Revenue forecasts cut amid unlimited data craze

TORONTO The introduction of unlimited data plans may have been met with consumer fanfare earlier this year, but the reality of life without overage charges could mean significant financial pain ahead for Canada’s telecom giants, analysts say.

In what could be a sign of things to come for the sector, Rogers Communications Inc. on Wednesday cut its full-year revenue guidance and adjusted EBITDA forecasts, in part blaming the rapid adoption of the unlimited plans.

Rogers is now expecting between a one-per-cent increase and a one-percent decrease in revenue, down from the three- to five-per-cent revenue growth it had forecast previously. Adjusted EBITDA forecasts also fell to three to five per cent from seven to nine per cent.

“The downward adjustment primarily reflects faster-than-expected adoption of our new Rogers Infinite unlimited data plans and the related reduction in overage revenue, lower wireless equipment revenue resulting from the highly competitive environment,

They’re all going to feel the impact of the change. Rogers just may feel it faster this time.

and certain efficiencies recognized this year on capital expenditures,” the company said in a press release announcing its third-quarter results.

On Wednesday, Rogers’s Class B shares closed more than eight per cent down at $61, bringing the stock’s year-to-date losses to more than 12 per cent. Bell and Telus each saw declines of more than four per cent but both remain positive for the year.

Earlier this year, Rogers, BCE Inc. and Telus Corp. announced new plans offering customers unlimited data beginning at $75 per month. They could access 10GB of data at full speed and once they passed that plateau they could get extra access at lowered speeds instead of having to pay costly overage fees.

Rogers reported that customers are buying into these plans at three times the rate the company expected. Since the initial rollout, about one million have signed on.

Citi Research analyst Adam Ilkowitz said all three telcos will be hurt by the same headwind in the short-term. When customers switch to these plans, telcos lose out on the revenue they once generated in overage charges, which still make up five per cent of Rogers’s wireless revenue. In the third quarter alone, the company said it lost out on $50 million due to reduced overage charges.

Rogers, however, has more exposure to wireless than its two national competitors, Ilkowitz said.