Rogers Communications Inc.’s RCI-B-T July network outage weighed on its third-quarter results, but executives called its impact “isolated” amid a wave of higher demand for wireless and mobile services that is boosting Canada’s telecommunications industry.
In the first quarterly report from the company to include the effects of the outage, Rogers said its net income fell 24 per cent compared with the same period last year. It attributed the drop to billing credits it gave customers to compensate them for the outage, and to higher costs of financing its proposed acquisition of Shaw Communications Inc. SJR-B-T
Net income for the quarter ended Sept. 30 was $371-million, down from $490-million last year. Earnings per share were down 24 per cent to $0.71.
The outage lasted for most of a day and left millions of Rogers customers across the country without wireless, internet and home-phone service. The report says the customer credits amounted to a one-time charge of $150-million, split between $91-million in wireless credits and $59-million in cable credits. The charge was reflected on the company’s income statement as a reduction of revenue.
Despite the outage, the company’s overall revenue increased 3 per cent compared with last year, to $3.74-billion.
This was driven by strong growth in Rogers’s wireless division, in line with its peers. The company added 221,000 net mobile-phone subscribers, up 30,000 from last year. Of them, 164,000 were on postpaid plans (which are billed at the end of each month) – down 8.8 per cent from last year. The other 57,000 were prepaid, up 418 per cent.
Canada’s telecommunications giants all saw increased interest in mobile plans in the quarter. Rogers’s additions to its subscriber base lagged slightly behind Bell Canada, owned by BCE Inc., which added 224,000 new customers in the quarter, but surpassed Telus Communications Inc. T-T, which added 150,000.
In an analyst call, Rogers chief executive Anthony Staffieri attributed this growth to increased travel, a widespread return to offices and increased immigration. The boost also came from higher demand for the company’s unlimited data plans, which are more expensive than its other plans. Data usage per user was up, on average, by a third over last year. But Mr. Staffieri warned that growth in revenue from roaming fees could slow next year if a recession curbs international travel.
Despite the public scrutiny after the outage, churn rates – the proportion of customers who decide to stop doing business with a company – came in lower than some analysts had expected. In an investor note, Canaccord Genuity analyst Aravinda Galappatthige noted that Rogers’s postpaid phone churn came in at 0.97 per cent, “notably higher” than last year, when it was 0.85 per cent. But the figure was still lower than the investment firm’s 1.02-per-cent estimate. Telus’s postpaid churn rate was 0.76 per in the quarter.
In the analyst call, Mr. Staffieri said that there was “nothing alarming” in the churn rate.
“In the back half of the quarter, our gross adds and our churn … were back on trends that we had prior to the outage,” Mr. Staffieri said.
Rogers’s cable business was also affected by the outage. The company reported a 4-per-cent decline in cable revenue, partly as a result of the $59-million in outage cable credits, as well as higher promotional costs. The company faced “very aggressive and opportunistic” cable competition from other telecom companies, Mr. Staffieri said.
The hit to Rogers’s net income from its Shaw-acquisition debt came in the form of a $139-million payment on its Shaw senior notes, which it issued earlier this year. Rogers is now facing off against Canada’s Competition Commissioner in a four-week-long hearing before the Competition Tribunal over the proposed $26-billion acquisition.
If the deal doesn’t close by the end of this year, Rogers will be required to pay around $250-million in fees to lenders. It has already paid $520-million in fees to extend the initial Dec. 31 deadline by a year to 2023.
Revenue from the company’s media business increased 12 per cent in the latest quarter. Rogers owns Toronto’s baseball team, the Blue Jays, and the radio and television broadcasting rights for all of its games. The company said the increase came from its sports facility, the Rogers Centre, reaching full audience capacity after several years of pandemic-related shutdowns and limitations.
As of midday, shares of Rogers were up 1.6 per cent.
Irene Galea