Rogers Communications Inc. RCI-B-T saw fourth-quarter revenue grow by 28 per cent and profit drop 35 per cent as its $20-billion takeover of Shaw Communications Inc. boosted its customer base while also resulting in higher costs.
The Toronto-based telecom giant reported $328-million of profit for the three-month period ended Dec. 31, down from $508-million a year earlier, while its revenue climbed to $5.34-billion, from $4.17-billion.
The fourth-quarter profit amounted to 62 cents per share, down 38 per cent from $1.00 per share during the same quarter last year.
Rogers attributed the lower profit to higher depreciation and amortization on assets it acquired when it took over Shaw in April, 2023, higher financing costs and higher restructuring, acquisition and other costs, primarily owing to the takeover and integration of the Western Canadian cable company.
After adjusting for some of those items, Rogers had $630-million of profit, up 14 per cent from a year earlier.
The adjusted profit amounted to $1.19 per share, surpassing analyst expectations of $1.12 per share for adjusted earnings and revenue of $5.27-billion, according to the consensus estimate from S&P Capital IQ.
“Today, Alberta and B.C. are our fastest growing markets, and we’re gaining healthy market share,” Rogers president and CEO Tony Staffieri told analysts during a conference call Thursday. “We said we would increase competition in the West and we have.”
Rogers added 111,000 net new wireless customers during the quarter, down from 186,000 a year earlier. On a net basis, the telecom added 184,000 postpaid wireless customers but lost 73,000 prepaid customers. (Postpaid customers are billed at the end of the month for the services they used, versus prepaid customers, who pay upfront for wireless services.)
Churn – the rate of customer turnover on a monthly basis – in the telecom’s postpaid subscriber base increased to 1.67 per cent, from 1.24 per cent during the fourth quarter of 2022.
During Thursday’s conference call, TD Securities analyst Vince Valentini called the churn figure the highest “we’ve seen in a long time.”
However, Mr. Staffieri said he is “not concerned about what we’re seeing on churn.”
“What we saw in the fourth quarter was a heightened level of what I would call promotional activity in the bottom end of the market. … Our focus was on the premium,” he said.
Wireless ARPU, or average revenue per user, was $57.96, down 73 cents from a year earlier when it came in at $58.69.
Revenue from the cable business was up 95 per cent year-over-year to $1.98-billion thanks to an increase in the telecom’s customer base as a result of its takeover of Shaw. However, when adjusting for the Shaw deal, cable revenue declined by 3 per cent compared with a year earlier, chief financial officer Glenn Brandt said.
“We recognize there is more work ahead on bringing our cable business back to positive and healthy organic revenue growth,” he said.
The company also issued its financial guidance for 2024, projecting that service revenue will grow between 8 to 10 per cent while adjusted EBITDA – earnings before interest, taxes, depreciation and amortization – is expected to increase between 12 to 15 per cent.
The company anticipates capital expenditures of $3.8-billion to $4-billion and free cash flow of $2.9-billion to $3.1-billion, up from $2.4-billion in 2023.
Bank of Nova Scotia analyst Maher Yaghi said Rogers is executing well on “merger related synergies” and that its wireless results “continue to show strong momentum supported by immigration growth.”
Mr. Yaghi wrote in a research note that he expects Rogers to continue exerting additional pressure on its competitors, “but not necessarily with lower prices; actually we have seen Rogers push price increases lately.”
Rather, the competitive pressure will come from “beefed up marketing, customer service improvements with AI and new potential product offerings like fixed wireless access to fill in areas where the company does not have a fixed line high-speed internet solution,” Mr. Yaghi wrote.
Mr. Staffieri also noted that Rogers acquired Toronto-based internet service provider Comwave during the fourth quarter, the latest in a string of takeovers of independent ISPs by larger telecoms.
Shares of Rogers rose $1.05, or 1.67 per cent, to $63.85 in Thursday morning trading on the Toronto Stock Exchange.
Alexandra Posadzki