TORONTO – While Rogers Wireless customers are moving to the company’s new Infinite plans in droves, the costs of such a shift had an impact on the company’s third quarter results, announced Wednesday morning.
At the end of the quarter, September 30th, the company said approximately one million of its customers had switched from their old plan to an unlimited data Rogers Infinite plan, more than three times what executives had expected. The company added 60% of those who moved to Infinite migrated up from lower priced plans.
While that has meant a marked increase in average data usage by over 50% for Rogers Infinite customers, the adjustments the company has made – and moves from its competitors (Bell spent the summer offering device subsidies and other promotions, for example) meant revenue and earnings dipped – and the company had to revise downward its 2019 fiscal guidance. Its overage revenue, which is on its way to zero with these new plans, dropped by $50 million compared to last year’s Q3.
"Last quarter, we led the market by introducing unlimited data and I am pleased to share that one million customers have already signed up," said Joe Natale, president and CEO, in the company press release. “While the reduction in overage fees from these plans will impact our results in the next few quarters, the underlying economics of device financing and unlimited plans are favourable and position us for long-term growth."
Total RCI revenue was stable this quarter at $3.75 billion, and total service revenue decreased by 1% to $3.23 billion, largely driven by a 2% decrease in wireless service revenue to $2.32 billion, due to the reasons explained above. The company added 103,000 net customers in the quarter, which was 21% lower growth than last year. Wireless adjusted EBITDA increased by 4% to $1.14 billion, leading to a margin of 49%.
Cable revenue increased by 1% this quarter to $994 million, led by Internet revenue growth of 7%. As of September 30th, Rogers had 1.59 million TV subscribers (it lost 35,000 in the quarter) and 2.5 million internet customers (where it added 41,000 in the three month period). Cable adjusted EBITDA increased by 2% this quarter to $499 million, primarily as a result of higher Internet revenue.
Media revenue decreased by 1% this quarter to $483 million, mostly thanks to the sale of the company’s publishing business earlier this year and lower Toronto Blue Jays revenue, partially offset by higher Today's Shopping Choice and Sportsnet revenue. Excluding the impact of the sale of the magazine business, Media revenue would have increased by 2% in Q3, said the company.
The downward adjustment in guidance, which is what seemed to spook Bay Street the most on Wednesday, “primarily reflects faster-than-expected adoption of our new Rogers Infinite unlimited data plans and the related reduction in overage revenue, lower wireless equipment revenue resulting from the highly competitive environment, and certain efficiencies recognized this year on capital expenditures,” reads the release.
Rogers had predicted a 3% to 5% increase in revenue in 2019 and is now projecting a range of a 1% loss to 1% growth come year-end. Adjusted EBIDTA guidance was an increase of 7% to 9% but is now 3% to 5%. Capital expenditures have been tightened in response as the company intended to spend between $2.85 billion and $3.05 billion but instead that guideline is between $2.75 billion and $2.85 billion. Free cash flow guidance was also decreased.
