Rogers revenue drops 5%, withdraws guidance due to COVID-19

Rogers Communications Inc. recorded a five per cent drop in revenue in the first quarter of 2020, as the COVID-19 pandemic affected wireless and media revenues in the final few weeks of the quarter. The company withdrew its annual financial guidance issued in January due to the difficulty in predicting the financial impact of COVID-19 going forward, chief financial officer Tony Staffieri told analysts on a quarterly earnings call, but it remains confident of its “financial strength and ability to efficiently manage the business.” Overall revenue fell by $171 million compared to 12 months earlier, to $3.42 billion, while wireless revenue for the quarter ending March 31 also reduced by five per cent, falling to $2.08 billion. The wireless revenue decrease was driven by a 17 per cent decline in wireless equipment revenue, which the company said in a press release was due to “lower gross additions and device upgrades by existing customers, in part due to the COVID-19 pandemic.” Wireless service revenue also dropped by two per cent compared to 2019, which the company attributed to lower roaming revenue — stemming both from less travel and the temporary suspension of fees for Canadians stuck abroad in certain countries — as well as a decrease in overage revenue due to a “strong” adoption of unlimited data plans. Media revenues fell by 12 per cent, due to lower advertising and sports revenue, including at the Rogers’ owned Toronto Blue Jays, caused by the suspension of major sports leagues in mid-March. Staffieri told analysts that the company’s media business would likely continue to incur losses in the near term as the suspension of live sporting events continues. “While reduced content costs offset some of the revenue loss certain other fixed costs will cause us to be negative for a period of time,” Staffieri said. Cable revenues were flat, decreasing slightly from $976 million in 2019 to $973 million. The company recorded a profit of $352 million for the quarter, a 10 per cent decrease on the $391 million it recorded in 2019. Rogers is the first incumbent telecom to report financial results for the first quarter of 2020, but CEO Joe Natale said the fact that the impacts of COVID-19 were only experienced in the last few weeks of March meant they were not “reflected in the usual sense of the run rate of our business” and the company had learnt “a lot more” in the first three weeks of April. Natale told investors that despite the “meaningful slowdown” in March, the company’s cable and wireless divisions were in line with the company’s expectations going into the quarter, and was bullish about the company’s long-term viability. “In this environment, near term monthly and quarterly results are not a reflection of our company's underlying fundamentals, financial strength, the quality of our assets, the soundness of our strategy, and long term growth prospects, or the effectiveness of our daily execution,” Natale said. “While there will be additional pressure in the coming months as Canadians work together to defeat COVID-19. Rogers is a financially strong company. It provides services that matter more than ever before in people's lives. We will navigate through this effectively.” Rogers has closed 90 per cent of its retail stores due to the pandemic, and Natale told analysts he believed it was “highly inappropriate in this environment to be offering or responding to aggressive promotions that drive foot traffic in stores,” despite its impact on its near-term business. Rogers has moved to 100 per cent “assisted” installation for its internet and TV products, which Staffieri said saves the company 30 per cent of the cost of technician-enabled installations. “And these savings will get higher as we move to full self install models at a later time,” Staffieri told analysts. Looking forward at the potential financial impact of COVID-19 in future quarters, Staffieri said the company anticipated that bad debt costs could increase in the second half of the year due to rising unemployment levels, saying there had been “early increases” in the number of calls about bill payments. Staffieri said the company was also seeing “early signs” of customers looking to downsize their cable and wireless packages as they “right size their spend to their new cash flow realities.” “We expect this volume will pick up depending on the depth and duration of the economic downturn and will ultimately impact the recurring ARPUs and revenue. All of these items as well as others that may arise are difficult to estimate at this time,” Staffieri told investors. Rogers lost 6,000 net postpaid wireless subscribers in the first quarter of 2020, compared to the 23,000 it added in the first quarter of 2019. It had 9.43 million total postpaid subscribers as of March 31, up from the 9.18 million it had at the same point in 2019. Churn decreased six base percentage points, dropping from 0.99 per cent to 0.93 per cent. In prepaid wireless, the company reported losses of 66,000 subscribers, 10,000 more than it lost in 2019. Rogers had 1.34 million total prepaid subscribers as of March 31, down from the 1.57 million it had at the same point in 2019, while churn increased from 4.69 per cent to 4.98 per cent. Wireless ARPU decreased by $1.28 to $52.85 as overage and roaming revenues declined. In internet service, Rogers added 17,000 net subscribers, 3,000 more than in 2019, for a total subscriber base of 2.55 million. That total subscriber figure is 107,000 higher than at the same point last year. Rogers has ceased reporting on cable television subscribers due to “shifting our product offering to focus on IPTV”, according to its financial statement, and a Rogers spokesperson declined to release the figures to The Wire Report. The company added 91,000 new IgniteTV subscribers in the quarter, 44,000 more than a year ago. IgniteTV now has a total subscriber base of 417,000, a 369 per cent increase on the 89,000 it had in March 2019. — With reporting by Adam Langenberg at alangenberg@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Rogers revenue drops 5%, withdraws guidance due to COVID-19

News | April 22, 2020

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Rogers revenue drops 5%, withdraws guidance due to COVID-19

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