Rogers Lifts Outlook on Shaw Deal, Canada Population Boom

Derek Decloet, Bloomberg News

A Rogers store in Vancouver, British Columbia, Canada, on Tuesday, Sept. 6, 2022. Rogers Communications Inc. is still waiting to see if it can win regulatory approval for a takeover of a smaller Canadian cable company, 17 months after it was first announced. , Bloomberg

(Bloomberg) -- Rogers Communications Inc. raised its outlook for the year and outlined plans to sell C$1 billion ($758 million) in assets — mostly real estate — to pay down debt from its acquisition of Shaw Communications Inc.

Canada’s largest wireless provider said it expects free cash flow of C$2.2 billion to C$2.5 billion this year. The higher end of that range is 14% above its previous guidance, according to a statement Wednesday.

The shares jumped as much as 4.7% in Toronto.

For Rogers, it’s the first earnings report to include Shaw, the Western Canadian cable and wireless company it bought in one of Canada’s largest-ever corporate mergers. Rogers closed the deal in April after winning a battle with the country’s antitrust watchdog, which had tried to block it.

The transaction left Rogers with more than C$40 billion in debt, but Chief Financial Officer Glenn Brandt told analysts the planned sales of surplus property, plus growth in earnings, will help the company pare its leverage ratio to less than 5 times by the end of the year.

The company isn’t thinking about selling significant media or sports assets to raise money, Brandt said. Rogers owns the Toronto Blue Jays baseball team and a minority stake in the company that owns the city’s professional hockey and basketball teams.

Wireless companies are getting a boost from Canada’s policy of rapid population growth via immigration. Rogers added 170,000 postpaid phone customers in the second quarter, beating analysts’ projections of fewer than 130,000.

Revenue in Rogers’ cable division nearly doubled in the second quarter because of the acquisition, topping C$2 billion.

Still, adjusted earnings of C$1.02 per share fell short of estimates of C$1.15, according to data compiled by Bloomberg, partly because of higher finance costs and taxes.

Brand Strategy

Analysts and investors have been concerned about falling wireless prices after Quebecor Inc.’s Videotron division acquired most of Shaw’s former wireless business, giving it scale as the fourth-largest national player behind Rogers, BCE Inc. and Telus Corp.

For Rogers, revenue per mobile phone user was down 3.6% in the second quarter to an average of C$56.79 per month. That was mostly because of the lower prices paid by the small number of Shaw wireless customer accounts that Rogers was allowed to keep, executives said.

The company’s wireless strategy is to pull more customers to the Rogers brand, which has higher prices and better service than so-called “flanker brands” such as Fido and Chatr. Rogers is seeing double-digit growth in customers choosing unlimited data plans, Chief Executive Officer Tony Staffieri told analysts.

(Updates with additional information on results, asset sales from the first paragraph)