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Rogers shares tumble after Q1 results disappoint

Rogers Communications (TSE:RCI.B) (NYSE:RCI) saw its shares fall Wednesday morning, after it saw a decline in first quarter earnings on hardware costs for iPhones and heated wireless competition.

Shares fell more than six percent in morning trading after the results were announced, to $37.68 per share.

Canada’s largest wireless provider said net profit for the three months that ended March 31 was $305 million, compared with $335 million in the year-prior period.

Total revenues were down just one percent at $2.95 billion, missing estimates, while adjusted earnings from operations, excluding one-time costs like handset subsidies, also came in lower than expected.

On a per share basis, adjusted earnings slid to 67 cents, well below analyst expectations of 76 cents per share, according to Thomson Reuters.

The earnings were also below the 76 cents per share reported in the first quarter of 2011.

"Our performance in the first quarter was highlighted by strong postpaid wireless smartphone sales and customer retention metrics, as well as continued solid margins in both our wireless and cable businesses," said Rogers’ president and CEO Nadir Mohamed.

"Despite highly competitive markets, particularly impacting both the wireless and cable portions of our business, we continued to leverage our technology leadership to deliver new and innovative products and services."

Wireless network revenue for the quarter remained flat, at $1.6 million.

The company said continued growth of its wireless postpaid subscriber base and the increased adoption of wireless data services was offset by a decrease in voice average revenue per user (ARPU), in large part driven by heightened competition in the industry.

Rogers said it activated and upgraded approximately 642,000 smartphones in the quarter, compared to approximately 534,000 in the first quarter of 2011.

Smartphone subscribers usually generate about twice the average revenue compared to a voice-only subscriber, Rogers said.

The smartphones activated were predominantly iPhone, BlackBerry and Android devices, of which approximately 34 percent were for subscribers new to wireless during the quarter.

The company’s total postpaid, or contract, retail subscribers totaled 7.62 million for the quarter, up from 7.3 million the year prior.

Total prepaid retail subscribers at Rogers numbered 1.68 million in the quarter, compared to 1.64 million a year earlier.

The monthly rate at which people discontinued Rogers’s wireless services, or the churn rate, increased to 1.66 percent from 1.39 percent a year ago.

Meanwhile, wireless data revenue rose by around 16 percent from the first quarter of 2011 to $627 million. Rogers said the growth reflects the increasing usage of smartphones, wireless laptops and tablet devices.

Cable television revenue was flat for the quarter, reflecting pricing changes made in March 2012, together with a continued increase in penetration of the company’s digital cable product offerings.

Rogers’ digital cable subscriber base grew by two percent in the period, and represented 78 percent of its total television subscriber base as of the end of the first quarter, compared to 76 percent the year prior.

The company said that cable internet revenue increased to $241 million, compared to $224 million a year earlier.
With the high-speed internet customer-base at approximately 1.8 million subscribers, Rogers said that internet penetration is approximately 48 percent of the homes passed by its cable networks and 79 percent of its television subscriber base, as of the end of the quarter.

Home phone revenue decreased to $116 million, from $121 million in the same quarter of 2011, reflecting a decline in the use of the service.

In the company’s business solutions segment, revenue fell 25 percent to $87 million, from $116 million a year earlier.

Rogers said it had planned for a decline in certain categories of the lower margin legacy business, partially offset by the growth in next generation IP and other on-net services.

Rogers’ video unit revenues fell 54 percent to $11 million, compared to $24 million a year prior. Coinciding with changing market conditions, the company expects there will be no video sales and rentals in its retail stores by the end of the second quarter of 2012.

These Rogers stores will continue to serve all of the company’s customers' wireless and cable needs, it said.