Rogers Communications Inc. is bumping up its financial targets for the year amid continuing subscriber demand for wireless data combined with lower expenses as it finds savings through customer service improvements.
The Toronto-based telecom and media company said Friday that its wireless business brought in revenue of $2.3-billion in the third quarter, up 6 per cent from the same period last year. Meanwhile, adjusted EBITDA at the division increased even more, surging by 8 per cent to $1.1-billion (EBITDA means earnings before interest, taxes, depreciation and amortization).
Chief executive Joe Natale has made customer service a priority since starting at Rogers in the spring of 2017. He told analysts Friday that his efforts to fix persistent problems, encourage customers to use online tools for support, and contact subscribers with new offers have led to lower call volumes at call centres.
“Cost efficiency is a natural outcome as we drive complexity out of the customer experience. As I have said before, customer service improvement and cost savings go hand-in-hand,” Mr. Natale said, noting that profit margins in both the wireless and cable divisions have increased this year.
Cost controls have also been critical as Rogers has accelerated spending on its wireless infrastructure over the past year, investing in its LTE (long-term evolution or fourth generation) network to prepare for 5G technology in the coming years.
On 5G, Mr. Natale sounded a cautious note Friday, pointing out that while it will improve the experience for smartphone users with faster speeds and almost no lag time, other potential revenue streams remain somewhat of a mystery.
“We’re all busy postulating where there might be strong use cases for 5G. At this point, there really are [just] a series of trials and PowerPoint presentations," Mr. Natale said, noting that Rogers and network equipment supplier Ericsson have set up a test lab at the University of British Columbia in Vancouver to help identify applications to monetize the new technology.
Rogers said overall revenue at the company was up 3 per cent in the quarter to $3.77-billion, in line with analyst estimates. Meanwhile, adjusted EBITDA of $1.62-billion was up 8 per cent and ahead of analyst estimates of $1.57-billion.
Profit in the quarter increased 17 per cent to $594-million or $1.15 a share. On an adjusted basis, Rogers earned $1.21 a share, ahead of analyst forecasts for $1.17.
Rogers increased its financial guidance for 2018, saying it now expects to report adjusted EBITDA growth of between 7 per cent and 9 per cent (up from a previous range of 5 per cent to 7 per cent). That move comes after some analysts questioned why it did not raise its targets earlier in the year following similarly strong numbers.
The company added 124,000 new contract wireless customers in the third quarter, slightly below analyst forecasts in the range of 133,000. But it also reduced the rate of subscriber turnover, reporting a churn rate of 1.09 per cent a month, compared with 1.16 per cent this time last year. Average billing per user (ABPU) also increased by $2.32 a month to $66.20.
“This strength in Rogers’ wireless is driven by a variety of factors including superior [ABPU] growth, steady [subscriber] loading, improvements in churn and cost control. Hence there is a sense of a more holistic and structural improvement under way at Rogers,” Canaccord Genuity analyst Aravinda Galappatthige said in a note to clients.
Rogers launched a new internet-based television product, Ignite TV, in July but that initiative has not yet boosted its cable division, which saw 1-per-cent revenue growth in the quarter to $979-billion, mainly due to an 8-per-cent increase in internet sales.
Rogers added 35,000 new internet customers, up from 29,000 in the third quarter of 2017. But it lost 18,000 television subscribers, the same rate as this time last year as it faced tough competition from rival BCE Inc., which has been investing in faster home internet to bundle with its own Fibe TV.
Rogers Media reported a 5-per-cent decline in revenue to $488-million, attributing the decline to lower sales by the Toronto Blue Jays baseball team, which did not make the playoffs this year. Yet, adjusted EBITDA at the division was up 20 per cent to $73-million as the company slashed costs in particular through layoffs at its magazine publishing business.