smart phone activations). 33% of those activations were new customers, while the majority were upgrading customers from previous service plans.

With the demand for smart phones comes a fall in profit margins, so it’s sort of a good news/bad news scenario that we’ll probably see come out of all of the major players. Equipment subsidies are up $70 million, for instance, and that sucks away at the profits considerably.

So what this is really about is the cost it takes to sell smart phones more than it is a lack of customers – in fact, Rogers even gained over expectations in its prepaid line (86,000 new subscribers).

I think what this means is that we’ll start to see some “adjustments” to smart phone plans as these companies try to figure out how to increase profit margins while switching people over to the more expensive phones. They’ll have to cut on operating costs and subsidies, so we could see the prices going up at the main retailers soon. Look for some of those juicy hidden fees to cover the bases, too.

David Waterloo November 28, 2011 at 7:54 pm

This might explain why rogers began aggressively billing for Gigabyte overages late last year. There is no way to dispute these overages, there is no cap any more, so one can easily pay double their entire package cost in additional overages. I had less than 5 % of my advertised speeds from 5PM to 3 AM (approx.) every night for 2 months because of Rogers admitted node congestion. That’s 1 mbps or less (slower than Rogers least expensive package) for Extreme Plus in North Waterloo. Hours of calls to tech support, 2 weeks of calls and tests before they stopped blaming my computers and lines, and admitted it was a Rogers issue. This despite good Rogers signal tests, or line tests, to the modem every time. Rogers needs to upgrade its network prior to adding new subscribers, especially in apartment building, and student heavy areas like mine.

There is no agency that ensure speeds to ISP subscribers, no agency that handles the complaints. Rogers sure doesnt seem to care. They no there is no fair competition for high speed internet here. Rogers resellers of the same slow, poorly maintained, congested network, is not fair competition. We consumers need protection from this monopoly.

Previous post:

Next post: