TORONTO – While Rogers Communications’ Q2 2010 financial results are expected to be pretty good when they are released on Tuesday, at least one industry analyst is expecting to see some competitive impact on the wireless side.
Canaccord Genuity analyst Dvai Ghose told investors last week he expects RCI will report consolidated revenue of $3.026 billion or 4.7% year-over-year growth. He pins his adjusted EBITDA estimate at $1.172 billion, “slightly above consensus of $1.163 billion,” meaning a solid YOY increase of 8.2%.
However, strong wireless margins are due to weak subscriber growth. “We only expect 90,000 Q2/10 wireless net additions, compared with 142,000 in Q2/09. We also forecast that Rogers’ share of net additions declined to only 29% in Q2/10, from a lofty 45% in Q2/09, due to market share gains at Bell, Telus and new entrants,” he wrote.
“In our view, Rogers’ decision to launch the Chatr brand is as much a reaction to market share losses, as a pre-emptive strike against new entrants. However, Q2/10 wireless margins should benefit from reduced subscriber acquisition costs. We forecast wireless EBITDA of $800 million or 7.8% growth, and this could be overly conservative.”
Ghose expects slower EBITDA growth in wireless in the second half of 2010 due to a number of reasons, such as increased device subsidy pressure with the launch of iPhone 4 (also expected this week), ARPU and margin dilution from the launch of Chatr, and pricing pressure in Quebec when Videotron launches.
“Consequently, we forecast flat YOY wireless EBITDA in H2/10 versus our 12.4% growth estimate for H1/10,” reads the research.
Ghose also sounded a note of caution on the cable side, reminding investors of Bell’s plan to launch IPTV soon to compete in the terrestrial video market with Rogers Cable.
“We expect Bell to launch IPTV in H2/10 and to win 1 million subscribers in 3-5 years. We expect 650k to come from Rogers Cable,” added Ghose.
“There is anecdotal evidence suggesting that Rogers Cable is offering unsolicited price discounts to higher-end customers at this time, perhaps in anticipation of IPTV.”
