Rogers foresees big wireless demand as profit driver

Rogers Communications Inc. anticipates it will perform better than expected this year thanks to unrelenting demand for wireless data and smartphones, products that, alongside internet connections, continue to gain momentum over traditional cable.

The Toronto-based communications giant on Friday raised its financial targets to reflect ongoing strength in its wireless business, which added 124,000 postpaid subscribers and posted revenue growth of six per cent to $2.33 billion in the three months ended Sept. 30. Despite the summer launch of a new premium television platform, Ignite TV, revenue from Rogers’s cable division edged up just one per cent to $983 million in the same period. It lost 18,000 television subscribers, more than analysts predicted, but its internet additions topped expectations with 35,000 new subscribers.

On a conference call with analysts, chief executive Joe Natale said he was pleased with Rogers’s market share gains across its TV and internet footprint given aggressive competition from its main competitor, BCE Inc., in the backto-school season.

It’s still early days for Ignite TV, Natale said, and investors can expect extra advertising costs as the product rolls out. But Natale said Rogers is pleased with the initial results and believes in its long-term prospects given it brings in higher revenue per account and costs less to install. In the future, he said Rogers will phase out legacy TV in an effort to boost operating and capital efficiencies.

When it comes to wireless, Rogers added slightly fewer customers than consensus expectations of 132,000, but its churn rate of 1.09 per cent was the best in nine years. Natale focused on the reduced churn, the rate of customers that leave in any given period, noting that one of Rogers’s key priorities is improving customer experience.

“We are driving continuous improvement by fixing customer processes and addressing moments of truth,” he said.

Customer service is top of mind for the telecom industry as it prepares for a public inquiry into misleading and aggressive sales tactics. The Canadian Radio-television and Telecommunications Commission will hear from consumers and carriers alike at a hearing next week.

Overall, Rogers’s quarterly revenue grew three per cent to nearly $3.77 billion. Its media unit reported a five-per-cent drop in revenue as a result of the Toronto Blue Jays, but its operating margin rose 20 per cent due to cost cutting.

Rogers reported adjusted earnings before interest, taxes, depreciation and amortization up eight per cent to $1.62 billion. Its new guidance calls for annual adjusted EBITDA growth of seven to nine per cent.

Desjardins analyst Maher Yaghi described the new guidance as “industryleading ” in a note to clients Friday.