Eyes on future with Rogers shakeup
Guy Laurence’s exit as CEO sparks speculation about direction of company
Guy Laurence’s abrupt departure on Monday from the helm of Rogers Communications caught Bay Street off guard, especially given the company’s strong share-price performance and signs a turnaround is largely on track despite a profit hit from the windup of streaming service Shomi.
The move also raised questions about whether Canada’s secondlargest telecommunications company will stay the course of using sports and TV content to win customers or start shedding some of its media properties.
“The timing is never perfect with these things,” Rogers board chair Alan Horn said on a conference call, adding that Rogers was focused on the opportunity to secure the services of Joe Natale, the former CEO of Telus. Horn said the change at the top does not signal a shift in Rogers’ focus on improving customer service and attracting new wireless users.
Horn will handle Laurence’s roles as president and CEO until Natale takes over after a non-compete clause with Telus expires next summer. Rogers gave no explanation for Laurence’s departure, saying only that he had stepped down.
Canaccord Genuity analyst Aravinda Galappatthige said in a note to investors that there was a growing perception that Rogers was getting back on track, but on the flip side, “this may spur some speculation around a restructuring at Rogers, with potential spinoffs, etc.”
Ryan Bushell, a portfolio manager with Leon Frazer and Associates, which has about 2.5 per cent of its $1-billion portfolio invested in Rogers, speculated that Rogers could consider selling its sports-media assets, which are a small part of the company’s overall revenue but which could command a premium price. Rogers owns the Toronto Blue Jays and has half-ownership in the Maple Leafs and Raptors, along with BCE.
“Rogers has too many businesses,” said David Baskin, president and founder at Baskin Wealth Management in Toronto. His firm manages about $930 million, including shares of Rogers as well as competitors BCE and Telus.
“They need to clean up their balance sheet and their operations, maybe get rid of the magazines altogether.”
Bushell said he worries that some of the positive momentum at Rogers spurred by Laurence may suffer in the transition.
“I think he was a necessary change agent, but I would have liked him to stay on a while longer. I hope the momentum can continue.”
Laurence leaves on the back of record-high subscriber growth. During his tenure, he hammered home the need to improve customer service and simplify mobile phone and cable plans for consumers.
New products such as $5-a-day U.S. roaming helped differentiate Rogers’ wireless services from those offered by Telus and BCE Inc. In some ways, his work has paid off. Over the past two quarters, Rogers posted major wireless subscriber growth and stemmed churn — the percentage of customers who leave the service.
“I think this was more about personality — style rather than substance,” said John Stephenson of Stephenson and Company Capital Management, who added that Laurence’s operational track record and strategic vision over his roughly three-year tenure was “entirely defensible.”
The early morning announcement of the departure came just before Rogers announced third-quarter earnings showing profit was about 50-per-cent lower than during the same time last year, despite a slight increase in revenue.
Rogers said its net income for the quarter was $220 million, or 43 cents per share, down from $464 million, or 90 cents per share, mainly because of the previously announced shutdown of video streaming service Shomi. Analysts had estimated net income would be 89 cents per share.
Rogers said its wireless operation had its biggest revenue growth and post-paid customer additions since 2010, with 114,000 net additions.
Revenue for the quarter was $3.49 billion, in line with analyst estimates and up 3 per cent from last year’s $3.38 billion.
The only major division to see a decline in revenue was cable, which slipped to $865 million from $871 million.
The release of the third-quarter results came three days ahead of schedule. They had been expected before the opening of markets on Thursday.
Rogers’ shares, which gained about 15 per cent over Laurence’s tenure, closed flat at $54.21. With files from Bloomberg