Rogers survives double cohort
Fallout from end of three-year contracts has been negligible, quarterly results indicate
The country’s largest wireless carrier says the end of the three-year mobile phone contract in Canada has had a smaller-than-expected impact on its business.
Rogers Communications Inc. said it gained 24,000 net new wireless contract customers during the three months ended June 30, far more than the 6,000 analysts had predicted.
The country’s biggest wireless carriers — including Bell and Telus — were all expected to face tough new competition after June 3, when consumers would be eligible to break their three-year deals without penalty. But that doesn’t appear to have happened. “June 3rd has come and gone, and consumer awareness of the elimination of three-year contracts appears to have remained quite low,” analyst Phillip Huang at Barclays PLC wrote in a preview note on June 14.
Hardware promotions also heated up near the end of the quarter, Huang noted, citing deals such as $100 off the new iPhone 6 and or zero upfront fees for the iPhone 5S to customers who signed new contracts.
Rogers said wireless revenues, along with the number of subscribers, grew more quickly than in the previous quarter.
And wireless “churn” — the rate at which subscribers left — was only marginally higher than the previous year.
Compared to the previous quarter, churn was down, Rogers chief executive officer Guy Laurence told analysts on a conference call. “And more importantly, there wasn’t a significant spike after the start of the double cohort.”
Double cohort refers to the condition created by a Canadian government decision in 2013 to put an end to cancellation fees on contracts of more than two years. The new wireless code didn’t immediately apply to existing three-year contracts, which had been the industry norm up until then.
As of June 3, however, consumers still on three-year deals could switch early, the government said. Combined with contracts that were set to expire, the new rules created a “double cohort” of millions of sub- scribers who would be up for grabs.
Between 2.2 million and four million subscribers at the three largest carriers were still on three-year terms at the end of 2014, analyst Jeff Fan at Scotia Capital Inc. estimated in a January research note.
Laurence told analysts that he believed consumer awareness of the opportunity to cancel their three-year contracts was high but that the company had managed the transition well.
The new national code has done little to improve customer service or costs for consumers, Mohammed Halabi, chief executive officer of MyBillsAreHigh.com, said in an interview.
Most carriers have responded by charging customers more per month on the new two-year deals to make up the loss on the handsets, which are offered at a discount to attract customers, he said.
“The consumer has taken a big hit,” said Halabi, whose company analyzes customers’ cellphone usage and shops around for the best deal for them.
Business customers were very aware of the June 3 deadline, Halabi said, but only small businesses with 20 or fewer lines are eligible to break their three-year contracts’ penalty frees.
Rogers’ second-quarter earnings beat analysts’ estimates, the company reported Thursday. Profit excluding certain items was 80 cents a share, versus analysts estimates of 78 cents.
That was lower than the same quarter last year, when profit was 84 cents a share.
Wireless revenue grew 5.7 per cent to $1.9 billion from the same quarter last year, while media revenue grew 23 per cent to $582 million as Rogers benefited from fans watching the National Hockey League playoffs.
Total operating revenue grew 6 per cent to $3.4 billion.
In the first quarter, Rogers fell short of earnings estimates after increasing spending on promotions. With files from Star wire services