However, people are starting to return to stores and advertisers are coming back
TORONTO — Rogers Communications this morning reported second quarter 2020 results which reflected a full-quarter impact of the Covid-19 economic shutdown. (Expect Bell Canada, Telus and Quebecor to report similar impacts when they file Q2 results in the coming days.)
RCI’s revenue was impacted by the pandemic across the board, decreasing overall by 17% to $3.2 billion in Q2 2020, ended June 30, compared to the second quarter of 2019. The revenue decline was largely driven by 13% and 17% decreases in wireless service and equipment revenue, respectively, and a 50% decrease in media revenue.
The wireless service revenue decrease was mainly a result of lower roaming revenue due to global travel restrictions during the pandemic and the waiving of such fees until April 30, plus lower data overage revenue, primarily due to continued adoption of Rogers Infinite unlimited data plans and lower wireless data usage as customers spent more time at home on Wi-Fi. Wireless equipment revenue decreased as a result of lower gross additions and device upgrades by existing subscribers during the pandemic, said the company.
Roaming fees is a $400 million annual business for the company where Q2 and Q3 are the high points, but with so few travelling, that line of revenue has dropped dramatically.
Its Rogers Infinite unlimited data plan customers now total approximately 1.9 million subscribers, which is up 36% in 2020. Rogers reported record-low monthly postpaid churn of 0.77% and said postpaid subscriber numbers were flat for the second quarter of 2020, with the majority of its retail locations remaining closed during the quarter. Most stores are now re-opened and company CEO Joe Natale told financial analysts during the Q2 conference call traffic and sales at retail has grown recently.
“In fact, there were a couple of days in late June reminiscent of some of the stronger promotional periods we typically see in the back half of the year,” he said. However, he cautioned investors not to try and read too much into that saying the company has little visibility on what the late summer – and usually higher growth – back to school period is going to look like this year.
Postpaid gross additions were 216,000 for the second quarter of 2020 (compared to 351,000 gross additions in Q2 2019), and Rogers experienced a net loss of 1,000 postpaid subscribers in the quarter. Wireless blended ABPU (average billings per user) decreased 8% in the quarter to $61.57 per month, compared to $67.16 in the second quarter of 2019. On the costs side, capital expenditures are down approximately $500 million due to the delay in building various projects.
Executives were careful to point out this spending decrease is not affecting the company’s 5G expansion.
“Advertisers are calling, eager to participate in the return of live sports.” – Joe Natale, CEO
The company’s 50% media revenue decrease in the second quarter was primarily as a result of lower advertising revenue on Sportsnet as well as a decline in revenue from the Toronto Blue Jays. No professional sports being played during the quarter due to the pandemic and no home games for the year for the team this year means the impact of which will continue to sting the company.
Since the federal government did not approve an exemption for the team to play in Toronto– and of course host many visiting teams this summer – that makes it “very difficult for Media to be net positive,” said CFO Tony Staffieri, on the call. All that lost income from thousands of people, 81 times per summer in the Rogers Centre “is a material amount for the media business,” he added.
On the plus side with Media, with the NHL, NBA and MLB returning “advertisers are calling, eager to participate in the return of live sports,” said Natale.
Rogers’ cable revenue also decreased by 3% in the second quarter of 2020, primarily due to declines in the company’s legacy television and home phone subscriber bases, partially offset by growth in its Ignite TV and Internet subscribers, says its press release. The company reported 5,000 net new Internet subscribers and 18,000 net new Ignite TV subscribers, most of whom are upgrading from the legacy cable service. Rogers Ignite TV subscribers now total 435,000 as of the end of the second quarter, which is a 180% increase from a year ago.
One positive, if it can be worded that way, which has come out of the pandemic has been the rapid acceleration of self-installs and the use of digital tools like video conferencing to guide customers through installations without having to send a technician to the home – and using apps to schedule such remotely-guided activations. “That has worked really, really well and we’re never going back,” to the old way of doing things, said Natale. He added this will mean 100,000 fewer truck rolls for the company while saving customers approximately 400,000 hours of their time, annually.
The company’s consolidated adjusted EBITDA in the second quarter of 2020 decreased 21% to $1.3 billion compared to the same quarter of 2019. Net income was $279 million for Q2 2020, a 53% decrease from the second quarter of 2019. The company also booked a $90 million bad debt provision for this year but does not know yet how much of a hit it is going to take, in the end. “We feel this quarter’s provision will capture the vast majority of the impact, based on what we see at this time,” said Staffieri.
“As we expected, our second quarter results reflect the economic pressures we saw in our business as Canadians adapted to the challenges of Covid-19. As Canada’s business environment slowly improves, we will rely on our strong balance sheet, world-class networks, and leading market share position to support long-term growth and drive shareholder value,” said Joe Natale, Rogers president and CEO, in the news release.
“We remain steadfast in our focus on maintaining our solid financial position, advancing our strategic priorities and investments, and delivering value to shareholders. Our priorities in the second half of the year are to drive the competitive benefits and efficiencies from the customer-first and digital initiatives we have accelerated during the pandemic, and to resume growth across our businesses as more of the Canadian economy opens up.”
For more information about Rogers’ second quarter 2020 results, please see the news release.
