Rogers unfazed by Freedom ‘Big Gig’ offer: CEO

Joe Natale isn’t worried about Shaw Communications Inc.’s move to offer its Freedom customers 10 gigabytes for $50, effectively turning away the idea that the move is a game changer in the industry. The CEO of Rogers Communications Inc. said the new offer, which launched Thursday, won’t fundamentally change its position on how it operates and that it will continue to use its strengths to compete. “We have always competed with Freedom on price this appears to be an extension of that strategy with a lot of marketing bravado behind it,” Natale said on a conference call with analysts following Rogers’ third quarter earnings release Thursday. “We believe our distribution strength, our network capability, our customer care strength remain clear competitive points of advantage and part of the full package when customers choose Rogers,” he added. Freedom called the “Big Gig” plans “loud and unprecedented” in a Wednesday press release. Chief operating officer Paul McAleese added to that by saying in the release the plans are a “total game changer in the Canadian wireless industry.” But Natale said Freedom’s network quality still needs work. He added that the vast majority of Rogers customers on 10 gigabytes are high-value customers who are looking for that network quality. Freedom began its roll-out of LTE late last year and has made gradual expansions recently. To improve its network, Shaw purchased additional spectrum from Quebecor Inc. in June, the benefits of which some analysts said would take time to see. “It wasn’t long ago that they had an eight gig offering in the market for about $60,” Natale continued. “It was rather benign in terms of its impact, so I would look at it as a business-as-usual kind of situation and one that we’ll prepare to take advantage of our strengths in distribution, customer care and network to really combat.” Freedom is also offering 15GB for $70 and 20GB for $90 on those new plans. Those plans, however, are limited-time “intro offers.” Shaw declined to respond to Wire Report questions about how long the intro offer will be available on Wednesday. The plans also include bonus data that will expire after two years. For example, the 10 gig deal includes four gigs of bonus data. When asked about whether Rogers would look to keep data overage charges down in the event that Freedom improves its network down the road, Natale said the “vast majority” of our customers don’t get charged overage overall, adding the company has benefited from less overage revenue turning into better recurring subscription revenue. “We’re trying to compete on the right plan,” Natale said. “It’s not just good business, but it really helps drive a great customer experience.” On that point, Natale said there is now an industry-wide effort around driving the customer experience, whereas “it wasn’t long ago” that there wasn’t much discussion about it on conference calls. Telus Corp.’s CEO Darren Entwistle, for example, partly attributed his company’s record low wireless churn to improvement in the customer experience on a second quarter conference call in August. Like clockwork, the wireless segment has surged for Rogers as it has for the past several quarters for all major players in the industry. For the three months ended September 30, Rogers added 129,000 new postpaid wireless subscribers, up 15,000 from the same period last year. That made for its highest net adds in eight years and elevated the total number of postpaid subscribers to 8.8 million, an increase of 375,000 compared to the equivalent period in 2016. Prepaid subscribers increased by 107,000 to about 1.79 million for a total wireless subscriber base of approximately 10.6 million. Its postpaid churn, also the topic of much discussion in the industry, improved 10 basis points, down to 1.16 per cent — also its best third quarter rate in eight years. Average revenue per user increased $1.48 to $63.78 over the year. Meanwhile, revenues in that segment increased five per cent to $2.1 billion compared to the same period last year. Natale also touched on the environment surrounding Apple Inc.’s new iPhone 8 and iPhone X. He said there is more “anemic appetite” for the iPhone 8 right now, with lots of anticipation around the iPhone X. He added that the feature that people are most excited about is the augmented reality capabilities, which he said will drive network traffic. While the company is expected to take preorders on Oct. 27 and launch on Nov. 3, it’s yet to be seen whether the impact of the phones will be felt in the fourth quarter this year or the first quarter next year. Activity in either quarter will factor inventory, appetite and price point, with Natale noting the iPhone X is about 75 per cent more expensive than the iPhone 7. On the cable side, which includes television, internet and telephone, the results were more muted. Internet revenues increased six per cent to $404 million compared to the same period last year despite 12 per cent fewer new subscribers in that segment, which amounted to 27,000 this quarter compared to 39,000 last year. Total internet subscriptions sat at 2.2 million, an increase of 98,000 over that period. Telephone revenues declined seven per cent to $88 million with four per cent fewer new subscribers, at 1,000 this quarter, compared to 5,000 adds in the same period last year. Total phone subscribers increased nine per cent over that period to about 1.1 million. The television segment also saw revenue declines of three per cent over the year to $377 million compared to $387 million in the same period last year. The company lost 18,000 TV subscribers in the quarter compared to a loss of 14,000 over the same period for a total subscription base of 1.7 million, reflecting a loss of 80,000 over the year. Rogers said expects its new IPTV system to pick up the slack. While the company’s initial forecast slated the release of the system, based on Comcast Corp.’s X1 platform, to be early 2018, Natale said they now expect to have a “soft launch” — a gradual roll-out — in that period, with a “full commercial launch” coming “at some point later in 2018.” He added the company expects to stop selling legacy systems at some point in 2019. “You have to go slow to go fast,” Natale said of the revised outlook. The company’s profit ballooned to $467 million compared to $220 million it earned in the same period last year. That was partly due to the comparative impact on the balance sheet from the wind down of Shomi — a joint venture with Shaw — and divestitures in investments, Rogers said. Overall revenues edged up three per cent to about $3.6 billion compared to the same period last year. Also Thursday, the CRTC is holding its final day of a hearing into licence renewals for broadcasting distribution undertakings (BDUs), as it reviews how those BDUs have been implementing the industry-mandated skinny basic and à la carte options — otherwise known as pick-and-pay — they were required to provide last year. But for Natale, giving customers “absolute à la carte choice” is going to overwhelm them, pointing to focus groups that he said showed they don’t want to “start from a blank sheet of paper” and pick and choose individual channels. “They rather have some base options that are leaner in nature and then have the opportunity to kind of add on top as they see fit.” He said he believes the X1 platform will bring more convenience to customers with the hopes of continually adding and integrating streaming services to the platform, which he said is the future of video. He added he wants the company to be the “purveyor of choice” for customers and the platform to be the destination for all their consumption needs. During the hearing, the Public Interest Advocacy Centre flagged the high cost of pick-and-pay as something the commission should review further. This week’s hearing is the first for new CRTC chairman Ian Scott, whom Natale said he hopes to speak with and continue a relationship-building dialogue that he had with Innovation Minister Navdeep Bains earlier. Reflecting on their discussion about investment, affordability, the reach and quality of Canada’s networks, Natale said “I’m pleased that it’s going in a good direction.” — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Rogers unfazed by Freedom ‘Big Gig’ offer: CEO

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