Skip to main content

The Globe and Mail

Rogers eyes network upgrades amid record customer growth

File photo of a woman walking past a Rogers sign on the way into the Rogers building in Toronto.

Mark Blinch/REUTERS

Rogers Communications Inc. is signing up new wireless subscribers at the fastest pace in almost a decade and – after a lag in spending earlier this year – will increase its focus on improving network quality.

Six months into his tenure as chief executive officer, following the abrupt departure of Guy Laurence last year, Joe Natale said Thursday he's confident in the company's networks: "Great, consistent results in terms of adding customers, in terms of growth in use, kind of speaks for itself."

Rogers added 129,000 new mobile customers on contracts in the third quarter, the most in eight years and ahead of analyst estimates in the range of 113,000. The rate of subscriber turnover was down and average revenue for every user was up as service revenue at the wireless division increased by 7 per cent to $2-billion.

Story continues below advertisement

The rosy wireless picture, part of a trend seen across the Canadian mobile market over the past year, prompted Rogers to increase its profit forecast for 2017. But that won't come with a bump in cash flow because the company is also ramping up capital spending in a bid to "improve the quality of our networks," a move that comes after signs its wireless speeds lag rivals and as its main residential competitor pours billions into a fibre-optic upgrade.

Mr. Natale said in an interview that he and Rogers chief financial officer Tony Staffieri "are perpetually dissatisfied with the things that matter most in our business. So we'll continuously be pushing the organization to do more and do better as it relates to network, as it relates to customer service, as it relates to financial performance."

A recent survey of wireless-network performance by PCMag found that Rogers lagged well behind its national rivals Telus Corp. and BCE Inc. on download speeds for LTE (long-term evolution or 4G).

Mr. Natale, who was CEO of Telus from 2014-2015, said he doesn't believe customers are overly concerned with the parameters tested in such surveys but care more about the actual experience and getting "reliable, worry-free performance."

Nonetheless, he said when he joined the company, the network team at Rogers had held off on making big decisions on new LTE technology investments, wanting to make sure they were "fully aligned" with the new boss "before we hit the button."

"We did that in the last month and a half or so and now we're busy implementing [new LTE technologies]," he said.

The Toronto-based cable and wireless company said its revenue grew by 3 per cent to $3.58-billion in the third quarter, largely on the strength of its mobile division. But that was shy of analyst estimates of $3.62-billion and Rogers shares were down 1.2 per cent, closing at $66.05 on Thursday.

Story continues below advertisement

Profit more than doubled to $467-million, but the surge was partly a result of a favourable comparison to the same time last year, when the company said it would record a $140-million writedown as it shut down its online-streaming service Shomi, a joint venture with Shaw Communications Inc.

On an adjusted basis, net income was up 22 per cent to $523-million as Rogers posted adjusted operating profit growth of 6 per cent largely on the strength of its wireless business. It reported adjusted earnings of $1.02 a share, up from 83 cents this time last year.

Rogers says it now expects adjusted operating profit growth of between 5 and 6 per cent for 2017 (up from a previously cited range of 2 per cent to 4 per cent). The company also said it will spend $100-million more than planned on its networks, increasing its projected capital expenditures for 2017 to $2.45-billion.

Mr. Natale told analysts on a conference call that demand for the iPhone 8, which went on sale in late September, has been "anemic" so far and suggested that trend was likely to continue when Apple Inc. launches the iPhone X next month.

"The iPhone X price point is about 75 per cent higher than the iPhone 7. So, it's a very expensive device," he said, adding there are also questions around how much inventory Rogers will get. (After an up-front subsidy, Rogers charges contract customers $449 for an iPhone 7 Plus with 256 GB of memory, while an iPhone X with the same amount of memory will be $799.) He said the company has factored variations in iPhone supply and demand into its updated profit guidance.

At its cable division, Rogers added 27,000 internet customers in the period – falling short of average analyst estimates of 35,000 – and lost 18,000 television subscribers.

Story continues below advertisement

BCE Inc., its main rival in the residential market, has been investing in upgraded fibre-optic networks and planning a full marketing campaign in the Toronto market next year when it has completed the majority of the city. But BCE has already started promoting its faster speeds through door-to-door sales and Mr. Natale acknowledged that its competitor was "very aggressive" in the quarter, particularly on sales of home internet as a standalone product.

Rogers will have a stronger response when it launches its IP-based TV platform using technology licensed from Comcast Corp. Mr. Natale said large employee trials will begin next month and Rogers will "soft-launch" the product by the end of the first quarter of 2018 with a full commercial launch to come later in the year.

At the media division, Rogers reported adjusted operating profit slipped 18 per cent to $65-million as salaries were up at the company-owned Toronto Blue Jays baseball team and revenue was lower compared with last year when Rogers broadcast the World Cup of Hockey. Advertising and circulation dollars at its magazine publishing business were down following a shift away from print to focus on digital.

Video: How advisors can keep client information safe from hackers
Report an error Licensing Options
About the Author
Telecom Reporter

Christine Dobby covers the Canadian telecom industry for The Globe and Mail. Before joining the Globe in May 2014 she reported for the Financial Post for three years, most recently writing about telecom and media. She has also reported for the Toronto Star and New Brunswick Telegraph-Journal. More

Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

Please note that our commenting partner Civil Comments is closing down. As such we will be implementing a new commenting partner in the coming weeks. As of December 20th, 2017 we will be shutting down commenting on all article pages across our site while we do the maintenance and updates. We understand that commenting is important to our audience and hope to have a technical solution in place January 2018.

Discussion loading… ✨