Rogers Communications is now depending heavily on VOIP to drive its subscriber and financial growth

Alan Breznick, Cable/Video Practice Leader, Light Reading

February 20, 2007

3 Min Read
Rogers Relies on VOIP  for Q4 Growth

Like most big cable operators in the U.S., Canada's Rogers Communications Inc. (NYSE: RG; Toronto: RCI) is now depending heavily on residential VOIP service to drive its subscriber and financial growth.

Rogers, the biggest MSO in Canada, reported that it netted 95,100 VOIP subscribers in the fourth quarter, its second biggest quarterly haul yet. While this figure marks a slight decline from the company's record take of 106,100 IP phone subscribers in the third quarter, it's a mighty jump from the 29,800 VOIP customers that it added in the final quarter of 2005.

In part, Rogers rang up this hefty increase by shifting some of its existing, circuit-switched phone customers to the newer VOIP technology, just as it did in previous quarters. Circuit-switched subscribers accounted for 13,100, or nearly 14 percent, of the company's latest batch of new VOIP customers.

With the second-half surge, Rogers ended 2006 with nearly 366,000 cable VOIP customers -- second in Canada only to the smaller but faster-moving Vidéotron Telecom Ltd. Rogers closed out the year ranked seventh on the overall North American MSO charts, behind Videotron and the five biggest U.S. cable operators.

Thanks mainly to its latest VOIP gains, Rogers added a total of 220,200 cable revenue generating units (RGUs) in the fall quarter. That represents a gain of almost 50,000 units, or about 30 percent, from the 170,900 RGUs that it added in the same period the year before.

Likewise, Rogers netted a record 666,000 cable revenue generating units (RGUs) for all of 2006. Once again VOIP subscriptions easily accounted for the largest chunk of that increase, as the MSO signed up 318,000 new IP phone customers during the year.

Rogers also saw its cable and telecom division operating revenue rise to C$842 million in the fourth quarter, up 10.6 percent from C$761 million in the year-ago period. Rogers Home Phone revenues contributed greatly to the increase, jumping 32 percent to C$99 million.

For the full year, the cable and telecom unit generated C$3.2 billion in operating revenue, up 9.4 percent from a pro forma C$2.9 billion in 2005. Rogers Home Phone produced C$355 million in revenue for the year, up 18.3 percent from a pro forma C$300 million in 2005.

Rogers officials say they're looking to add somewhere between 625,000 and 725,000 cable RGUs in 2007, which ranges from slightly down to slightly up from last year's results.

New VOIP subscriptions will likely account for the greatest share of the company's projected RGU gains in 2007, just as they did in 2006. That's because Rogers, which just introduced IP phone service in its first market 19 months ago, is still stepping up its deployment of VOIP in its cable territories.

Plus, Rogers plans to keep converting its older circuit-switched phone subscribers over to the newer, less costly technology. The MSO closed out last year with just below 350,000 circuit-switched phone subscribers, down 8,400 for the quarter.

Rogers projects that its revenue from cable, broadband, and residential phone services will reach between C$2.57 billion and C$2.60 billion in 2007, up from C$2.30 billion in 2006. The company expects its cable division's operating profit to rise to between C$925 million and C$950 million this year, up from C$843 million last year.

In contrast, Rogers sees its huge wireless business starting to tail off in 2007 after several years of swift growth. The Toronto-based media giant -- which is also Canada's biggest mobile provider with 6.8 million wireless voice and data subscribers -- projects that it will enlist 500,000 to 600,000 new wireless subscribers this year, a dip from a net gain of 610,000 subscribers last year.

Rogers projects that its consolidated revenue will jump to between C$9.7 billion and C$10.0 billion in 2007, up from C$8.8 billion in 2006. The company's operating revenue rose 20.5 percent last year, following a 14.4 percent increase in the fourth quarter.

— Alan Breznick, Site Editor, Cable Digital News

About the Author(s)

Alan Breznick

Cable/Video Practice Leader, Light Reading

Alan Breznick is a business editor and research analyst who has tracked the cable, broadband and video markets like an over-bred bloodhound for more than 20 years.

As a senior analyst at Light Reading's research arm, Heavy Reading, for six years, Alan authored numerous reports, columns, white papers and case studies, moderated dozens of webinars, and organized and hosted more than 15 -- count 'em --regional conferences on cable, broadband and IPTV technology topics. And all this while maintaining a summer job as an ostrich wrangler.

Before that, he was the founding editor of Light Reading Cable, transforming a monthly newsletter into a daily website. Prior to joining Light Reading, Alan was a broadband analyst for Kinetic Strategies and a contributing analyst for One Touch Intelligence.

He is based in the Toronto area, though is New York born and bred. Just ask, and he will take you on a power-walking tour of Manhattan, pointing out the tourist hotspots and the places that make up his personal timeline: The bench where he smoked his first pipe; the alley where he won his first fist fight. That kind of thing.

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