Rogers CEO issues warning on growth
Rogers Communications Inc. chief executive Nadir Mohamed is resetting expectations for the country’s biggest wireless company and its investors, warning Wednesday that growth will continue to “moderate” owing to persistent competition across the telecom and media giant’s businesses.
Some were already at the exits. Shares in Rogers swooned as soon as trading started as the market reacted to the company’s first-quarter results. Rogers reported late Tuesday its operating profit fell 16 per cent from a year earlier while the company missed tempered expectations on earnings and revenue. By day’s end Wednesday, they had fallen 5.7 per cent to $36.81.
At the annual meeting in Toronto, Mohamed spoke plainly: “As I look to the balance of the year, I expect this competitive intensity to continue,” said the executive, who succeeded the firm’s founder, Ted Rogers, after the latter’s death in late 2008.
The marketplace Mohamed inherited has steadily become more hostile.
Chief mobile competitors BCEINC. and Telus Corp. have drawn even on multiple fronts, not least in landing Apple’s popular iphone, one of many sources of success for Rogers. New players such as Wind Mobile have also competed aggressively for market share in recent years, repricing down the $18-billion sector in the process.
After a slow start, it appears BCE is also now turning aggressively onto ramping up a new TV service, directly challenging Rogers’s cable franchise in Toronto and surrounding areas. Other centres where Rogers has cable services are up next.
“There’s a lot of pressure on the revenue side,” said Jeff Fan, analyst at Scotia Capital. “Our feeling is that they’ll do what they need to do to fall in the range of their guidance, albeit at the low end.”
The analyst believes the company will make $4.74 billion in earnings before interest, taxes and other expenses this year.
Still, Mohamed said, cost-management is now the “imperative.” Speaking to reporters after the meeting, he talked of improving customer service as a means of reducing costs. Happy customers don’t snarl phone lines and take up call-centre resources, he said. Discretionary spending is also coming down.
The executive avoided the biggest question of all — whether more job cuts are in line. “We’re focused on these cost initiatives and I don’t look at it from that perspective,” he said.
The company axed 300 positions, or about one per cent of its workforce, last quarter, resulting in a $64-million restructuring charge. Analysts suggest Rogers may resort to layoffs again to maintain industry-leading profit margins and continue with $1-billion share buyback program to keep the stock price buoyed.
“It is a stark reality for the business,” said one analyst said who asked for anonymity. “It’s a maturing business and one that’s facing new competition.”
Mohamed said the company will continue pouring hundreds of millions of dollars into network upgrades to its cable and wireless systems, and making investments in media.