TORONTO – Net income tripled, revenue climbed 15%, operating profit jumped 33%, subscribers in all segments are up – these are heady days for Rogers Communications.
Consolidated revenue grew to $2.35 billion in the third quarter, ended September 30th, while consolidated operating profit rose to $784 million driving operating profit margin up 460 basis points. Net income in the quarter was $154 million, up from $48.9 million in Q3 2005.
For the first nine months, revenue increased 23.4% to $6.6 billion, OP went up 30.2% to $2.1 billion and net income went from $22.1 million over the first three quarters of 2005 to $446.3 million in ’06. The company also announced a two-for-one stock split which will happen in December and a dividend increase of 113% to $0.32 per share
This, of course, left CEO and founder Ted Rogers happy to sit and rest on the results, right? Er, no. The start of today’s conference call wasn’t a boast or a gloat about one of the best quarters RCI has ever recorded. "We’re competing well with very powerful and very entrenched monopolies," said Rogers, who then added, "I’m not at all satisfied."
"We have much hard work and continued investment in front of us."
Rogers warned analysts that while the company should at least get "within spitting distance" of an investment grade stock, he won’t be afraid to invest where the company sees fit. He predicted the company, because it "will hit a home run on some of our products," in 2007 will spend, and "that will reduce our free cash flow and we will be criticized for that," he said.
Acquisitions, of course, are not out of the question, but Rogers flatly denied wanting to purchase national carrier Allstream from MTS Allstream. "I’ve always believed in building the business ourselves," he said. RCI is pushing and plans to push harder into the business market, "one which Rogers is going to make a major commitment and we are not going to buy Allstream," said the CEO. The company will strike mostly at small to mid-sized businesses that are already passed by Rogers’ network.
Purchasing small cable systems in regions surrounding Rogers’ existing cable markets are acquisitions Rogers mentioned during the call, however.
On the subscriber side, wireless net postpaid additions were 171,200 and net prepaid additions came in at 31,800. Wireless postpaid subscriber monthly churn was 1.3% versus 1.5% in the third quarter of 2005, while postpaid monthly ARPU (average revenue per subscriber) increased 5.3% in the quarter to $70.37. The ARPU increase reflects a 47.9% lift in data revenues, which represented 10.5% of total wireless network revenue in the quarter, as well as continued growth in roaming and other optional voice services, said the Rogers release.
The company, at the end of September, had 5,208,900 post-paid wireless customers and with wireless operating revenue of $1.2 billion in the quarter, it’s much larger than the cable and wireline telecom side, whose revenue in Q3 grew by 10.2% to $800 million.
Cable and telecom ended the quarter with more than 270,800 residential voice-over-cable telephony subscriber lines, with net additions of 106,100 cable telephony subscriber lines for the quarter (of which approximately 14,400 were migrations from the circuit-switched platform). The Rogers Home Phone ("RHP") cable telephony service is now available to approximately 90% of Rogers’ cable homes passed. The combined number of local telephony lines on both the cable telephony and circuit-switched platforms from Rogers Home Phone and Rogers Business Solutions reached 823,100.
Cable also reported basic cable subscriber gains of 12,600 versus an increase of approximately 900 in the third quarter of 2005 (after adjusting for the impact in 2005 of a change in the company’s subscriber deactivation policy). Digital cable households increased by 62,200 in the quarter to reach a total of 1,064,400, while residential high-speed Internet subscribers grew by 51,800 in the quarter to a total of 1,250,000. "Video-on-demand continues as a core differentiator for Rogers Cable, with quarterly pay-on-demand views increasing by 19.2% year-over-year to 1,721,000 from the third quarter of 2005," says the press release.
The increase in digital subs represent a 47% penetration of basic cable customers.
Also during the call, Rogers addressed the company’s interest in a National Football League team, something his executive vice-chairman, Phil Lind, and Toronto Blue Jays president Paul Godfrey, have stated their interest in throughout the years.
Saying he thought the NFL would expand to Los Angeles first (and leaving unsaid the fact that leagues usually expand by even numbers of teams in order to have a balanced schedule), Rogers added: "We’re not interested in investing huge amounts in a thing like that… I don’t think the NFL is going to expand materially the number of teams."
