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Cable/Video

Rogers socked by early revenue hit from COVID-19

In a sign of what's undoubtedly to come from other service providers around the world, Rogers Communications reported a notable revenue decline for the first quarter this morning as both its wireless and media businesses took big hits due to the COVID-19 pandemic.

One of Canada's two biggest cable operators, wireless providers and media players, Rogers said overall revenue for the first quarter fell 5% to C$3.42 billion ($2.41 billion), driven largely by a 17% decrease in wireless equipment revenue and a 3% decrease in total service revenue. The operator, which has nearly 10.8 million wireless subscribers across the country, sold far fewer handsets and added fewer new subs than expected as it was forced to shutter 90% of its retail stores in March because of the pandemic-induced lockdown.

Rogers saw both its postpaid and prepaid subscriber gains slide in the winter quarter on a year-over-year basis, deflating its revenue totals. It also saw a decline in roaming and overage revenues as Canadians stopped traveling last month and the company stopped charging roaming and overage fees midway through March. Overall, wireless revenue slipped to C$2.08 billion ($1.89 billion), down 5% on a year-over-year basis.

Unlike its peer, Shaw Communications, though, Rogers did not announce any layoffs of its 25,000-plus employees. In its Q1 earnings report last week, Shaw said it would temporarily lay off 10% of its workforce, or nearly 1,000 employees, because of the "extraordinary and unpredictable conditions created by the COVID-19 pandemic."

Rogers took a much bigger hit on its much smaller media business, which includes its cable channels and sports teams, particularly baseball's Toronto Blue Jays. With play in all major sports leagues now suspended because of the novel coronavirus outbreak, Rogers reported that its media revenues plunged to C$412 million ($291 million) in the first quarter, down 12% from the year before.

Cable biz holds firm
However, Rogers' cable business bucked the downward trend, holding steady despite the pandemic. With tens of millions of Canadians now sheltering at home and relying more heavily on their broadband and video services, the company reported Q1 cable revenues of C$973 million ($687 million), down only marginally from C$976 million ($689 million) in the same quarter last year. It also reported that its network traffic has soared more than 50% since the virus-induced lockdowns went into effect early last month.

Speaking on their quarterly earnings call with financial analysts this morning, Rogers executives said they're seeing offsetting trends so far as their customers try to cope with the virus' impact. On the one hand, some customers are upgrading their pay-TV and especially broadband plans as they work, school and play more at home. On the other hand, other customers are downgrading their cable packages as they tighten their belts because of job layoffs and other cutbacks.

On the bright side, Rogers added 17,000 broadband subscribers in Q1, up from 14,000 a year earlier, to boost its customer total to 2.5 million. With the operator passing 4.5 million homes, that means it now enjoys a 56% penetration level with its broadband products.

Rogers also reported continued progress in rolling out its new Ignite TV service, which is a syndicated version of Comcast's cloud-based X1 platform. The MSO added 91,000 households to the Ignite TV platform in Q1, up from 47,000 new subs the year before, increasing its total to 417,000. With a pay-TV customer base of about 1.6 million subs, most of its video subs still remain to be converted over to Ignite TV.

In one more silver lining, Rogers reported that both its capital and operating expenses dipped in the first quarter, with overall capex declining 4% on a year-over-year basis to C$693 million ($489 million). Company officials credited the declines to less spending on wireless handsets, TV set-top boxes, in-home cable installations and the like. On the cable side, for instance, the company is aggressively pursuing a self-installation strategy that doesn't require technicians to enter the customer's home.

Citing the uncertainties caused by the COVID-19 pandemic, Rogers withdrew its earlier financial guidance for the year. The company's share price slipped to C$56.55 in morning trading on the Toronto Stock Exchange, down 1.55% on the day.

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

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