TORONTO — Rogers Communications kicked off its industry’s fall earnings season Thursday by reporting a healthy recovery from the early months of the COVID-19 pandemic, although the results remained lower than last year as its advertisers and consumers continued to grapple with the virus’ economic fallout.
The Toronto-based wireless, cable and media company said Thursday it earned $512 million or $1.01 per diluted share for the quarter ended Sept. 30.
That was down from a profit of $593 million or $1.14 per diluted share in the third quarter of 2019 but up from the second quarter, when the pandemic’s first wave gripped the country.
On an adjusted basis, Rogers beat analyst estimates with $1.08 of earnings per diluted share — above an average estimate of 78 cents, according to financial data firm Refinitiv.
“Soaring over a low bar,” in the words of one analyst’s initial commentary.
Rogers B shares rose 11.6 per cent to close at $58.40, the highest close since mid-June.
Rogers chief executive Joe Natale told analysts in a conference call that the results showed “we are managing the environment effectively, and our long-term strategy is sound.”
He said that competition between Canada’s wireless carriers intensified in the third quarter, when most of them began reopening stores after mandatory shutdowns, especially involving flanker brands (which include the company’s Fido and Chatr services).
Other flanker brands in the market include BCE Bell’s Virgin Mobile and Lucky Mobile and Telus Corp.’s Koodo and Public Mobile brands. Those two national carriers and Quebecor, which owns the Videotron telecom business in Quebec, report their results Nov. 5.
Shaw Communications, which owns Freedom Mobile and the new Shaw Mobile brands, has its next quarterly report on Oct. 30 before markets open.
Natale said that he thinks the wireless industry’s second quarter was down by 10 or 15 per cent from last year but the year-over-year comparison was better after June.
“In Q3, we bounced back,” Natale said. “We’ll see when everyone reports what it looks like, but we believe it was maybe five percentage points off of last year or roughly the same as last year.”
Revenue from across the Rogers business totalled nearly $3.67 billion, up from the second quarter but down from $3.75 billion in the same quarter last year.
Rogers, which generates more than half of its total revenue from wireless services and related products such as smartphones, said it now has 2.2 million wireless customers (about one-fifth of the total) on unlimited plans — part of a strategic switch begun in mid-2019..
However, wireless overage fees were down about $50 million from last year’s third quarter, and overage revenue is expected to continue to gradually decline until mid-2021.
Rogers Wireless also got $90 million less in roaming revenue in this year’s third quarter, amid global travel restrictions during COVID-19.
Overall, the wireless segment generated $2.2 billion of revenue in the third quarter, down four per cent from last year. But the biggest hit was from a nine per cent decline in service revenue.
On the other hand, equipment revenue was up 12 per cent to $576 million as Rogers added 138,000 postpaid subscribers, up 34 per cent compared with a year earlier.
Revenue from the company’s cable and internet services fell one per cent from last year with consistent service revenue and a decrease in equipment revenue.
Rogers Media revenue rose one per cent, primarily as a result of higher revenue associated with the resumption of NHL hockey, partially offset by lower revenue at the Toronto Blue Jays, which were unable to play home games in Canada due to COVID..
Natale had relatively little to say about his company’s attempts to buy the Canadian business of Cogeco Inc. and its main operating subsidiary Cogeco Communications, which has cable and internet systems in Quebec, Ontario and the eastern United States
Asked during the Thursday call if Rogers might sell its stake in Cogeco if it can’t buy its Canadian operations, Natale demurred.
“The offer expires on November 18. I don’t think it’s fair to provide any other comments on the dynamics of the situation, the dynamics of the offer,” Natale said.
He went on to say, that if the offer isn’t accepted, Rogers management and its board will review its priorities for allocating capital spending, without discussing alternatives.
Natale said previously that Rogers has wrestled for years with what to do with a 33 per cent direct and indirect equity stake in Cogeco, which the latest Altice offer values at about $5.2 billion..
This report by The Canadian Press was first published Oct. 22, 2020.
Companies in this story: (TSX:RCI. B, TSX:CGO, TSX:CCA, TSX:BCE, TSX, T, TSX:SJR. B, TSX:QBR. B)
David Paddon, The Canadian Press