If Rogers Communications has been counting on its adoption of Comcast's X1 video platform to spur renewed pay-TV subscriber growth, it may need to change those expectations.

Despite completing its nationwide rollout of Ignite TV, a syndicated version of Comcast's cloud-based X1 platform, throughout its nearly 4.5-million-home footprint, Rogers reported Wednesday that it shed 17,000 video customers in the fourth quarter of 2019. That's a touch more than the 16,000 video subs it lost in the same quarter a year earlier, lowering its total pay-TV customer base to about 1.58 million.

Largely as a result of these continuing video sub losses, which amounted to 106,000 for the full year, Rogers' pay-TV revenues slid 2% in Q4 on a year-over-year basis to C$355 million ($270.69 million). For the full year, the MSO's video revenues slipped 1% to C$1.43 billion ($1.09 billion) despite price hikes, fewer promotional discounts and the increasing shift of legacy customers to Ignite TV and higher content tiers. Rogers closed out 2019 with about 325,000 of its video customers switched over to Ignite TV, up about 50% from the end of September.

But Rogers executives shrugged off the continuing drop in video subs on their earnings call this morning, citing the operating and financial advantages of switching to the cloud-based X1 platform. They stressed that cable capex is now falling and should continue to decline to as low as 20% by the end of next year as they move to IPTV set-tops and more customer self-installations. They also noted that cable cash margins are rising as they shed less profitable legacy pay-TV subs and continue to add more profitable broadband subs, even as overall cable revenue remains flat.

"We intend to continue to decrease cable capital intensity in 2020," said Rogers CFO Tony Staffieri. "We're seeing very good margin expansion."

Like its North American cable peers, Rogers continues to rake in new broadband subscribers. With DOCSIS 3.1 fully deployed throughout its footprint to enable speeds as high as 1 Gbit/s, the company picked up another 27,000 data customers in the fourth quarter, up slightly from 25,000 net subs a year earlier. As a result, it finished 2019 with more than 2.53 million Internet subs, up 104,000 for the year.

Thanks to this subscriber growth and customers upgrading to higher speed tiers, Rogers' Internet revenue climbed to C$575 million ($438.45 million) in the fourth quarter, up 7% from the year-earlier period. Consequently, in a sign of how much the cable industry has changed over the past decade, broadband now accounts for close to 60% of the company's nearly C$4 billion ($3.05 billion) in overall cable revenues annually while video accounts for only a bit more than 35%.

Rogers starts 5G rollout
While they were moderately enthusiastic about their cable results, what Rogers officials really wanted to talk about on the earnings call were their 5G rollout plans. The company, which is already one of Canada's largest wireless providers with nearly 11 million prepaid and postpaid subscribers, has ambitious plans to become the leader in the nation's emerging 5G market.

With the Canadian government preparing to auction off a significant chunk of fresh spectrum for 5G use later this year and the first 5G handsets from Samsung expected to be available in March, Rogers has begun rolling out its 5G network in downtown Vancouver, Toronto, Ottawa and Montreal using 2.5GHz spectrum. Rogers plans to expand its 5G reach to 20 more markets by the end of the year.

Rogers executives noted that they have already acquired 600MHz spectrum in every single Canadian province and territory for 5G use. The company is also teaming with five academic institutions to advance "made-in-Canada 5G research and development" and is a founding member of the 5G Future Edge Forum, which will collaborate to develop interoperable 5G standards across the Americas, Asia-Pacific and Europe.

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— Alan Breznick, Cable/Video Practice Leader, Light Reading