There were a lot of moving pieces contributing to Rogers Communications’ increasing both revenue and profit in its first quarter, including gains in both wireless and broadband customers, wireless customers upgrading to smartphones, and rising average revenue per user.
The company reported a 3 percent increase in revenue during the quarter, to $3.02 billion, and an increase in net income to $414 million, both compared the first quarter of the prior year.
Rogers lost 25,000 TV customers, leaving it with 2.18 million at the end of the quarter. Those losses were measured against a gain of 26,000 broadband subscribers, bringing the total of wireline Internet customers to 1.89 million. Toss in 17,000 new phone subscribers, and Rogers increased its overall number of revenue generation units (“total service units”) by 35,000, to 5.1 million.
Rogers CEO Nadir H. Mohamed said, "You can see the net effect of the current environment -- competitive environment on the basic Cable subscriber net, as well as the impact of retention and promotional offers that we've needed to utilize and the dampened rate of growth on the TV revenue line. Having said that, you also see the continued growth on the Internet and Cable telephony revenue line, which, frankly, more than offsets the pressure on TV revenue and enables us to continue to grow the top line in this segment of the business. Our focus on driving Internet and Cable can be seen in the strong top line growth that we experienced in Q1. And as you saw at Wireless, we also benefited from ongoing solid cost management in our Cable Operations segment, where we recorded margins, which are up both year-over-year and sequentially." The comments are from a transcript of the company's conference call with analysts provided by Seeking Alpha.
Mohamed continued, "What we're seeing in the market is a twofold, I'll call it, promotional activity. On the one hand, what you have is our primary competitor deep discounting on the IPTV side as they rolled that out through our footprint. And obviously, what we're trying to do is to make sure that we stay focused on the one that we're promoting, which is Internet, but, at the same time, protect our share in the Cable TV side. That's a balance between matching some of the discounts and what we do in terms of margin. But frankly, Rob, our focus is what we believe the future is and where we see growth, which is Internet. And so we're squarely on the path of leveraging our superior Internet service."
The company said its cable unit “began a substantial conversion of the remaining analog cable customers onto its digital cable platform during 2012.” While the company had to lay out money for the new equipment, in the long run the migration will eventually enable the reclamation of network capacity, as well as reduce network operating and maintenance costs. Rogers expects to conclude its analog to digital migration in 2015.
Meanwhile, the company is pursuing M2M connectivity, began offering home monitoring services, and invested in major league sports teams in which it has ownership stakes (baseball’s Blue Jays and hockey’s Maple Leafs) by bringing in high-priced players, and also spent money to secure rights to broadcast the games of other pro teams (football’s Bills and hockey’s Canucks, Flames, Senators, and Oilers).