TORONTO – A weak advertising market combined with restructuring costs at Rogers Communications helped to drive down first quarter profits by 3%, the company announced late Monday.
Operating revenue for the period ended March 31, 2016 totalled $3.23 billion, up 2% from $3.18 billion year-over-year, but net income dropped to $248 million from $255 million in Q1 2015. On an adjusted basis, net income fell 4% from $275 million to $263 million, primarily as a result of higher depreciation and amortization and lower adjusted operating profit, partially offset by lower income taxes. Net income this quarter was also impacted by higher restructuring costs.
The 2% increase in consolidated revenue reflected revenue growth of 5% in Wireless and 2% in Business Solutions, and decreases of 2% in Cable and 3% in Media. Wireless revenue increased as a result of higher network revenue from a higher subscriber base and the continued adoption of higher-postpaid-ARPA-generating 'Rogers' Share Everything’ plans and increased device revenue. Cable revenue decreased due to the continued decline in Television and Phone revenue, partially offset by continued Internet revenue growth. Media revenue decreased primarily due to continued softness in conventional broadcast television, radio, and print advertising, partially offset by growth in sports-related revenue.
Free cash flow decreased 17% to $220 million from $266 million last year, which the company said relates to the timing of network investments and cash tax payments. Rogers confirmed that it is on track to deliver on its guidance targets for additions to property, plant and equipment and free cash flow for 2016.
Rogers reported 14,000 Wireless net postpaid additions this quarter, an improvement of 40,000 over the same period last year, and said that it spent more this quarter to get the “high-value customers” it wants to help drive further improvements in churn and lifetime value.
The company ended the quarter with 8.29 million wireless postpaid customers and 1.58 million prepaid customers, up 146,000 and 247,000, respectively. On the TV side, Rogers lost 15,000 cable customers to fall to 1.87 million; added 23,000 Internet customers to sit at 2.06 million broadband subs; and lost 10,000 home phone customers and now has 1.08 million of those households.
"We posted our best first-quarter Wireless postpaid churn in over five years thanks to the quality of our networks, the value of our offerings, and our improvements to the customer experience," said president and CEO Guy Laurence, in the earnings’ news release. "Overall, we delivered another quarter of revenue growth, along with continued improvements in key subscriber metrics, despite an intensely competitive quarter. With momentum in Wireless, continued growth in Internet, and a clear path forward for our TV and media businesses, we're well positioned to achieve our 2016 financial guidance."
