Rogers Profits Decline As 'Your Grandmother' Switches To Skinny Basic Cable: CEO

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TORONTO — Rogers Communications says most of its customers are choosing to stick with their current TV packages rather than switch to the recently mandated skinny-basic TV bundles.

"It's a bit like going to McDonald's,'' president and CEO Guy Laurence said during a conference call with analysts after the company reported first-quarter earnings.

"We've now given customers the chance to buy a basic hamburger and fries separately and some do. But most customers stick with the meal option ... because they are better value for money.''

guy laurence
Rogers president and CEO Guy Laurence. (Photo: Mark Blinch/Reuters)

Meanwhile, this Stanley Cup playoff season Rogers stands to take a financial hit on its $5.2-billion investment for exclusive NHL broadcast rights in Canada since all seven Canadian teams failed to make it to the post-season.

The lack of Canadian representation is disappointing for all of Canada not just Rogers, said Laurence, who added that some advertisers have shifted their spending from hockey to baseball.

Pressed on the issue during a conference call with the news media, Laurence said: "We don't give guidance on revenue for forward looking quarters.''

rogers

The three months ended March 31 was the first since the country's broadcast regulator, the Canadian Radio-television and Telecommunications Commission, mandated all cable and satellite TV service providers offer basic cable packages capped at $25 a month as of March 1. They must also let consumers add on a-la-carte channels or pre-packaged bundles.

Last week, the CRTC said 66,000 consumers have signed up for the new offerings in the first five weeks of availability. It did not break down the subscribers by company, though Laurence said his company's uptake is in line with its market share.

The type of consumer who is switching over to basic cable is "your grandmother,'' Laurence said, adding that consumer may be less interested in some of the programming available beyond basic cable's offerings.

"We've now given customers the chance to buy a basic hamburger and fries separately and some do." — Rogers CEO Guy Laurence

However, he stressed it's too early to determine long-term trends from the limited data available, adding companies are only partway into the process of adhering to the regulations as they're not required to offer both a-la-carte channels and pre-packaged bundles to consumers until December.

Rogers reported lower year-over-year profits in the first quarter, citing among other reasons higher restructuring costs and an increase in the adjusted operating loss of its traditional media business.

The Toronto-based telecommunications giant said net income in the three months ended March 31 was $248 million or 48 cents per share, down from $255 million or 50 cents per share in the same 2015 period.

skinny basic
Some of the channels available as part of Rogers' "skinny basic" cable package. (Photo: Rogers)

Adjusted net income, which excludes certain one-time items, was $263 million or 51 cents per share, down from $275 million or 53 cents in the prior-year period.

Revenue was $3.245 billion, up two per cent from $3.175 billion, reflecting growth of five per cent in its wireless operations and two per cent in business solutions. That was offset by a decline of two per cent in its cable business and three per cent in media.

Reporting after markets closed, Rogers said its lower consolidated adjusted operating profit largely reflected an increase in the adjusted operating loss of its traditional media businesses, which are facing pressure from a changing advertising landscape.

Net income was also impacted by higher restructuring costs for the company, which announced job cuts in the quarter affecting conventional TV, radio and publishing, as well as some back-office positions to help alleviate some of the pressure on its media business.

Rogers said it posted its best first-quarter wireless postpaid churn in more than five years, thanks among other things to improving customer experience.

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