Rogers profits drop 17 per cent amid fierce competition

Telecom’s revenue growth beats projections despite investment in customer retention, NHL broadcasts

Spending to retain wireless customers, along with the timing of NHL programming and production costs contributed to a 17-per-cent drop in first-quarter income at Rogers Communications Inc., the telecom and media giant said Monday.

Revenue growth at the Toronto-based company, however, came in ahead of forecast and Rogers shares were flat in extended New York trading at $34.10 (U.S.).

“We made planned strategic investments to retain high-value customers ahead of the conclusion of the industry-wide shift to two-year contracts this sum- mer — our underlying adjusted operating profit growth was otherwise solid,” said chief executive Guy Laurence.

Rogers said net income dropped to $255 million (Canadian) or 53 cents a share, from $305 million or 66 cents a year ago — trailing the average profit estimate of analysts by 10 cents. Revenue for the three months ended March 31 rose to $3.18 billion from a year-ago level of $3.02 billion, topping expectations.

The profit decline follows a regulator’s ruling that ended 30-day notice periods before cancellation of telecom service contracts, a change that lowered cable revenue by $3 million.

As well, Laurence said production costs ramped up in advance of the NHL play- offs and will pay off in subsequent quarters, adding that viewership of NHL properties is ahead modestly while Rogers’ acquisition of NHL licensing rights added $106 million in revenue. The gain was partially offset by continued softness in conventional broadcast TV and print advertising.

The company said spending to retain wireless customers in advance of a socalled double cohort in wireless contracts and the seasonality of NHL costs were key contributors to a 3-per-cent yearover-year decline in adjusted operating profit.

Spending on retaining customers rose 32 per cent from a year earlier, mostly to subsidize expensive new smartphones to entice customers to sign new contracts.

The move follows expiration of threeyear contract terms in the quarter as a result of new federal telecom rules.

Rogers lost 26,000 wireless customers on long-term contracts during the quarter, compared with a gain of 2,000 a year earlier. The company was projected to lose 21,000 contract customers, according to the average estimate of seven analysts surveyed by Bloomberg.

Average revenue per contract customer was $66.21, compared with an average estimate of $66.41.

Laurence has tried to focus the company on its most valuable wireless customers, offering special roaming rates and access to exclusive hockey content.