Rogers recovers financial footing in Q3

Shaking off much of the financial impact from the mass COVID-19 lockdowns of the spring, Rogers Communications reported better-than-expected results for the third quarter as the Canadian economy reopened and wireless and media revenues rebounded.

Rogers, which sustained double-digit declines in revenues, net income and other key metrics during the second quarter, still saw its overall revenues and net income fall on a year-over-year basis in Q3. The company generated C$3.67 billion (S2.73 billion) in total revenues, down 2% from the year-ago period, while its net income came in at C$512 million ($381 million), down 14% from the prior year. But both figures represented marked improvements from the second quarter, when the operator reported C$3.16 billion ($2.35 billion) in overall revenue and C$279 million ($208 million) in net income, and beat the estimates of financial analysts.

"The strong sequential improvement in our third quarter results is reflective of solid execution across our businesses, including continued growth in our digital-first efforts, to ensure our customers have a range of channels available to meet their needs," said Joe Natale, president and CEO of Rogers. "Our results show we are managing the environment effectively, and our long-term strategy is sound."

To be sure, Rogers is still feeling the sting of COVID-19. For example, service revenue from its wireless division, the company's biggest, fell to C$1.65 billion ($1.23 billion) in the quarter, down 9% from the same quarter last year, despite the gain of 138,000 new postpaid subscribers. Speaking on the company's earnings call with financial analysts Thursday morning, Rogers executives blamed most, if not all, of that decline on decreases in overage and roaming revenues because of the pandemic.

But the company's cable division held steady, with revenues slipping just 1% on a year-over-year basis to C$988 million ($736 million), as Rogers continued to sign up more broadband and IPTV subscribers. The MSO also improved its cable capex intensity margin to 22% as it cut back on set-top box rentals and boosted its equipment sell-install rate to an impressive 95% of new or upgraded customers. We'll have more on Rogers' cable and broadband performance in a later story on our sister site, Broadband World News.

Rogers' media division, which took a huge hit in the first half of the year because of the loss of live sports action on its cable channels, also bounced back in the third quarter with the return of MLB, NBA and NHL games on TV. Rogers – which owns MLB's Toronto Blue Jays and their stadium and owns TV rights to the NHL's Toronto Maple Leafs, NBA's Toronto Raptors and the NHL's Canadian national TV package – reported that its media unit produced C$489 million ($364 million) in revenue in Q3, up 1% from the year-ago period, thanks to resurgent TV ad sales.

On their earnings call, Rogers officials also boasted about their rollout of 5G mobile technology with Ericsson during the pandemic period. The carrier, which launched 5G in its four biggest cities (Toronto, Ottawa, Montreal and Vancouver) in mid-January, said it has now extended the service to 130 cities and towns across Canada, making it the largest 5G network in the nation.

Rogers officials had little new to say, however, about their joint pursuit of Cogeco Communications with Altice USA. Earlier this week Altice USA and Rogers, which aim to divvy up Cogeco's US and Canadian cable systems between them, raised their joint offer for Cogeco to C$11.1 billion ($8.4 billion). But, as it did before, Cogeco flatly rejected the unsolicited bid.

Questioned by analysts about whether Rogers might sell its current stake in Cogeco if it can’t buy the company's Canadian operations, Natale declined to tip his hand. "If it’s not accepted, we would do what you would expect us to do,” he said. "We’ll review our capital allocation parties with our board as part of our normal course of planning and strategic priority setting. And we’ll come back to the investment community on what our thoughts and plans are on capital allocation."

In morning and early afternoon trading on the Toronto Stock Exchange, Rogers' share price surged nearly 10% to C$57.47, reflecting the company's stronger-than-expected earnings report.

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