Staffieri not pleased with cable, Rogers’ profit dip in first quarterly report as CEO

Rogers Communications Inc. reported a 10 per cent decline in profits for the three months ending on Dec. 31, and expressed disappointment in its cable division’s performance in what is the first quarterly earnings reported from the incumbent since its former CFO, Tony Staffieri, officially replaced Joe Natale as chief executive officer at the behest of the company’s chair, Edward Rogers. Thursday, the company posted its fourth quarter (Q4) 2021 results and held a conference call with analysts. The quarterly net income fell year-over-year from $449 million this time last year to $405 million in 2021. Total revenue increased by six per cent, for a total of $3.91 billion. Revenue for cable remained flat with $1.02 billion earned this quarter compared to $1.01 billion this time last year, prompting Stafferi to tell analysts that the company is “not satisfied with the performance in this area.” “What we do want to see is more participation in the growth in our home cable business, quite frankly, as we look to Q4 results,” he said. “Being transparent and blunt, we're really not happy with the performance of subscriber additions in the fourth quarter. And we think we can do better given our product superiority in terms of internet speeds across our entire footprint.” Staffieri said he expects the company to capitalize on the broader national opportunities that the acquisition of Shaw Communications Inc. will provide for the cable segment. The deal is still expected to close in the first half of 2022, more specifically in the second quarter, which was all Staffieri said he could reveal about the state of the transaction currently being reviewed by the CRTC, the department of Innovation, Science, and Economic Development, as well as the Competition Bureau. “We made changes to improve momentum and drive increased revenue and profitability in our cable business. Even prior to our integration with Shaw our newly created Home and Business Division will allow us to focus on better leveraging exceptional quality of our network and Ignite product family,” he said on the morning call. The net additions for internet subscribers dropped to 14,000 from 19,000 seen in 2020, however, its total internet subscribers increased by 67,000 for a total of 2.6 million owing to the addition of subscribers from Rogers' acquisition of Seaside Communications. Rogers saw a decline in its Ignite TV net subscriber additions, as the company added 56,000 subscribers, 15,000 less subscribers than it did in the same quarter last year. Total customers for the product did see an increase of 244,000, 45 per cent, for a total of 788,000 this quarter. The average revenue per account (ARPA) for the whole cable division was $131.63, a decrease of $2.80 since last year. “The stable service revenue and 2 per cent decrease in ARPA this quarter were a result of: the movement of internet customers to higher speed and usage tiers in our Ignite Internet offerings and the increase in total customer relationships over the past year, due to growth in our Internet and Ignite TV subscriber bases; offset by declines in our legacy television and home phone subscriber bases,” according to Rogers’ quarterly report. Staffieri told analysts that the wireless business continues to lead Rogers’ post-COVID recovery with improvements seen in net new customers, improved customer retention, and growth in both service revenue and average revenue per user (ARPU). Revenue in the wireless sector “was solid,” he said, with revenues climbing five per cent, jumping from $2.29 billion in 2020 to $2.41 billion in the fourth quarter. Revenue in Rogers’ media business revenue grew by 26 per cent, to $516 million as sports broadcast advertising continues to recover post pandemic, according to its interim CFO Paulina Molnar. “The year-over-year change in revenue and adjusted EBITDA is notably skewed by the timing of pro sports, season schedules, and broadcasting rights fees into 2021 versus 2020. In Q4 of this year, professional sports leagues resumed their full regular season schedules, where last year they were operating on compressed and adjusted schedules,” she noted to analysts on the call. Wireless postpaid subscribers increased by 130,000, up 14 per cent – or 16,000 – from the levels seen the previous year, for a total of 10.13 million. Molnar noted to analysts that the net additions included high quality mobile phones of 141,000, and that starting in its first quarterly report for 2022, its wireless postpaid net additions will reflect mobile phones only. Rogers saw a subscriber loss of 21,000 for its prepaid wireless services, where this time last year it saw a net loss of 40,000 subscribers, for a total of 1.17 million. The ARPU for its wireless sector was $51.47, making for three per cent growth since last year. Molnar said the increase in revenue and ARPU in the wireless sector can be attributed to the increase in roaming revenue as well as more customers on higher data tier plans. “While roaming was ahead of our previous outlook, it has not fully recovered as travel remains muted. Roaming revenue was approximately 70 per cent of pre pandemic levels seen in Q4 of 2019,” she noted to analysts, adding that roaming revenue should account for 80 per cent next year as travel and COVID recovery improves. Canaccord Genuity analyst, Aravinda Galappatthige, in a Thursday note, wrote that the wireless side showed “some positives,” mainly that ARPU was “nicely up” and ahead of estimates. He also noted that the reported cable financials “were a bit lighter while internet sub adds underperformed our estimate.” RBC analyst Drew McReynolds said in a Thursday note that “results and 2022 guidance were in line to slightly better than our forecast, which we view as a modest positive for the stock at current levels. Bigger picture, Rogers' results and outlook confirm expectations for a continued industry recovery in 2022.” Staffieri said the company plans to invest in its 5G network infrastructure, pointing to Rogers’ partnership with Kirkland Lake Gold Ltd., announced earlier this week, as an “example of the opportunities brought to life with 5G.” “It's remote, 300-kilometres north of Timmins, Ontario, and not the kind of place you might think of rolling out 5G so soon. Yet by working with Rogers, Detour Lake Mine has become the first of its kind in Canada to be fully connected over a 5G wireless private network… across its 80-square kilometre operation.” Staffieri, when asked by analysts, said Rogers’ was not going to disclose the economics of this particular partnership. “But what I can tell you is that it is accretive to our revenue, accretive to our earnings and accretive on a net present value basis,” he said. – Reporting by Jenna Cocullo at jcocullo@thewirereport.ca and editing by Michael Lee-Murphy at mleemurphy@thewirereport.ca

Staffieri not pleased with cable, Rogers’ profit dip in first quarterly report as CEO

Broadcast | January 27, 2022

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Staffieri not pleased with cable, Rogers’ profit dip in first quarterly report as CEO

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