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Toronto-based cable and wireless company Rogers Communications will post its third-quarter financials on Thursday.MARK BLINCH/Reuters

Rogers Communications Inc. kicks off the telecom earnings season this week with analysts predicting it will continue to ride a wave of growth in the Canadian mobile market even as the latest iPhone release puts pressure on carriers subsidizing the cost of the pricey device.

The Toronto-based cable and wireless company will post its third-quarter financials on Thursday and, as the first of Canada's three national carriers to report, its results often provide an early sign of how the wireless business as a whole fared in the most recent quarter. (BCE Inc. and Telus Corp. report on Nov. 2 and Nov. 3, respectively.)

"Given the sustained surge in wireless fundamentals over the past year across the incumbents and Rogers's own ascendency, we believe a key focus in the quarter will be around maintaining wireless profitability growth," Canaccord Genuity analyst Aravinda Galappatthige wrote in a report last week.

For more than a year now, the industry has reversed an earlier trend of decline in the number of new contract customers, which are known as postpaid subscribers.

In the first two quarters of 2017, Canadian carriers added a total of 473,000 new postpaid customers, compared with 247,000 over the same period in 2016 and a loss of 166,000 in the first half of 2015. Company executives and experts have attributed the surge to population growth from immigration, economic strength and people passing on used smartphones to younger children and teens as well as older relatives who didn't previously subscribe to cellular service.

Scotia Capital Inc. analyst Jeff Fan said on Friday that he expects "strong wireless results for Q3" for Rogers, pointing to positive trends at the Big Three on both attracting new customers and keeping the rate of subscriber turnover low.

And he expects the company can maintain good trends on profit, attributable in part to indications from U.S. carriers that sales of the iPhone 8 have been slow. Apple Inc. released the device on Sept. 22 and the price to buy it outright starts at $929 in Canada. But carriers pay part of that cost upfront for customers who sign contracts, and iPhone releases can lead to heightened spending on customer retention and acquisition.

"We believe iPhone 8 volume has been fairly muted in late Q3 and through Q4 so far," Mr. Fan said. "As a result, we do not expect a significant spike in smartphone subsidies to impact wireless EBITDA or margins for Q3." EBITDA means earnings before interest, taxes, depreciation and amortization, and is a closely watched metric for telecom companies.

Mr. Fan estimates Rogers added 110,000 new postpaid wireless customers in the third quarter and in his Friday report, he increased his 12-month share price target on the company to $73, up from $71.50.

Earlier this month, the federal government said Shared Services Canada awarded a six-year contract of up to $432-million for cellular services to BCE, which will replace Rogers as the primary provider. Analysts estimate this could mean a loss of about 200,000 customers for Rogers and could lead to increased churn next year. However, since the contract is based on a discounted rate, it could actually result in a slight increase in Rogers's average revenue per user (ARPU).

Analysts will also be looking carefully at the number of internet customers Rogers managed to attract in the period as it continues to fight its main telephone-company rival, BCE, for dominance of the residential market. Rogers plans to roll out an improved TV product next year. In the meantime, it has been taking advantage of the faster Internet speeds it can offer on its cable infrastructure as BCE invests in faster fibre networks but still lacks full coverage of its service area.

Scotia's Mr. Fan estimates Rogers attracted 33,000 new Internet subscribers while Canaccord's Mr. Galappatthige projects the company added about 38,000 in the third quarter.

Analysts on average predict Rogers will report adjusted earnings per share of $1 on revenue of $3.6-billion for the period.

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Reuters

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:00pm EDT.

SymbolName% changeLast
BCE-N
BCE Inc
-0.82%33.98
BCE-T
BCE Inc
-1.01%46.03
RCI-N
Rogers Communication
-0.49%41
T-T
Telus Corp
+0.37%21.67
TU-N
Telus Corp
+0.63%16.01

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