‘Unlimited’ plans leading to 50% more data use, Rogers says

Rogers Communications Inc.’s CEO Joe Natale said there has been a 50 per cent increase in data use among the 365,000 customers who’ve adopted its “unlimited” data plans in the six weeks they have been in the market. “Very healthy data usage growth, which was the behaviour we were expecting we didn’t expect it as quickly as we thought,” Natale said on a second-quarter conference call with analysts on Tuesday. Natale said one reason for that is users being okay with leaving their device’s WiFi off now, which is the experience he said they wanted. Last month, Rogers became the first national carrier to introduce data plans with no overage fees, instead opting to slow user speeds after they exceed their monthly data caps. Rogers’ competitors followed suit with their own promo offers, which Telus Corp. has since made permanent. Previous data on usage before the introduction of the no-overage plans pegged consumption at under two gigabytes per month on average, though that’s been increasing as data packages -- spurred by Shaw Communications Inc.’s strategy with Freedom and now unlimited plans -- increase. Natale didn’t specify whether the 365,000 adoptees of the new plans were generally new or upgrading customers, but said it is a combination of both. He said of those who migrated, roughly two-thirds moved up in pricing from a cheaper plan and one-third are spending less. That was not what the company was expecting. “Our expectation was that early on, the majority of customers would be downgraders and they would chase the savings quickly and the upgraders were going to take awhile -- understand the plan, understand the commitment they’re making to a higher price point. “We were quite pleasantly surprised to see the inverse happening, and so our expectation is with upgraders waking up and adopting the plan sooner than we expected, I think we should expect to continue to see that. Will it be in that direct proportion? Don’t know, but I think it’s off to a good start.” Rogers added 77,000 new postpaid subscribers in the second quarter, 45,000 less than it added in the same period last year. The company blamed the relative reduction to a “disciplined approach” around subscriber base management and “softness in the market this year” compared to last. Overall, the postpaid base grew by 336,000 to 9.23 million over the year, while prepaid numbers were down by 254,000 for a total of 1.45 million. The company also released details about its equipment financing plans launched earlier this month, which allow customers to pay for their device over a period of two or three years at $0 upfront cost, in exchange for reducing the subsidy telecoms have historically been paying to bring-down the price of the device. The financing options are common in the United States, but new in Canada. In 2015, the big telecoms said they had no interest in those kinds of financing plans, but would change their mind if the market did. Natale said in the first two weeks, more than 50 per cent have chosen the 36-month option over the 24 months, despite concerns expressed by some groups that the longer period of time could run afoul of the Wireless Code’s maximum two-year contract limit. The company spends over $2 billion a year on handsets, which includes “significant subsidies,” Natale said. Analysts have estimated that for high-end devices, subsidies could run between $300 and $500 per device. The unlimited options have, however, sparked some concern about how much runway there is left for wireless growth for the bigger players -- especially the back-and-forth promotions and data plan changes that are driving a renewed price war between the players. Canaccord Genuity analyst Aravinda Galappatthige said as much in a research note on Monday. The “consistent stream of promotions and counter promotions” that followed the new plans could lead to a short- to long-term moderating effect on the wireless industry that could last through the end of this year and into the next, Galappatthige said. He said the competitive intensity would hurt wireless-heavy players such as Rogers and Telus, whose stock he downgraded. The analyst also noted that the $75 entry point for the plans could mean that Freedom could pick off some of the market, among customers who are looking for a lower price point. Freedom added 62,000 total wireless subscribers in its fiscal third quarter this year, an increase of about 15,000 compared to the same quarter last year. Rogers’ churn -- a measure of customers leaving the company -- matched last quarter’s 0.99 per cent, which stood as a record for the company, as the new data options came near the end of the quarter. Analysts had said part of the reason for the unlimited move by Rogers was to improve its churn rate. Average revenue per user was up $1.13 to $56.73 compared to the same period last year. Natale said the industry should expect to see short-term moderation in the growth of unlimited plans, but said he was still optimistic about growth in wireless, especially when factoring in that wireless penetration is still only about 87 per cent in Canada and oversubscribed in the United States. “We’re still seeing a healthy, vibrant wireless market, with penetration growth opportunities, with data growth opportunities, and we think we picked a good price point with respect to these unlimited plans,” Natale said. Despite overage fees constituting less than five per cent of Rogers’ balance sheet, Natale said that will still spell some moderation to its growth in the short-term. But for the rest of the year, the company doesn’t expect to see a “material impact” from that loss on its wireless service revenue. Galappatthige said in a Tuesday note that the third quarter will “reveal a lot more as the initial impact of declining overage takes effect,” adding: “We suspect that the current volatility in the market may take two or three quarters to play out.” Total wireless revenues, including both service and equipment, were up one per cent to $2.24 billion. The company has seen more than just its no-overage plans hit the market: it has also partnered with Waterloo-based Communitech for a 5G lab. Earlier this year, the company acquired the biggest number of licenses for the 600 MHz spectrum, widely regarded as important for the deployment of the next-generation 5G networks. Natale said on the call Rogers will begin deploying the spectrum later this year. Television revenues were down one per cent to $355 million, with subscriber losses of 26,000 this quarter, 17,000 more than the same period last year. The segment lost 88,000 subscribers from the same quarter a year ago, for a total base of 1.63 million. The loss of TV subscribers follows a general industry trend, which was offset by customers moving to higher content tiers and new Ignite TV subscribers. Ignite is the company’s new IPTV product. Natale said on the call that the Ignite subscribers make up 10 per cent of that segment. “Our goal is to migrate the entire base over the next couple of years,” Natale said on the call. Internet revenues were up seven per cent to $573 million compared to last year. The company added 1,000 fewer subscribers in the segment this quarter, 22,000, compared to the same period last year. But the overall base increased by 96,000 over that period to 2.5 million. The media segment saw revenues decrease by three per cent to $591 million over the year, the result of the sale of its publishing business and lower Toronto Blue Jays revenue. That was partially offset by higher advertising and subscription revenue through its Sportsnet properties. Total revenues were up one per cent to $3.8 billion, as net income was up 10 per cent to $591 million. The CRTC is also in the midst of a consultation for its upcoming wireless review, a hearing for which will be held in January 2020. As part of that process, it’s asking the telecoms to tell it how they are conforming to a federal government directive, formalized last month, that orders the CRTC to look at how the regulator’s decisions promote competition and affordability. “We are perfectly aligned with the overall agenda of the government on the regulatory front with respect to making wireless services more accessible and more affordable for Canadians,” Natale said on the call. “My simple view of it is: the more we focus on what’s important for the customer, the more we focus on the customer experience as a whole, the more aligned it becomes with the overall regulatory view and policy of government.” — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

‘Unlimited’ plans leading to 50% more data use, Rogers says

News | July 23, 2019

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‘Unlimited’ plans leading to 50% more data use, Rogers says

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