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Rogers said Tuesday that 365,000 customers have moved to one of the plans it introduced six weeks ago, noting that two-thirds of those subscribers actually chose to move from a cheaper plan into one of the 'unlimited' options.

Darren Calabrese/The Canadian Press

Rogers Communications Inc. added fewer new wireless customers than expected in the second quarter but says demand for new wireless plans that have no additional fees for going over monthly data limits has been strong, with many customers willing to pay more for the option.

The Toronto-based communications provider said Tuesday that 365,000 customers have moved to one of the plans it introduced six weeks ago, noting that two-thirds of those subscribers actually chose to move from a cheaper plan into one of the “unlimited” options (Rogers dramatically slows users’ browsing speeds after they hit a monthly data cap but doesn’t charge additional fees).

Rogers was the first Canadian telecom to shift to the new pricing model. Rivals BCE Inc. and Telus Corp. quickly followed with similar plans.

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Chief executive Joe Natale said Rogers conducted a series of focus groups before making the changes and found the biggest customer concern was overage charges, or fees for exceeding monthly data limits. The company determined that even if it lost some revenue from eliminating those charges, it would reduce customer frustration and cut the costs that come with complaints to call centres and issuing credits to subscribers.

Rogers initially believed there would be more demand for the new plans from people on higher-priced subscriptions, but it was the reverse, with subscribers on cheaper plans eager to upgrade to the overage-free options.

“We’re pleasantly surprised to see that mix go in that direction. It supports the fact that customers really do want worry-free access to data,” Mr. Natale said in an interview. "It is still early days but we’re very pleased with what we’re seeing so far."

He said Rogers has seen a five-fold increase in the number of customers making price-plan changes since the launch of the new plans. Terrie Tweddle, senior-vice president of communications and social media, also said the length of customer calls has gone down by five minutes since the company introduced the new options, which are simpler for sales representatives to explain or for customers to purchase online without assistance.

Some financial analysts have warned the pricing changes could lead to slower revenue growth and on a conference call with analysts on Tuesday, executives acknowledged that Rogers will see a “moderation” of wireless revenues in part because overage fees account for about 5 per cent of current revenue. But the company believes the changes will be manageable and did not lower its financial guidance for the year.

Rogers also recently launched new $0-down smartphone offers, allowing customers to finance the cost of a device over two or three years. There is some uncertainty as to whether the three-year option complies with federal regulations, but Mr. Natale said he believes it is in line with “the overall agenda” of the government in terms of promoting more affordable wireless options. He said more than half of customers who have signed up for device financing in the past two weeks have selected three-year terms.

The benefit to Rogers of the switch to device financing is that it will spend less on smartphone subsidies as customers will pay off the entire cost of the handset over time. Under most existing options, wireless carriers still subsidize part of the device cost.

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Rogers added 77,000 contract wireless customers in the quarter, down from 122,000 in the same period last year and falling short of average analyst expectations in the range of 80,000 to 85,000.

The decline comes after rival Shaw Communications Inc.’s regional carrier, Freedom Mobile, added 62,000 new subscribers in the three months ended May 31, up from 47,000 during the same period in 2018.

But Rogers does not attribute the result to increased competition, saying it added fewer subscribers as a consequence of “overall softness in the market” and its own “disciplined” approach, suggesting it offered fewer incentives, such as large handset subsidies or promotional deals on data plans to win customers.

Canaccord Genuity analyst Aravinda Galappatthige said that the second-quarter numbers met profitability expectations but came up short on new subscriber additions. He expects the wireless market to face some volatility over the next few quarters.

Rogers’s second-quarter revenue from wireless service increased by 3 per cent to $1.8-billion and the average monthly wireless bill was $67.16 in the quarter, up from $64.80 one year ago.

At the cable division, Rogers added 22,000 new internet customers, but lost 26,000 television subscribers, a worse result than analysts expected. But revenue for the cable unit still increased by 1 per cent to $997-million.

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Rogers’s overall revenue increased by 1 per cent to $3.8-billion, slightly less than consensus forecasts, while profit grew by 10 per cent to $591-million. Rogers earned $1.15 a share or $1.16 after adjustments, also just short of expectations.

Adjusted EBITDA was up 9 per cent at $1.6-billion, ahead of estimates, which helped drive the overall profit growth. (EBITDA means earnings before interest, taxes, depreciation and amortization.) That increase stemmed in part from accounting changes that made for a favourable comparison with last year’s numbers. But Rogers said customers spending more on internet services at the cable division and lower Toronto Blue Jays player salaries at Rogers Media also contributed to the growth.

The sale of Rogers’s magazine business during the quarter contributed to lower revenue at the media division but higher EBITDA, the company said.

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