Rogers getting reluctant on rollbacks: Barclays

After pronouncements from Rogers Communications Inc. about improving the customer experience and simplifying the options available to customers, analysts from Barclays said the company appears to be "shifting away from pricing discounts." In a research note issued Monday, Phillip Huang and Ali Pervez said Rogers recently raised the threshold on eligibility for upgrading smartphones. As of June 17, only customers subscribed to plans costing at least $80 a month are eligible, while previously, customers on contracts worth $60 or more were allowed such upgrades. "Store managers are reportedly given some discretion to approve upgrades 'one last time' for long-time customers with plans between $60-79," Huang and Pervez said in their note. "Until recently, customers with $60+ plans were able to receive fully-subsidized smartphone upgrades." The analysts' report noted that the move follows Rogers CEO Guy Laurence's speech at the Canadian Telecom Summit last week in which he said what's offered to customers needs to be simplified, including pricing plans, handset offers and usage rules. The Barclays analysts added in their note: "The days of being able to negotiate for cheaper plans and earlier handset upgrades through Rogers’ Customers Retentions department now appear to be largely gone." Huang and Pervez said Rogers has so far failed to match the discounts being offered by Telus Corp. and BCE Inc. on the iPhone 5S. They said reducing prices on iPhones ahead of expected announcements from Apple Inc. on new models has been typical in the past, with Rogers usually leading such moves. The research note said Telus and Bell have both discounted the 16-gigabyte iPhone 5S to around $100 from $180 a few weeks ago, which was down from $230 before that. Rogers, they said, has kept its price at $180. The Barclays note said resisting discounts could help Rogers in terms of higher revenue per subscriber, though it could limit customer growth. Huang and Pervez noted that Rogers currently has the largest postpaid wireless base in the country at 8.1 million, compared to Telus at 6.8 million and Bell at 6.7 million. "With Rogers clearly and quite abruptly shifting away from pricing discounts, we wonder whether management would let their postpaid subscriber base temporarily go into decline as they seek to turn around the customer experience while holding firm on pricing," the analysts said in their note. When asked about its current pricing strategy, Rogers spokeswoman Jennifer Kett said in an email that the company is "working to improve customer service, including making our plans and processes as simple and straightforward as possible." She said that wireless plans for new customers "are easy to understand and designed for how customers are using their devices. They include all the services our customers want, like unlimited Canada-wide long-distance and texting, voicemail and call-display features that customers on older plans have to pay extra for, on top of their monthly fee." In May, Rogers launched a multi-year transformation aimed at improving customer loyalty, with Laurence saying the company had "neglected" customers for some time. Dvai Ghose, telecom analyst for Canaccord Genuity, said it seems like Rogers is pulling away from what had been a strategy of "aggressive" discounting, which he said was compensating for deficiencies in service. "On the one hand, I applaud them for not trying to leverage off pricing when their service is bad," Ghose said in a phone interview. "On the other hand, service hasn't improved yet, so I think that's really their problem." He said service improvements should have been implemented before pricing incentives were taken away. Ghose said Rogers' current approach to pricing could cost it some of its postpaid customer base. He was also doubtful whether it would result in higher revenue per customer when taking into consideration market pressures on pricing for voice services and international roaming. Ghose said recent declines in rates for international roaming are hitting Rogers harder than other Canadian carriers since Rogers had a near monopoly on international roaming agreements outside the U.S. until recently. He said Bell and Telus "only really started competing on non-U.S. traffic in the last two years or so." When asked about Rogers' recent pricing moves, Scotia Capital telecom analyst Jeff Fan said in an email that it seems like the company "is trying to focus more on protecting revenue and retaining existing subscribers than getting more new customers at this stage." — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Rogers getting reluctant on rollbacks: Barclays

News | June 23, 2014

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