“So yes, we’ll battle out the day-to-day issues in the business that we are in,” he said. “... But nobody should think of that as kind of the product sets we are working with – we’ve got a whole bunch more that we are going to bring to market.”
His vision is optimistic, far more so than that of Bay Street analysts, many of whom doubt the company can evolve beyond the utility-like behemoth it is today. Of the 17 who follow the company, only six rate it a “buy” – and shareholders have earned almost nothing over the past five years, even when dividends are included.
The problem, analysts say, is that while the company once had the luxury of extending into new businesses without worrying about competition eating away at its legacy lines, those days are clearly over. Telus, Bell and the new wireless entrants have commoditized the handset market, for instance, forcing Rogers to heavily subsidize smartphones to win new customers and keep the ones it has from leaving.
“They were a leader on all fronts for the longest time and had such strong market share because of a long period of superior offerings backed by a competitive advantage on technology and limited competition,” said UBS analyst Phillip Huang.
“But that advantage goes away because now what you’re selling is a commodity and the only differentiator is your brand. And that is more difficult.”
He expects the bulk of the company’s growth will come from increased use of wireless data, something that holds true for the entire industry. The cable business is more difficult, because telcos are aggressively rolling out new, fibre-optic television services that that are better able to compete with the cable television packages that have been the standard in Canadian households for decades.
“It is partly beyond their control, how much growth they can squeeze out,” Mr. Huang said. “They can raise prices, that’s always done on the cable side. But how much of that price increase flows to the bottom line depends on how competitive the environment gets. If you have to keep matching your competitors on acquisition offers, then most of that benefit will be eaten away.”
In the past year, for example, Rogers has seen an $80-million bump to its earnings thanks to price increases. But Mr. Huang said most of that will be eaten away by another line item – the one that shows how much the company had to spend to keep customers from leaving for rivals.
“[Customers say]‘Bell offered me this, what will you give me not to leave?” Mr. Huang said.
Mr. Mohamed see things differently. The critics who say the company isn’t growing aren’t looking at things the right way. Cable doesn’t just mean television subscribers any more , for example, because the Internet is a more important part of the cable equation. Its wireless customers may be spending less on average than they used to each month – $57.65 a month, compared to more than $62 two years ago – but the company is still signing them up in healthy numbers.
“People prematurely think the business is maturing,” he says. “It is maturing. But don’t think of no growth ... What you want to do is drive revenue through new uses that consumers find valuable.”
“We’ve got to keep doing what we do best – seeding new business to create growth.”
It almost sounds as easy as pulling money out of parking meters.
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