Rogers Q4 Profit Increases But Wireless Growth Slows

by Gaurav Kheterpal on February 23, 2012

There’s little doubt that Rogers Wireless is the most formidable player in Canada’s wireless arena. It’s the standout leader in LTE and offers unparalleled services such as One Number. However, none of that implies that Rogers is immune to competition.

In fact, a quick look at Rogers Q4 results indicates that Canada’s largest carrier is now facing the heat from all wireless competitors – big and small. Though Rogers’ fourth-quarter earnings rose 8.3%, its lackluster performance in the smartphone segment is definitely a cause for concern.

First, a quick look at Rogers Q4 financials. The company’s operating revenue grew to $3.18 billion from $3.14 billion. Net income grew eight per cent to $327 million, or 61 cents per diluted share, from $302 million, or 50 cents per share. Adjusted earnings were $372 million or 70 cents per share, up from $338 million or 60 cents per share in the year earlier. Buoyed by its strong financial performance, Rogers announced that it would increase its quarterly dividend by 11% and launch a $1 billion share buyback program.

“During the fourth quarter we sold a record number of new wireless smartphones and increased the number of total cable service unit net additions by 59% versus last year in the face of intense competition, while at the same time we held our expenditures in solid check enabling us to continue to deliver healthy margins,” said Nadir Mohamed, President and Chief Executive Officer of Rogers Communications Inc. “We not only continued our growth during 2011, but we also met our adjusted operating profit and free cash flow targets which enabled the returning of more than $1.9 billion cash to shareholders through a combination of increased dividends and continued share buybacks, while at the same time further strengthening our already healthy balance sheet.”

Though Rogers’ cable and media businesses grew by 3%, the company’s wireless performance can be summed up in one word – average. Although quarterly wireless revenue was $1,789.5 million, up 2% year over year, the adjusted operating profit was $656.6 million, down 5% year over year. Rogers activated a record high 791,000 smartphones, up 24.6% year over year.

To put things in perspective, Rogers added 42,000 postpaid smartphone subscribers in the last quarter. In contrast, BCE added 131,986 subscribers last quarter and Telus gained 148,000. In fact, Rogers net postpaid additions fell well below analyst’s expectation of the 85,000 mark. The company’s ARPU was $58.82, down from $61.31 a year earlier and less than the analyst estimate of $59.20.

Although Rogers attributes slump to high upfront costs tied to subsidizing activations and lower average monthly bills for its more valuable postpaid subscribers, it’s a worrying sign that Rogers is no longer unchallenged in the fight for top-end mobile users.

As the Globe suggests, smartphone users represent a key segment for several reasons. First, they are more stable clients and secondly, their monthly bills are substantially higher as compared to feature phone users. Rogers says it’s revisiting its upgrade strategy and working on a plan to ensure retention of high-end consumers.

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Written by: Gaurav Kheterpal. www.digitcom.ca. Follow TheTelecomBlog.comby:RSS,TwitterFacebook, or YouTube.

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Rogers Quarterly Profit Drops Again As Cable, Wireless Slip — TheTelecomBlog.com
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