Rogers Communications Inc. had a weaker quarterly profit and flat revenue due to competition in its wireless and cable divisions, but the Toronto company said Tuesday it has started to see the benefits of cost cutting.
Rogers (TSX:RCI.B) has eliminated more than 650 jobs so far this year and wants to increase its revenues.
"We accelerated a number of cost-management initiatives aimed at offsetting the top-line (revenue) pressures and worked on changes that will address the topline in the coming quarters," chief executive Nadir Mohamed said on a conference call to discuss the second-quarter results.
"To be clear, our definition of winning longer term is from top-line growth. Where we saw stable or modest growth in wireless and cable in Q2, we're committed to improving this trajectory," he told financial analysts.
Mohamed didn't say how long the cost-cutting initiatives would last or if they would include more job cuts.
"We'll continue to look for opportunities to manage our costs and improve productivity and we tend to look at this as something that's ongoing," he later told media.
Rogers (TSX:RCI.B) said its second-quarter net income declined 2.4 per cent to $400 million, or 75 cents per share, off from $410 million a year ago, or 74 cents per share.
The results beat analyst expectations on an adjusted basis, with net income of $478 million, or 91 cents per share, which is five cents higher than analysts expected, according to a survey by Thomson Reuters.
Revenue was $3.11 billion, up slightly from $3.1 billion in the comparable period, but below expectations of $3.14 billion.
Rogers shares bounced upward $1.88, or five per cent, to $39.12 in early afternoon trading on the Toronto Stock Exchange.
The company also lowered its postpaid monthly churn rate, usually smartphone customers who leave for another wireless provider. It fell by 1.15 per cent from 1.21 per cent year-over-year.
"It is one of the key reasons for our cost structure improvement because the better the churn, the lower the amount you are spending on handsets and getting your net share. It really is one of the big contributors to margin growth that you are seeing," Mohamed said.
The company's wireless profit margin as a percentage of the wireless division's revenue was 48.2 per cent, up from 46.5 per cent and is a measure of how well a company controls its costs.
RBC Capital Markets analyst Drew McReynolds said revenue was in line with his estimate and wireless margins were better than expected due mainly to cost cutting. He called those results "solid."
Revenue growth is expected to be stronger with more smartphone use by its customers, customer retention efforts and other growth initiatives such as mobile commerce, mobile video and machines connected to its wireless network, Mohamed told analysts.
Chief financial officer Anthony Staffieri said Rogers will maintain its financial guidance, which some analysts believed might have been lowered due to pressures the company has been facing.
"We're also not making any changes to our consolidated, adjusted operating profit and pre-tax free cash flow guidance ranges that we set out at the start of the year," he said.
"We are focused on executing on our roadmap and we believe we will achieve our financial targets. There are obviously continued pressures facing our businesses, but we're making meaningful progress around a number of cost management initiatives that we believe can offset the topline pressure that we have seen to date."
RBC's McReynolds also noted that Rogers' maintained its financial guidance.
"Although we believed this quarter there was a risk that management would revise downward 2012 guidance following a weak start to the year, management is maintaining guidance following Q2 results," he wrote in a research note.
"A positive sentiment in our view," McReynolds said.
Rogers added 87,000 post-paid net subscribers, a key measure of its competitive health. These customers are usually on three-year contracts on BlackBerry, Apple or Android smartphones.
Smartphones users are now 63 per cent of Rogers' postpaid subscriber base, up from 48 per cent in the same quarter last year.
But Rogers' monthly average revenue per user in its wireless division dropped to $68.46 in the quarter compared with $70.07 in the same quarter in 2011.
The cable division also had a net loss of 21,000 basic subscribers in the quarter due to the end of the post-secondary school year, which saw students move, and competition from Bell's Internet Protocol TV service. That compares with 9,000 in the same period last year.
Rogers is Canada's largest cable TV operator and wireless operator and is a major magazine publisher, TV and radio broadcaster and owner of the Toronto Blue Jays.
It also owns a slate of print magazines including Maclean's and Chatelaine.