BUSINESS

Rogers Job Cuts: 375 Face Layoffs In Face Of Shrinking Profit, Tougher Competition

06/26/2012 10:59 EDT | Updated 08/26/2012 05:12 EDT
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Rogers Communications Inc. (TSX:RCI.B) will eliminate 375 jobs, a move that comes as the wireless, cable and Internet provider cuts costs in the face of lower profits and tougher competition on all fronts.

The staff reduction is part of a cost-cutting strategy announced earlier this year and include employees in the business, wireless, and cable and Internet divisions. They follow 300 job cuts announced in March.

The latest downsizing covers a variety of skills and includes some management and sales positions, Rogers spokeswoman Patricia Trott said Tuesday.

"Going forward, we're managing costs where it makes sense but we're continuing to invest in driving the business forward and obviously we have a focus as well on driving revenue, new sources of revenue," Trott said.

"This is sort of Part 2 of our cost cutting initiative that we announced earlier."

Rogers hopes to get increased revenues from its mobile banking initiative, devices connected to its wireless network such as parking meters, appliances and machines and other business services.

"Again, a difficult day for everyone but we're really focused in the future on alternative revenue sources and driving the growth of the business," Trott said.

Trott wouldn't address any competitive pressures that Rogers is facing.

The Toronto-based company's wireless division — which has the largest base of subscribers in Canada with about 9.3 million— has faced challenges from players big and small. It's competing against major players Bell (TSX:BCE) and Telus (TSX:T) for mobile phone subscribers and also from new players like Wind Mobile.

Rogers, Bell and Telus are fiercely vying for lucrative smartphone subscribers on faster, next-generation networks. Rogers had a competitive advantage with its more advanced network until three years ago when Bell and Telus upgraded their networks, allowing them to offer the same smartphones as Rogers.

Rogers' cable division is also battling fellow industry giant Bell, which has rolled out its Internet Protocol TV service in Montreal and Toronto. The service is delivered over an Internet Protocol network and allow users to watch sports, for example, while pulling up stats.

The layoffs in March focused on management and head office positions. At the end of 2011, Rogers had almost 29,000 employees.

RBC Capital Markets analyst Drew McReynolds said the cuts are indicative of competition and reflect management's goal of maintaining its profit margins.

"We continue to expect Rogers to 'grind away' in 2012 pending a more balanced competitive equilibrium on wireless and television (our estimates and consensus are below 2012 guidance)," McReynolds wrote in a research note.

McReynolds said the discount that Rogers trades at relative to its large-cap peers reflects these competitive headwinds. He is targeting a $43 per share price for Rogers, which would be about $6 above the current market value.

In April, CEO Nadir Mohamed told shareholders that Rogers would cut costs to help deal with competition in the wireless and cable TV markets that has resulted in slower revenue growth.

In its first quarter, Rogers said it lost 7,000 cable customers in a highly competitive period with Bell's IPTV service. UBS analyst Phillip Huang said at that time the loss of subscribers was not a "one-off event'' and he has predicted Rogers will lose 86,000 cable subscribers in 2012.

For its first quarter, Rogers posted a lower profit of $305 million or 57 cents per diluted share on $2.95 billion in revenue for the first quarter.

That compared with a profit of $335 million or 60 cents per diluted share on $2.99 billion in revenue a year ago.

Revenue of $2.95 billion also missed analyst expectations, which on average were for $3.05 billion for the first quarter of fiscal 2012.

Rogers shares were up seven cents at $36.58 in afternoon trading on the Toronto Stock Exchange.

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