TORONTO – While there were some bright spots during Rogers Communications first quarter, they weren’t enough to make up for weaker results than what Bay Street was expecting.
While wireless adjusted operating profit increased 3%, margin grew to 48.3% and postpaid churn declined to 1.20%, revenue dropped by 2%, the company reported today for the three month period ended March 31st.
According to the company’s release, “consolidated operating revenue was nominally lower than the first quarter of 2013, reflecting a 2% decline in wireless revenue, offset by growth at business solutions (up 1%) and media (up 8%). The decline at wireless was mainly related to pricing changes associated with new customer friendly simplified plans and lower priced roaming plans introduced mid-2013,” says the release. “Cable revenue was flat as continued Internet revenue growth was offset by television subscriber losses, promotional activity and the timing of pricing changes.”
Also, wireless data revenue grew 10% exceeding voice revenue for the first time and now represents approximately 51% of total network revenue. Rogers activated 579,000 smartphones, of which 30% were new subscribers, and high-value smartphone customers now make up 76% of wireless postpaid subscribers. It’s postpaid net wireless subscriber additions were just 2,000 in the quarter, however.
Basic cable subscriber losses moderated, both sequentially from the fourth quarter of 2013 and year-over-year, to 20,000, said the company. The full release can be found here.
“Adjusted consolidated EBITDA of $1,161 million was below our $1,170 million forecast and IBES consensus of $1,176 million and down 1.5% YoY. Adjusted EPS of $0.66 was below our estimate and consensus of $0.71 and down from $0.80 in Q1/13. However, FCF of $356 million was above our $344 million estimate due to lower than forecast capex. It was down from $428 million in Q1/13,” wrote Canaccord Genuity analyst Dvai Ghose in a note to clients on Monday after the results were released.
“If you forced me to pick one word it would be change, appetite for change.” – Guy Laurence
All company executives promised better from the company in coming quarters, including CEO Guy Laurence, who is nearing the completion of the plan for RCI which he intends to present to the board of directors at a meeting in May. Laurence spent the end of 2013 and most of Q1 on a coast-to-coast tour where he travelled 22,000 kms, meeting 11,000 RCI employees in its 12 largest markets. He also performed a number of “deep dive business reviews” with corporate leaders and interviewed 59 senior managers and each of the board of directors individually.
All of this will be informing his report to the board and his plan for Rogers, none of which Laurence was prepared to divulge Monday. He said he found a lot of common opinions on the company from customers and employees all across the country and told the conference call with media on Monday when asked what stood out most during his trip (besides all the snow): “If you forced me to pick one word it would be change, appetite for change.”
During the conference call with financial analysts, the CEO said one new theme is already being worked on inside Big Red. “We’ve started discussing a concept internally called ‘One Rogers’ which is where we actually use the assets we’ve got to actually work together in an explicit way,” he explained.
One example, of course, is the company-wide NHL blitz which is already building. Laurence noted there are countdown clocks in a number of Rogers offices ticking down the days to the start of the 2014-’15 NHL season (there were 170 as of Monday)
Rogers Media president Keith Pelley also noted that the company is coming together well across all lines of businesses to maximize its NHL deal. Just on the advertising side, he is seeing positives. “It is having an affect on our entire business and there is no question it really bodes well for us in Q3 and Q4,” Pelley told analysts. “There is complete horizontal integration in how we are working together,” he later told media, explaining how so many of his internal meetings involve all aspects of RCI business and not just the media side.
“We have the assets to win. We just have to make them dance together better than we have done previously,” added Laurence.
