Rogers profits down 53% in ‘most volatile’ quarter

Rogers Communications Inc. posted a 17 per cent fall in revenue and a 53 per cent drop in profits in the second quarter, numbers that reflected the impact of the COVID-19 lockdowns that began in mid-March. The drop in revenue was driven primarily by a 13 per cent decrease in wireless revenue and a 50 per cent drop in media revenue, as the pandemic lockdowns cut into revenue traditionally generated from wireless roaming and media advertising, respectively. The quarter "was without a doubt the most volatile quarter we have seen in our business," Rogers chief financial officer Tony Staffieri told analysts on a Wednesday morning conference call, referring to the transition from lockdown into the limited reopenings of recent weeks. "We went from a hardstop standstill economy that required us to focus on the safety of our employees, customers and communities, to the start of what we hope is a sustainable recovery for our country." In a note from Canaccord Genuity analyst Aravinda Galappatthige Wednesday morning, he said the quarter was worse than expected. "While we had braced for steep declines in wireless and media, the decline rates, particularly in wireless, were even steeper than our estimates," he wrote. "These declines are COVID-specific items which we anticipate will recover as we move out of the pandemic environment," Staffieri told analysts on the call. Responding to a question from Galappatthige about promotional competition in the wireless market in the quarter, Staffieri said that "our general stance during Q2 was that this is not a sales quarter." "When you're facing the fact that 90 per cent of your stores are closed and you've got thousands of people with nothing to do because they work in those stores, it seems counterintuitive to be aggressive around promotion," he said. "There were some promotional skirmishes in the quarter, led by our competitors. And of course we matched." Rogers is the first of the big three wireless providers to report results from the lockdown period. Shaw Communications Inc. saw a slight decline in profits and an 18.9 per cent drop in net income. Cogeco Inc.’s revenues were up slightly, though the company saw a 33 per cent fall in radio revenues; broadcaster Corus Entertainment Inc.’s total revenues dropped 24 per cent due to sharp declines in advertising. For Rogers, overall revenue fell to $3.16 billion for the three months ending June 30 from $3.78 billion during the same period last year. The 53 per cent drop in profits brought the company down to $279 million from $591 million the previous year. Revenue in the company's wireless division fell to $1.93 billion in the quarter from $2.24 billion a year ago. Cable revenue -- combining home internet and television -- was more stable, only dropping by three per cent to $966 million from $997 million last year. Media revenue declined to $296 million from $591 million last year. The losses in media revenue, Rogers said in its quarterly report, were "primarily as a result of lower advertising revenue due to softness in the market and lower sports revenue, including at the Toronto Blue Jays, as no professional sports were played this quarter due to the COVID-19 pandemic." This is the first quarterly to fully reflect the effects of the pandemic lockdowns, as the Q1 report — in which revenues dropped five per cent — reported returns from the first three months of the year, ending March 31. The company added 216,000 postpaid wireless subscribers in the quarter, down from the 351,000 they added in the same quarter last year, for a total of 9.43 million subscribers. In prepaid, the company added 119,000 subscribers, down from the 199,000 they added in the same quarter last year, for a total of 1.27 million prepaid subscribers. The company's wireless average revenue per user (ARPU) dropped to $49.09 from $56.73 in the same quarter last year. On the cable side of things, the company posted a significant fall in subscriber additions in both home internet and its IgniteTV service. The company added 5,000 internet subscribers, down from the 22,000 it added this time last year, for a total of 2.56 million subscribers at the end of the quarter. Rogers added 18,000 thousand IgniteTV subscribers, down from the 66,000 they added in the second quarter of 2019, for a total of 435,000 subscribers. In a Wednesday afternoon note from RBC Capital Markets analyst Drew McReynolds, he said the impacts will almost certainly continue into the third quarter. "Despite management indicating a notable uptick in wireless activity in late June and into July along with a steady rise in out-of-home mobility as the economy re-opens (positive for overage)," McReynolds wrote, "we believe the Q3/20 outlook versus our current forecast is a little more challenging with greater than forecast wireless roaming and overage pressure and a still uncertain COVID-19 impact on back-to-school activity." — With reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Rogers profits down 53% in ‘most volatile’ quarter

Broadcast | July 22, 2020

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Rogers profits down 53% in ‘most volatile’ quarter

Broadcast | July 22, 2020

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