TORONTO — Rogers Communications Inc. says it found $48 million in cost savings in its most recent quarter after closing its deal to buy Shaw Communications Inc., representing nearly 25 per cent of the $200 million in costs it plans to cut this year as it works to eliminate duplication.
To further its savings, the Toronto-based telecommunications company plans to sell up to $1 billion of non-core assets over the next six to 12 months, primarily consisting of surplus real estate, it said Wednesday as it reported its second quarter earning results.
"We have some additional business operations, which I'm not prepared to announce, that we're looking at whether or not there's an opportunity there," said Rogers chief financial officer Glenn Brandt on an analyst call.
He said the company's media branch and sports franchises wouldn't be affected by the asset selloff that will focus on more peripheral holdings.
"These really are assets that we simply don't need for the core operations of business."
Brandt said Rogers' second quarter results "reflect the start of a new era for Rogers in the telecom industry in Canada" as they capture the effects of its $26-billion merger with Shaw, which closed in April.
Rogers saw its profit decrease by 73 per cent to $109 million in the quarter, compared with a net income of $409 million in the same period last year. The profit amounted to diluted earnings per share of 20 cents for the period ending June 30, down from 76 cents during its previous second quarter.
Those drops reflected an ongoing increase of approximately $500 million in quarterly depreciation and amortization from the assets acquired in the Shaw merger, the company said.
Rogers and Shaw got final government approval for the deal to move forward in late March after agreeing to several terms including selling Shaw's wireless business, Freedom Mobile, to Quebec-based Videotron Ltd., a subsidiary of Quebecor Inc.
"We have seen market share gains in the West, including double digit subscriber growth, and we expect our share in the West to continue to grow in the coming quarters," said Rogers president and CEO Tony Staffieri.
"Overall, in these first 15 weeks, we're tracking ahead of our integration targets and we continue to be impressed with the quality and commitment of the Shaw team."
On an adjusted basis, Rogers' net income totalled $544 million, a 17 per cent increase from $463 million during the prior second quarter, while its adjusted diluted earnings per share moved from 86 cents to $1.02 per share.
Analysts on average had expected a profit of $1.02 per share on a non-adjusted basis, according to estimates compiled by financial markets data firm Refinitiv.
Revenue for the period grew 30 per cent to $5 billion in the most recent quarter, up from $3.9 billion in the previous second quarter, fuelled by the company adding 170,000 net postpaid mobile phone subscribers. That's up 39 per cent from 122,000 last year, which Rogers said was a result of sales execution and customer satisfaction in a growing 91原创 market.
The company noted it also introduced new 5G plans starting at $55 per month.
"As expected, there was some noise in the numbers that will need explaining owing to the allocation of Shaw's results to various sectors," said TD Securities analyst Vince Valentini in a note.
But he said "the clear takeaway" from Rogers' second quarter results should be that the company's organic wireless growth is "very strong" and that the Shaw integration is going well.
Rogers saw a seven per cent bump in wireless service revenue in the quarter, which was primarily a result of growth in mobile phone subscribers, the addition of Shaw customers following the merger and higher roaming revenue associated with increased travel.
Rogers' monthly churn for net postpaid mobile phone subscribers was 0.87 per cent in the quarter, up from 0.68 per cent last year.
Its mobile phone average monthly revenue per user was $56.79, marking a 3.5 per cent decrease from the second quarter of the prior year, which the company attributed to an increase in its mix of lower cost plans following the acquisition of Shaw.
"We're squarely focused on the cost synergies … but we haven't lost sight of the thesis of the Shaw acquisition, which is on the revenue side — one plus one, how do we make that three?" Staffieri told analysts.
In an internal memo to staff earlier this month, Staffieri announced Rogers is offering voluntary departure packages to some employees as it seeks to reduce overlap in roles following the Shaw merger. The memo said those eligible include "most corporate and line of business employees" up to the senior director level of the company, while most employees in customer-facing jobs are ineligible.
Rogers also confirmed "a small percentage" of employees have left the company involuntarily since combining with Shaw. The company did not say how many employees would be affected by either the voluntary departure program nor other cuts.
Meanwhile, Staffieri told analysts Wednesday that Rogers is reviewing a decision this week by the CRTC, which the federal telecommunications regulator said would help deliver more affordable cellphone plans and bolster competition in the sector.
On Monday, the CRTC ruled in a final offer arbitration proceeding between Quebecor and Rogers, which was requested by the companies just days after the former's Videotron subsidiary acquired Freedom Mobile from Shaw as a requirement of Rogers' takeover.
While the two sides had agreed on certain rates that Videotron would pay to Rogers when offering services using its wireless network, they had been unable to reach a deal on data rates. The CRTC sided with Quebecor's ask and directed both sides to enter into an access agreement so that Videotron "can expand competitive mobile wireless services to 91原创s as quickly as possible."
Staffieri said Rogers is considering next steps, including a possible appeal.
"There's not a lot I want to say on this call, for obvious reasons, but what I will say in the overall scheme of things, we're not going to be distracted and are going to continue to manage our business and investments accordingly," he said.
RBC analyst Drew McReynolds said the ruling could lead to more pricing competition from Freedom Mobile in the near term.
"More importantly, the decision includes ominous language that is negative to incumbents in rejecting a full costing approach that supports a return on network investment," he wrote in an analyst note.
This report by The 91原创 Press was first published July 26, 2023.
Companies in this story: (TSX:RCI.B)
Sammy Hudes, The 91原创 Press
