‘Technical issue’ hurt Rogers churn during Dec. wireless promos: CEO

Rogers Communications Inc.’s systems had a technical glitch that negatively affected the company as it dealt with a high number of customer requests during an industry-wide promotional frenzy in December, executives said Thursday. In its fourth-quarter results, Rogers said it added a net 72,000 postpaid wireless subscribers in the three-month period ending Dec. 31, 21,000 less than in the equivalent quarter last year, and lost 8,000 prepaid subscribers, compared to the 38,000 it added a year ago. During a conference call with analysts, CEO Joe Natale said that during the quarter, there was a technical issue in which Rogers’ system couldn’t keep up with the large amount of customer requests. “It was that five days of intense promotional activity where we had some issues with our price plan change system that really inhibited our ability to kind of address customers who are requesting a price plan change,” Natale said in response to analyst questions, according to a transcript. “So, as a result, they chose to go elsewhere during that period.” Natale also said during the call that “we have addressed the root cause, and this one-time occurrence will not impact our 2018 run rate.” In December, the three incumbents all launched limited-time offers of 10 GB of wireless data for an unprecedented $60. Social media reports indicated that the plans attracted much attention and caused long customer support line wait times across the industry as people are tried to change their plans, in some cases not being able to get through at all. The promos followed the introduction of plans from Shaw Communications Inc.’s Freedom Mobile at the same price point in October. “Management believes the impact of this glitch equated to -35k fewer postpaid net additions,” RBC Capital Markets analyst Drew McReynolds wrote in a post-conference-call note. “Since the mid-December promotion, management confirmed that all wireless performance metrics have returned to normal and that wireless momentum from 2017 was continuing into 2018. While the tactical rationale behind Rogers' $60/10GB promotion remains unclear to us, management vehemently argued that the promotion was not in response to a negative impact from Shaw/Freedom Mobile,” he noted. During the call, executives were asked about why Rogers chose to kick off that intense competition. Natale responded that the company noticed the market was quiet in the pre-Christmas period. “And we made a call to pull forward that promotional volume or put forward that seasonal volume. The debate we was we pull it forward or wait for someone else to pull it forward. And we thought the best way to kind of create a smoother promotional period was to create a sale or promotion for five days, a very limited duration,” in Alberta and British Columbia. The launch of a 5 GB for $60 plan with a 5 GB bonus offer “quickly got escalated over the next couple of days by our competitors” to a 10 GB plan for $60 that was also available in Ontario and with a handset subsidy. He said the frenzy reinforced “the fact that there is certainly a voracious appetite for data in the marketplace.” Rogers also reported a blended average revenue per user (ARPU) of $63.46, up from $60.72 a year earlier. The company noted in its results that it had, in October, and “on a prospective basis,” adjusted its wireless postpaid subscriber base “by 207,000 subscribers to remove a low-ARPU public services customer that is in the process of migrating to another service provider. We believe adjusting our base for a customer of this size that migrates off our network provides a more meaningful reflection of the underlying organic performance of our Wireless business.” In October, BCE Inc. announced it would become the primary supplier in a deal to provide 230,000 cellular devices for use in more than 100 departments and agencies across the Canadian government, a move that Barclays Capital noted could hurt its ARPU. Rogers ended the quarter with 8.7 million postpaid and 1.8 million prepaid subscribers. Natale said on the conference call that overall, 2017 saw the best wireless financial results the company has had since 2009. Revenues in the quarter were $3.63 billion, a three per cent increase from a year earlier. That was largely driven by increases in the company’s wireless revenue, due to subscriber growth and more subscribers taking up higher-rate plans, Rogers said. That revenue was up six per cent, to $2.2 billion, while its cable division was up two per cent to $871 million on internet revenue growth. The media division was down four per cent to $526 million. That decrease was mostly due to “lower revenue from the Toronto Blue Jays, primarily due to the postseason success in 2016, and lower publishing-related revenue due to the strategic shift to digital media announced last year, partially offset by higher Sportsnet revenue and increased sales at Today’s Shopping Choice (TSC),” the quarterly document outlined. Net income was $419 million, an increase from the $9 million loss in Q4 of 2016, which was caused by Rogers’ killing of its in-house IPTV project and higher adjusted operating profit. On the analyst call, Natale gave an update on Rogers’ progress on adopting the X1 platform from Comcast Corp. the company chose instead of developing its own platform. Dubbed Ignite TV, the service is currently being tested by employees, he said. “And at some point later this year, we'll have a full-on, above-the-line TV commercials, billboards, commercial launch,” he said, though declining to offer details on the timing of that launch. In the fourth quarter, Rogers lost 13,000 TV subscribers, the same as a year ago. It added 17,000 internet subscribers, fewer than the 30,000 it added in Q4 2016, ending fiscal 2017 with 2.2 million internet subscribers and 1.7 million TV subscribers. — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Bryson Masse at bmasse@thewirereport.ca

‘Technical issue’ hurt Rogers churn during Dec. wireless promos: CEO

News | January 25, 2018

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‘Technical issue’ hurt Rogers churn during Dec. wireless promos: CEO

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