Rogers Communications Inc. shook off a rocky fourth quarter and an increased competitive threat from Freedom Mobile, winning far more wireless subscribers in the first three months of the year than expected.
The Toronto-based telecom and media company said on Thursday after markets closed that it added 95,000 new mobile customers on contract, beating the average estimate of 58,000 that analysts had predicted.
It was an improvement from the last quarter of 2017, when the company said it added 72,000 contract subscribers but estimated it lost 35,000 due to a computer glitch that plagued it during a five-day frenzy of wireless deals in December.
Rogers’s first-quarter wireless numbers also come just a week after Shaw Communications Inc.’s Freedom Mobile division doubled analyst estimates by adding 93,500 contract customers in its three-month period ended Feb. 28. In recent months, Freedom, which only operates in British Columbia, Alberta and Ontario, has improved its network and begun offering the iPhone, becoming more competitive with Rogers and its fellow national carriers, BCE Inc. and Telus Corp.
“In terms of four-player dynamics, we’ve been competing against some of these fourth players for the better part of 10 years,” Rogers chief executive Joe Natale said on a conference call with investors, referencing players such as Freedom Mobile and Quebecor Inc.’s Videotron Ltd.
“It’s not something that’s intimidating at all. It’s something we’re very comfortable doing,” he said, pointing to his company’s stronger network compared to the fourth players as well as the advantage for Rogers in distribution as its wireless services are sold in roughly 2,500 retail locations compared to just hundreds for the smaller operators.
Mr. Natale called the quarter “a rock solid start to the year,” and added later that “churn is the real story in Q1,” referencing the rate of customer turnover. Rogers reported a churn rate for contract wireless customers of 1.08 per cent in the period, below analyst estimates and a significant improvement from 1.48 per cent in the fourth quarter.
He said Rogers has not seen a spike in the number of customers leaving to go to Freedom Mobile (when subscribers switch providers, the carrier can tell which competitor they are leaving for). He pointed out that the Canadian market overall continues to grow at a fast pace, saying, “There’s an opportunity for growth in the marketplace and room for the fourth player to participate in that growth.”
Rogers also reported growth in internet customers, adding 26,000 in the quarter while it lost fewer television subscribers than this time last year (12,000 compared to 24,000 last year) as it continues to test an improved, internet-based TV platform that it plans to roll out “later this year.”
The company reported $425-million in profit in the first quarter, up 37 per cent from the same period last year, or 83 cents per share, up from 60 cents per share . On an adjusted basis, Rogers earned 93 cents per share, up from 64 cents last year and ahead of analyst estimates of 75 cents.
Overall revenue was $3.63-billion, up 8 per cent from last year, while adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $1.34-billion, up 14 per cent from the first quarter of 2017.
RBC Securities analyst Drew McReynolds said that the company beat expectations on revenue and EBITDA, primarily because the media division reported a 12-per-cent increase in revenue to $532-million. That was due to higher payment to the Toronto Blue Jays from Major League Baseball and an earlier start to the team’s regular season this year.
However, he added that he sees the “underlying results as better than expected, driven by solid wireless postpaid net additions and wireless ARPU [average revenue per user] growth and slightly better cable [subscriber numbers].”