Three-year handset plans popular; new TV option coming, too
TORONTO – Rogers Communications CEO Joe Natale admitted Tuesday morning he was happily surprised by the early numbers coming in from its new Rogers Infinite wireless plans.
On June 12th, readers will recall, Rogers junked overage fees and many of its old wireless plans in favour of three simpler unlimited data plans, starting at $75/month. Company executives crossed their fingers hoping the price point and “unlimited” data would make sense to people (even though the unlimited data is slowed after 10GB/month on the lowest cost plan) and that customers moving down from higher priced, older plans didn’t hit the company’s bottom line too hard, which is already going to be impacted from diminishing data overage revenue.
However, of the whopping 365,000 customers as of Monday, July 22 (so, a few days short of six weeks) who had taken advantage of the Infinite plans, “roughly two-thirds upgraded their price plan, choosing to spend more, and one-third are spending less,” Natale told the company’s second quarter conference call with financial analysts Tuesday morning.
This is not what they figured would happen. “Our expectation was the majority of customers early on would be down-graders,” added Natale on the call. “…and the upgraders were going to take a while to understand the plan, understand the commitment they’re making to a higher price point. So we actually had the inverse modeled.”
And since “as a portion of our entire base, the potential upgraders are vastly larger than the portion of down-graders,” these early numbers bode well for the future.
While investors and analysts fretted the re-pricing move – which other carriers have since followed – would seriously impact Rogers’ income with a drop in overage revenue and people downgrading, CFO Tony Staffieri urged those on the call to think good riddance to overages and their attendant problems.
First, it made up only about 5% of overall revenue “and if you were to do a full economic analysis on that small piece of revenue on the entire business: What is the extent to which we speak to those customers, who are negotiating that overage number, are dealing with it on their bill, are having to have follow-up conversations with them, are issuing credits, are driving a propensity to churn, it is in some ways, revenue with no real economic outcome.”
“What we’ve seen already with this cohort of Infinite customers, is those growth rates climb substantially.” – Joe Natale, Rogers
“When the overage regime in Canada was such that people… had to sign up for top-ups that they had to manage and worry about whether their son or daughter or family member was using too much data… it creates a burden on our customers, and it shows up in the data growth rates,” added Natale. “What we’ve seen already with this cohort of Infinite customers, is those growth rates climb substantially.”
And with 5G on the way, Rogers needs to train its customers to be free with the data use. “5G is at our doorstep and we need to unlock and unleash customer demand for data,” he said.
Canada has some of the lowest data growth rates globally, added Staffieri, something that can’t hold as 5G comes to market in the next 12 to 36 months. 5G can’t grow “where customers are afraid of using data,” said the CFO, who added later that the 365,000 Infinite customers have grown their data consumption by 50% so far.
Also making customers happy in a short time has been Rogers’ launch of new 24- or 36-month $0-down, no interest device payment plans. In the first two weeks more than half are choosing the 36-month plan, said Natale. Besides, with the most expensive new devices now cresting the $2,000 price point “we have a duty to our customers to help them figure out how to afford these handsets,” he added.
The new plans will also help the company as well since it spends about $2 billion annually on devices, which includes substantial subsidies for customers.
“We’ve had some very encouraging conversations around some of the moves that we’ve made most recently, very supportive conversations from the Minister and other members of the cabinet as a whole.” – Natale
However, the CRTC Wireless Code effectively limits wireless contracts to a maximum of two years, so Natale was asked what he thinks the regulatory response will be to the 36-month payment plans. The company believes it is on side with the code because it has decoupled the service from the device. While the CRTC is now asking carriers about it, Natale told analysts the company and the government want the same things.
“We are perfectly aligned with the overall agenda for the government on the regulatory front with respect to making wireless services more accessible and more affordable for Canadians,” said Natale. “The more we focus on what’s important to the customer… the more aligned it becomes with the overall regulatory view and policy of government.
“We’ve had some very encouraging conversations around some of the moves that we’ve made most recently, very supportive conversations from the Minister and other members of the cabinet as a whole,” added the CEO.
What about TV?
All this talk of wireless and data is super, but what about the olde business that built Rogers big enough to back and build its now huge wireless company: cable TV?
Cable isn’t cable anymore, of course, and Rogers is adapting to the new realities in video with its new Comcast X1-powered Ignite TV, which now boasts 160,000 customers. “Our goal is to migrate the entire base over the next couple of years,” to Ignite, said Natale during the call.
But something new is coming so that Rogers can hit more market segments because while Ignite is great for the customer who is ready, willing and able to consume loads of video (and pay for it), there are video market segments Rogers is missing right now.
“What we’re finding is at the top end of the video market, we’re doing very well for customers who want lots of content, want an abundance of choice and programming as a whole, and we’re seeing very strong ARPU growth. We’re seeing 4% ARPU growth (in TV) as a result of the continued growth in that part of the market,” explained Natale.
However, when you ponder the portion of the video market which doesn’t want 200-plus TV channels, but instead might want a local channel, some sports and loads of online video, “the quasi-OTT kind of appetite where there are some service offerings in different parts of the country that require very little investment in terms of installation or set-top box and TV services for very basic services starting at about $5 a month, we don’t have a play in that part of the market yet,” said Natale, “but something is on the horizon for us.”
Perhaps something along the lines of Comcast’s $5/mo. Flex, which is powered by the same video technology Rogers has already deployed.
“Our goal is to create more choice for customers, where they have a very affordable entry point, and then, through the course of time, they can buy content in a much more snackable approach. They can buy a series or an episode, they can buy the Raptors playoff as a service overall. They can add on as they see fit, and we would see ourselves merchandising this as an add-on to internet.”
