BUSINESS

Rogers says profits drop 17 per cent to $255 million in first quarter

04/20/2015 04:40 EDT | Updated 07/13/2015 02:59 EDT
TORONTO - The cost of keeping customers from migrating to competitors jumped by nearly a third at Rogers Communications Inc. in the first quarter as the battle for subscribers intensified.

The Toronto-based telecommunications provider said Monday that quarterly profits dropped 17 per cent as it spent more to subsidize new smartphones and offer more attractive packages.

Net income fell to $255 million from $307 million in the same period a year ago.

Earnings were equal to 53 cents per share on an adjusted basis, falling 10 cents short of analyst estimates, according to Thomson Reuters.

Operating revenue rose to $3.18 billion from $3.02 billion.

Rogers (TSX:RCI.B) blamed the weaker profits at least partly on two recent CRTC decisions that have changed how telecom companies operate in Canada.

In one decision, the CRTC said customers no longer need to give telecom companies 30 days notice before they cancel their TV, Internet and phone services.

Rogers says that left a $3-million dent in cable revenue for the quarter and was responsible for an estimated loss of 40,000 subscribers to its cable packages and bundles.

Subscribers were down across the board in the period, as the company lost 41,000 net cable subscribers overall, as well as 7,000 Internet and 20,000 landline phone customers.

The wireless division faced pressures of its own as Rogers tried to head off the effects of a separate CRTC rule change, which has shortened the span of wireless contracts to two years, meaning customers can switch carriers sooner.

Rogers said operating expenses to rose 32 per cent as it worked to retain customers with subsidized smartphone upgrades.

"In step with the rest of the wireless industry in Canada, we made planned investments in customers to get ahead of the expiration of three-year contracts, which is set to occur this summer," president and CEO Guy Laurence said in a conference call with analysts.

"In essence, our retention spend this year is more front-end loaded to the first half than you would've seen in prior years."

During the period, 26,000 net postpaid subscribers left the company, along with 37,000 prepaid customers.

Other costs wore into the results, including higher spending in its media operations as the company prepared for the NHL playoffs, which Laurence said would be an investment that pays off as more viewers tune into hockey games.

Licensing rights for the NHL generated about $106 million in revenue in the quarter.

Laurence said he's focused on a broad offering of content that addresses customer demands or offers them premium services they can't get elsewhere, like an unlimited Internet package that also offers its Shomi video streaming service and other features.

Rogers also recently launched bulked up offerings for Fido wireless customers, which give them Spotify Premium music streaming on their phone and a Daily Vice news show.

"For the segment of the market that appeals to — which is primarily the Millennials — it's a superb proposition," Laurence told reporters on a media call.

"That's the sort of thing I think you need to have in the marketplace to go through this period. What we're trying to do is add value to what the customer gets."

On Tuesday, Rogers will also hold its annual meeting in Toronto.

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