Back in November, 2000, Rogers Communications Inc. made a daring leap, becoming the first big Canadian carrier to move to a new wireless technology called GSM.
The company realized the cellphone industry was moving beyond basic calls to more advanced data services that would require much faster network speeds, according to chief technology officer Bob Berner, a long-time Rogers employee.
The bet was that TDMA technology, which Rogers was using at the time, would not become the global standard and GSM, or global system for mobile communications, would win out.
"It was impossible to believe GSM could be derailed as the global choice for technology," Mr. Berner said yesterday.
Good call. Seven years later, Rogers is still the only GSM carrier in Canada. But it has no regrets; GSM has since become the world standard for wireless technology.
That gives Rogers an edge over its two biggest rivals, Telus Corp. and Bell Canada, which use another technology called CDMA - otherwise known as code division multiple access - that is mainly used in Canada and the United States.
Rogers, for example, has a virtual monopoly when it comes to Canadians making calls abroad. And it tends to get cellphones quicker and at a cheaper price because they are being made in greater numbers for a global market, according to observers.
It has translated into growing revenue and dividends in recent years. The Toronto-based company continued its winning streak yesterday, reporting a 75-per-cent jump in third-quarter profit. The wireless business generated a lot of those gains, posting an 18-per-cent increase in revenue to $1.44-billion.
In the blockbuster fall season when people are returning to school and work, Rogers added 243,100 cellphone customers, a 20-per-cent jump from the year-earlier period.
As for its existing customers, they are spending a lot more money on data services, whether it's surfing the Internet or playing games. Customers on contracts now spend $75.15 each month on average, $8.32 more than just two years ago.
On the earnings conference call yesterday, Rogers chief executive officer and founder Ted Rogers trumpeted his GSM advantage, claiming his technology of choice provides faster service. Rogers is now testing peak download speeds of 7.2 megabits a second (Mbps), about double its current pace. Telus and Bell offer top speeds of just over three Mbps.
"Until they finally learn the lesson of their past and convert over to GSM, they will not be able to match the speeds we have," Mr. Rogers said.
Mr. Berner said the choice to move to GSM was "blindingly clear" for Rogers back in 2000.
Another source, however, said a new investor in Rogers' wireless business at that time - global cellphone carrier BT - told them that GSM was the future. BT's partner in the Rogers investment, which was unveiled in August, 1999, was AT&T of the United States. AT&T and Rogers switched to GSM in 2001.
"It's just so hard to say who was the chicken and who was the egg because everyone all reached the same conclusion," Rogers' Mr. Berner said.
Rogers further strengthened its wireless business by outbidding Telus and snapping up the only other GSM carrier in Canada, upstart Microcell Telecommunications Inc. in 2004. At that point, Rogers leapfrogged Bell for the top wireless spot.
"It's been the right move at the right time," said National Bank Financial analyst Greg MacDonald.
He said Rogers' timing was particularly good because the BlackBerry wireless devices was just starting to catch on. Rogers could offer executives global roaming, and often access to the newest BlackBerrys first, Mr. MacDonald explained.
That has helped Rogers attract more business customers for its wireless service, an area where it traditionally lagged, he added.
Rogers' cable business has also had some fortunate breaks in recent years. Cable providers have found it easier to add telephone services than phone carriers expanding into television.
Revenue at Rogers' cable business gained 12 per cent to $899-million in the third quarter. Rogers signed up 9,100 clients for basic cable, 54,800 for digital cable, 55,000 for Internet and 81,200 for telephone in the quarter.
The company, however, has said the cable unit needs to improve its profit margins. As part of that effort, Rogers Internet service has reached a new deal with Yahoo Inc. that will see the two share ad revenue next year instead of Rogers paying Yahoo portal fees.
ROGERS (RCI.B)
Close: $47.40, down 74 cents