Rogers falls behind competitors in wooing customers

The new CEO of Rogers Communications says he's not satisfied with the company's fourth-quarter results after its profit and revenue were hit by lower prices and margins in its wireless division.

Telecom industry facing cap on wholesale rates after budget announcement

Guy Laurence, new CEO of Rogers Communications, says he is disappointed Rogers has fallen behind Telus and Bell in its wireless earnings. (Rogers/Canadian Press)

The new CEO of Rogers Communications says he's not satisfied with the company's fourth-quarter results after its profit and revenue were hit by lower prices and margins in its wireless division.

Guy Laurence, who took over from former chief executive Nadir Mohamed, said Wednesday that Rogers' growth has slipped compared to its peers, referring to Bell and Telus.

Laurence said he expects to deliver his strategy for the Toronto-based telecommunications and media company in May, noting the industry faces moderate growth and regulatory uncertainty.

"However, I will say that with respect to the results of Q4 and certain of the trends that, while there are areas of strength overall, they're not satisfactory to me and over time I expect to do better," Laurence told analysts on his first conference call with financial analysts.

"Our margins, cash flows and return on assets are strong, but we slipped in terms of our growth rates relative to our peers and we need to execute in even a more methodical and disciplined manner as we go forward."

Rogers reported $357 million or 69 cents per share of adjusted earnings for the three months ended Dec. 31 — below analyst estimates of 75 cents per share.

The quarter's revenue also missed expectations falling one per cent from a year earlier to $3.24 billion and below estimates of $3.3 billion.

Federal law to mandate lower rates

In the federal budget announced yesterday, Finance Minister Jim Flaherty said he planned to amend the Telecommunications Act to prevent the Big Three wireless operators from charging higher wholesale rates to small competitors.

Flaherty defended his intervention in business areas such as telecom and banking at a news conference Wednesday.

"I don't like doing that and I don't like calling a CEO of a bank and saying, 'What are you doing?' which I've done," Flaherty said.

"But if I don't, who does? And do we have to pass legislation every time? I think there's a bully pulpit there that I don't use very often. And, I'm friends with most of them. But I do think there's a role for a finance minister to, once in a while, nudge people in the right direction," he said. 

Ottawa has done a lot of nudging of the telecom industry in the past year, criticizing Canada's high cellphone rates and asking the CRTC to investigate roaming rates as well as introducing a wireless code to give customers new rights.

Rogers to consider customer service

Laurence pledged to improve customer service, which some analysts have noted needs work.

"We have opportunities to put our customers needs more front and centre in everything we do to deliver a better, more consistent experience," Laurence said.

The company also announced two initiatives that are geared to its shareholders — a five per cent increase in its dividend and renewed share buyback program.

Still, Rogers stock was down 5.2 per cent, or $2.341, to $43.26 at the end of the day on the Toronto Stock Exchange.

Rob Bruce, head of Rogers' communications division which includes wireless, said the short-term pain of reducing customer roaming rates has been significant and said he expects it will take a couple of quarters to turn around the situation. Rogers offers its customers a $7.99 U.S. roaming plan.

Roaming rates paid by cellphone users when they're travelling in Canada and the U.S. are being reviewed by the CRTC, which could consider regulations as a result of consumer complaints.

Rogers, as well as Bell and Telus, introduced data sharing plans last summer that allow mobile phone and tablet users in a household to share one data package with a set amount of monthly data usage to do things like surf the internet.

Falling behind competitors

In its wireless division, Rogers added 34,000 net postpaid customers, who generally have lucrative smartphone contracts. That compares with net additions of 58,000 in the same quarter last year.

By comparison, BCE added 119,520 net postpaid customers in its fourth quarter.

Rogers said it cut its net loss of cable TV subscribers to 25,000 in the quarter, down from a loss of 28,000 year-over-year. Total cable subscribers as of Dec. 31 were 2.1 million compared with 2.2 million year-over-year.

The company added 13,000 net Internet customers versus 22,000 year-over-year. Total Internet subscribers were at 1.9 million compared with 1.8 million year-over-year.

In its financial results, Rogers net income before adjustments fell to $320 million or 62 cents per share from $522 million or $1.01 per shares in the fourth quarter of 2012.

The increased dividend will rise to 45.75 cents per share per quarter, or $1.83 per share on an annualized basis — up from the previous rate of $1.74 per year.

The share buyback will give Rogers the opportunity, but not the obligation, to repurchase and cancel shares.

With files from CBC News


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