Rogers CommunicationsFred Lum/The Globe and Mail
Aggressive cost control and a flurry of high-tech smart phone releases helped Rogers Communications Inc. beat analyst expectations Tuesday, driving the telecommunications giant to improved profits and revenues in a traditionally slow period in the midst of a recession.
Even so, Rogers downgraded its revenue outlook for the year ahead, dropping expectations for consolidated top line growth to between two and four per cent, down from earlier predictions of five to nine per cent.
"On balance the quarter reflects the strength of our franchises, the quality of our networks and our focused execution, though we're clearly moving through some challenging economic times," Rogers chief executive Nadir Mohamed said on a conference call with analysts.
"We continue to build on our operating and financial strengths by staying focused on the basics making the right investments to grow high-value customers and maintain our network superiority."
Mr. Mohamed said the company remains committed to the Toronto Blue Jays.
The team has put ace pitcher Roy Halladay on the trading block.
Rogers Media president Tony Viner says the club is doing better financially than last year but needs to bring costs more in line with revenues.
Rogers bought the Blue Jays in 2000. The company also owns the team's stadium and its flagship radio and television stations.
Mr. Halladay will earn $15.75-million next season and has indicated a desire to test the free agent market. The Blue Jays' 2009 payroll is approximately $80-million.
Toronto-based Rogers reported Tuesday net income of $374-million or 59 cents per share for the quarter ended June 30, up from year-earlier profits of $301-million or 47 cents per share.
Excluding one-time items, net income amounted to $412-million or 65 cents per share, beating analyst forecasts of 55 cents per share, according the Thomson Reuters.
Quarterly consolidated revenue edged up three per cent to $2.9-billion from $2.8-billion the year before, led by a six-per-cent revenue increase in the wireless division. The effect of a slowing economy was clearly visible within Rogers' revenue results, however, as average revenue per user - a key measure of performance - in the wireless division fell to $73.24 from $75.62.
There was also slowed subscriber growth in the cable division and expected advertising sales declines in the media sector.
Chief among Rogers' strong performers was the wireless division, where a burgeoning array of new smart phones and mobile device offerings helped drive smart phone growth up 38 per cent to 20 per cent of network revenue.
Supporting the smart phone improvements was a trend toward users sticking with Rogers as churn -the rate at which customers switch from Rogers to other carriers - dropped to one per cent "the best post-paid churn performance we have ever put up," said Mohamed.
Rogers said some of those gains were offset as wireless customers cut back on roaming, long distance and other discretionary spending options due to the nationwide recession.
Tough economic conditions also took a toll on Rogers' cable TV division, particularly in Ontario where 90 per cent of the sector's market is concentrated. The company reported slowing subscriber growth across the division, but said revenue for the sector climbed to $972-million from year-earlier levels of $938-million.
Weak advertising sales also led to a decline in Rogers' media division, where revenue fell to $366-million from $409-million the year before. The division, which operates TV stations, magazines such as Maclean's and Canadian Business, is now expected to see revenues fall between four and 10 per cent this year and operating profits sink 40 to 60 per cent.
Also Tuesday, the company announced it will partner with MTS Allstream to develop and operate a high-speed packet access (HSPA) wireless network in Manitoba. The two will share the costs of deployment and MTS HSPA customers will get access to Rogers as a roaming partner.