Rogers Embraces 'Comcast North' Strategy
Rogers Communications is trying to transform itself into the Comcast of Canada, at least when it comes to residential video, broadband and smart-home services.
In its fourth-quarter earnings call early Thursday morning, Rogers Communications Inc. (Toronto: RCI) spelled out its intentions to deploy several platforms and services licensed from Comcast Corp. (Nasdaq: CMCSA, CMCSK) over the next 12 months or so as it seeks to spur video growth and trim capital and operating expenses. The list of US imports includes Comcast's X1 IP video platform and set-tops, new DOCSIS 3.1 wireless gateway and new Digital Home whole-home networking solution.
The moves come about a month after Rogers dumped its fledgling IPTV product and signed a long-term deal with Comcast to deploy X1, joining fellow Canadian MSO Shaw Communications Inc. and US MSO Cox Communications Inc. . They also come about four months after Rogers and Shaw, the two biggest cable operators in Canada, decided to shut down shomi, their joint OTT video service that failed to gain much traction against Netflix. (See Rogers Dumps In-House IPTV Product for X1 and Rogers Still Big on Gig & IPTV.)
Rogers took a C$484 million (US$369 million) charge in the fourth quarter to cover the scuttling of its in-house IPTV platform, which had been slated to launch around now. Due largely to that charge, the company posted a C$9 million (US$6.9 million) loss on C$3.51 billion (US$2.68 billion) in revenue for the quarter, reversing its C$299 million (US$228.1 million) profit on C$3.45 billion (US$2.63 billion) in revenue in the year-ago period. For the full year, Rogers recorded net income of nearly C$1.5 billion (US$1.1 billion) on C$13.7 billion (US$10.5 billion) in revenue, flat with the previous year's results.
On the earnings call, senior Rogers executives said the introduction of X1 in early 2018 should spur fresh video subscriber and revenue growth for the company, which is the second-largest Canadian MSO (just behind Shaw) with 1.8 million pay-TV and 2.1 million broadband subscribers in its 4.2 million-home footprint. "We expect our cable video results to benefit from X1," said Rogers CFO Tony Staffieri. "We are extremely encouraged by the experience that we've seen Comcast has had in the US" with X1, as well as Cox's early success with the IP video platform.
Like most North American cable operators not named Comcast, Rogers has been steadily losing video subscribers, although its losses have been slowing down lately. The MSO shed 13,000 video customers in the fall quarter and 76,000 over the entire year.
Rogers, which is also the largest wireless provider in Canada, is counting on the X1 partnership with Comcast to help trim its capital and operating expenses on the cable side. Overall, the company expects to shell out C$2.25 billion to C$2.35 billion (US$1.72 billion to US$1.79 billion) on capex this year, down from the C$2.352 billion (US$1.79 billion) it spent in 2016. Last year's total represented a dip from the C$2.44 billion (US$1.86 billion) that Rogers spent on capex in 2015. The company does not break down its capital spending by business segments.
Turning to the broadband side, Rogers plans to ape Comcast's strategy south of the border by deploying the US MSO's new DOCSIS 3.1 WiFi gateways, WiFi extenders and wireless set-tops starting in the middle of this year. The souped-up WiFi gateways -- which are capable of delivering up to 9 Gbit/s in the home and support voice, video, data, home monitoring and home automation services -- are meant to complement Rogers' rollout of 1-Gig service throughout its entire eastern Canada footprint.
With its new Ignite service now available to all of its 4.2 million homes passed, Rogers said nearly half of its 2.1 million broadband customers now subscribe to downstream speed tiers of 100 Mbit/s or higher. The MSO netted 30,000 new broadband subscribers in the fourth quarter, bringing its gain for the full year to 97,000 subs.
Further, Rogers plans to adopt Comcast's new whole-home networking product, known as Digital Home, sometime later this year. The cloud-based Digital Home solution, which links to the WiFi gateway, offers a way for customers to control and manage all their connected devices.
"It dovetails nicely with what we're looking to do," Staffieri said. "It's really about simplifying and aggregating [services] in the home, so it's a lot more than IPTV."
Finally, Rogers said former Telus Corp. (NYSE: TU; Toronto: T) CEO Joe Natale will take over as the company's new chief executive in July. Natale will replace former Rogers President & CEO Guy Laurence, who abruptly left his post in October after just three years at the helm. Rogers Board Chairman Alan Horn has been serving as the company's acting CEO since then. (See Rogers Says See Ya to CEO Laurence.)
— Alan Breznick, Cable/Video Practice Leader, Light Reading