Price war had some casualties
Glitch during December data sale affected Rogers sales, CEO says
TORONTO — A technical glitch that caused delays and alienated some Rogers Communications Inc. subscribers lured some customers to its competitors during a major pre-Christmas pricing war, the company said Thursday.
As a result, Rogers reported 72,000 net additions for the fourth quarter — still enough to bring the annual net additions for Rogers to 354,000, the best in years — but not enough to meet analyst preannouncement estimates of about 100,000 new additions.
The telecom giant started a competitive pricing battle just before Christmas when it advertised a limited-time offer of 10 gigabytes of data for $60 per month, with certain conditions. Its major rivals Bell and Telus followed suit. Customers waited in long lines in stores and complained of hourslong wait times when calling customer service as a result.
“Clearly, execution for us was a challenge,” Rogers chief executive Joe Natale told analyts Thursday in a conference call to discuss the company’s fourth-quarter results and 2018 outlook.
He said Rogers experienced a technical problem with its price-adjustment system — limiting its ability to sign up customers and resulting in some prospective customers turning to its competitors.
“I do believe it’s an isolated incident ... but we’ve found the root cause, corrected it and it’s been isolated and behind us.”
He said the whole organization — from the call centre, to the stores, others in the field and management — had rallied to face the crisis and found “all sorts of clever work-arounds” that will make Rogers stronger and better.
But Natale also estimated that the technical problems during a seasonally important period had cost Rogers about 35,000 net additions to its subscriber base.
He was asked if the December promotion — which Telus and Bell eventually matched — was sparked by a very similar deal introduced a few weeks earlier by Shaw’s Freedom Mobile.
“The promotional activity in Q4 had nothing to do with any one of our competitors ... full stop,” Natale said.
He added that the impact from Freedom “is very small. At the margin. Non-material. Not of consequence overall ... And there’s absolutely zero concern from the board, from management, about that impact, whatsoever.”
Analyst Drew McReynolds of RBC Dominion Securities wrote in a post-call note that he believed that company had normalized after stumbling on the short-lived promotion.
“Bigger picture — we believe Rogers’ Q4/17 results and commentary are consistent with our working assumption that Shaw will gain incremental wireless traction in 2018, but that Shaw’s impact will be manageable for the incumbents.”
Natale said Rogers has a clear plan “for sustained financial growth, along with strategic capital investments in our core business.”
He said the company’s dividend — 48 cents per share quarterly, the same as it has been since early 2015 — will be increased when the time is right but didn’t indicate when that would happen.
Natale said capital spending is the No. 1 priority for investing its free cash flow.
The company’s key priorities include investments in upgrading its wireless networks to fifthgeneration technology, bidding on spectrum licences at a government auction, and rolling out the next generation of home TV and internet technology on a neighbourhood-by-neighbourhood basis, he said.
He and chief financial officer Anthony Staffieri said there are no plans to sell the Toronto Blue Jays — addressing speculation that arose last month.
Rogers said earlier Thursday that its net income for the fourth quarter was $419 million and amounted to 81 cents per share for the period ended Dec. 31.
That compared with a loss of $9 million or two cents per share a year ago when it was hit by a large, one-time charge after it shut down video-streaming service Shomi.
On an adjusted basis, Rogers said it earned $455 million or 88 cents per share in its latest quarter compared with an adjusted profit of $382 million or 74 cents per share a year ago.
Revenue totalled $3.63 billion, up from $3.51 billion, boosted by improved wireless revenue due to subscriber growth and a greater number of customers on higherrate plans.
Analysts on average had expected $3.64 billion in revenue for the quarter and an adjusted profit of 86 cents per share, according to Thomson Reuters.