(Bloomberg) -- Rogers Communications Inc. missed analysts’ profit estimates for the third quarter but kept its outlook for 2022 as it posted strong growth in new wireless subscribers.
The Toronto-based cable and wireless firm earned 84 Canadian cents a share on an adjusted basis in the third quarter, narrowly missing the consensus of 87 cents.
Adjusted EPS was 18% below last year’s third quarter because of a network failure in early July, which knocked millions of consumers and businesses offline for an entire day. Rogers gave credits to customers worth five days of service and bought advertising to apologize.
Despite that episode, Rogers added 164,000 postpaid wireless subscribers in the quarter, beating analysts’ forecasts for about 129,000. Canada’s open immigration policy is helping: the population is growing at the fastest pace since the 1950s.
The subscriber number “reflects the strength of our wireless franchise and confirms that the impact of the outage was very isolated,” Rogers Chief Executive Officer Tony Staffieri said on a conference call Wednesday.
But the company was disappointed by the results in its cable television and internet business, Staffieri said. It added just 6,000 retail internet and 7,000 TV subscribers amid “aggressive” promotions from a national competitor that he didn’t name, but is BCE Inc.
Rogers is in the middle of a protracted takeover bid for Shaw Communications Inc. for about C$20 billion ($14.8 billion). The deal has been delayed by objections from the Competition Bureau, which is trying to block it on the grounds it will weaken competition in the wireless sector, particularly in Western Canada.
Read more: Rogers Finally Gets Its Day in Court to Rescue Shaw Takeover
Canada’s Competition Tribunal began hearings on the transaction this week. Final arguments are scheduled for mid-December, with a ruling soon after that.
If the deal doesn’t close by the end of the year, Rogers will have to pay bondholders more than C$250 million as part of an earlier agreement to extend deal financing. Rogers and Shaw have said they want to close by then, but they have the option to extend because debt financing is in place through 2023.
Key Insights
- Total revenue was up 2% to C$3.74 billion ($2.8 billion). It would have increased 6% without the cost of the network problem in July.
- Media revenue was up 12% to C$530 million, helped by a successful season for the Toronto Blue Jays. Rogers owns the baseball club as well as the broadcasting rights for radio and television.
- The delay in the Shaw deal is costly. Free cash flow in the third quarter was C$279 million. Excluding the Shaw financing, it would have been C$347 million.
Market Reaction
- Rogers shares were little changed at 9:42 a.m. Toronto time. They’ve fallen 5.7% year-to-date, slightly better than the 6.4% decline of the S&P/TSX Composite Communications Services index.
Get More
- For the news release, click here
--With assistance from Esteban Duarte.
(Adds additional information on results, conference call commentary)
©2022 Bloomberg L.P.
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