Rogers reports lower Q1 revenue and profit

Smart phones are displayed at a Rogers store Tuesday, April 24, 2012 in Montreal. Rogers Communications Inc. will report its first-quarter financial results after markets close Tuesday and analysts' estimates put revenue for Canada's largest wireless provider at $3.05 billion. THE CANADIAN PRESS/Ryan Remiorz

Rogers Communications suffered a blow to its profits in the first quarter as competition in wireless and cable TV hurt results and caused the company to fall short of analyst expectations.

Chief executive Nadir Mohamed assured analysts late Tuesday that the telecom company intends to improve its earnings before the end of 2012.

"There are some clear areas of strength and some areas that we're focused on doing better over the balance of the year," he said on a conference call after markets closed.

Rogers posted an adjusted profit of $356 million, a drop of 16 per cent from $423 million in the same quarter last year.

On a per share basis, adjusted earnings slid to 67 cents per share, below analyst expectations of 76 cents per share, according to Thomson Reuters. The earnings were also below the 76 cents per share reported a year earlier.

Revenue also came in slightly lower — a dip of one per cent — at $2.95 billion, missing analyst expecations and coming in below the $2.99 billion reported in the same period in 2011. Analysts had estimated revenue of $3.05 billion for the first quarter of fiscal 2012.

"We are seeing a softer rate of topline growth than we would have liked and that's a reflection of the continued intense wireless competition and a further slowing in the rate of growth in wireless data," Mohamed said.

"At the same time, the competitive intensity heated up in cable as IPTV (Internet Protocol television) became more widely available and the ad market softened in media division particularly late in the quarter."

Rogers (TSX:RCI.B) is facing competition from Bell's IPTV service in Toronto.

Postpaid wireless net subscriber additions for the quarter were 47,000, compared with 45,000 in the same quarter of 2011 and beating some analyst expectations. The category generally includes customers on lucrative three-year contracts for iPhone, BlackBerry or Android smartphones.

Analysts track these subscribers as a measure of a telecom company's competitive health.

Mohamed said 60 per cent of its postpaid base now uses smartphones.

Rogers said the quarter's wireless net subscriber additions included a 35 per cent increase in iPhone activations, and added it has stabilized churn, or customers leaving to go to other carriers, in this category.

UBS analyst Phillip Huang had estimated 36,000 postpaid net subscribers in the quarter.

Competition has been fierce in the wireless industry among Rogers, Bell (TSX:BCE), Telus (TSX:T) and new players like Wind Mobile, Mobilicity and Public Mobile.

Rogers' average revenue per user — also a key figure in the cellphone industry — was down 2.3 per cent to $57.65 in the quarter.

In its cable division, Rogers said it lost 7,000 customers in the quarter.

"While Q1 is generally a seasonally slow quarter in cable we did also face intensified IPTV competition in our territory in the quarter," Mohamed said.

"Clearly we are entering a period of stepped up competition where our primary telco competitor, which already has a broadly deployed satellite offering, is now pushing with deeper concessions on its more widely available IPTV product," he said referring to Bell.

Rogers has more than nine million wireless subscribers.

Chief financial officer Bill Linton said competition in the wireless industry hasn't changed and it's "still very intense."

Rogers will be more transparent with its data roaming price plans for consumers who are roaming onto other networks outside Canada and to help consumers understand data rates with their smartphones, Linton said after the conference call.

Linton also noted that competition in cable has increased with IPTV, especially in Toronto, and Rogers has fought back on price and with similar offerings with its cable service.

"We have done a lot of stop-gap measures to get us to a point where we think we have have competitive offers with IPTV and we think that's going to be a good strategy going forward," Linton said after the conference call.

Over time, the cable industry will move to IPTV because it makes efficient, said Linton, who is retiring as chief financial officer.

He will be replaced by Anthony Staffieri, who was most recently senior vice-president of finance at BCE Inc.

Rogers is also Canada's largest cable TV operator, a major magazine publisher, TV and radio broadcaster and owner of the Toronto Blue Jays. It owns a slate of print magazines including Maclean's and Chatelaine.