Rogers reports strong earnings despite loss of net profit

Better-than-expected wireless and Internet subscriber additions helped Rogers Communications top adjusted earnings forecasts in its fourth quarter, although a charge for the write down of an Internet TV project wiped out net profit.

“We maintained robust wireless revenue growth, underpinned by strong subscriber metrics and translated this to healthy adjusted operating profit,” said Rogers board chair Alan Horn, who is serving as interim CEO until former Telus chief Joe Natale assumes the role in July.

“Internet results showed sustained strength as Rogers offers customers the fastest widely available Internet speeds in our marketplace.”

Rogers topped analyst expectations with 93,000 net, postpaid wireless subscriber additions in the fourth quarter ended Dec. 31, up 62,000 year-on-year and continuing a trend that has also seen rivals beat wireless growth outlooks.

On a conference call with analysts Thursday, Horn said the proliferation of devices and a move “up the bandwidth value chain” as more customers choose to opt for premium voice and data bundles are key drivers behind the growth in wireless and Internet subscribers at Rogers and across the industry over the past few quarters.

Rogers’s overall revenue in the quarter increased 2 per cent year-over-year to $3.51 billion on wireless service revenue growth of 6 per cent. Postpaid wireless customers shelled out $7.83 more per month versus a year ago, as the company expanded its use of data plans that can be shared across devices and by multiple users.

Chief financial officer Tony Staffieri said the surge would likely extend into 2017 and, combined with people paying up for faster Internet service, will lead to the 3- to 5-per-cent revenue growth rate.

“You have more devices, more family members coming in,” Staffieri said.

Teenagers and senior citizens, who might not have had contract phone plans in the past, are now more likely to have them and spend more money on bigger data plans, he said.

Cable revenue increased marginally as Internet growth was largely offset by a decline in TV customers.

Rogers added 30,000 Internet and 4,000 landline phone accounts, but lost 13,000 television subscribers in the quarter.

Media revenue decreased as a result of fewer post-season Toronto Blue Jays games compared to last year, lower overall advertising revenue and lower circulation revenue within Rogers Publishing.

Rogers in September said it would cut magazine print editions and sell some publications as it accelerates a shift to new digital products.

The company said it expects stable operating margins in cable and me- dia, with cable even proffering the prospect for margin improvement once a Comcast next-generation TV delivery platform is rolled out to customers next year.

During the quarter, Rogers announced a long-term agreement with the Philadelphia-based cable giant to bring its X1 IPTV offering to Rogers customers, leading to a discontinued investment in development of Rogers’ own product.

Horn said the deal will lead to a better customer offering, while presenting minimal implementation risk since the off-the-shelf platform has been successfully deployed in various enterprises.

Rogers’s abandoned in-house IPTV investment led to a $9-million net loss in the fourth quarter on a $484million one-time expense.

“You have more devices, more family members coming in.” TONY STAFFIERI ROGERS CHIEF FINANCIAL OFFICER

Excluding the writedown, Rogers had $382 million of adjusted earnings — up from $331 million in the fourth quarter of 2015.

The net loss per share amounted to two cents, down from a profit of $299 million, or 58 cents per share, in the fourth quarter of 2015 — while adjusted earnings were 74 cents per share, up from 64 cents per share a year earlier.

Analysts had estimated 71 cents per share of adjusted earnings before items.

Toronto-based Rogers, which derives the bulk of its revenue from wireless and cable services, offered an upbeat outlook for 2017 but said it would stand pat on its dividend payout as it focuses on debt reduction and increasing cash flow.

“Good subscriber momentum going into 2017,” said Desjardins analyst Maher Yaghi in a note to investors. “Time to translate this into earnings.”