Paul Bagnell

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It’s usually found on page eight or nine of the quarterly earnings news release issued by Rogers Communications, about halfway down the page and in a table of figures labelled Wireless Subscriber Results.

Churn.

If there is one number new Rogers CEO Joe Natale will be judged on, it will be this figure. 

Churn measures the percentage of customers who took their business elsewhere. All wireless companies experience it, and all of them fret over it. Replacing those customers with new customers is expensive, and has a corrosive effect on profit growth.

Just as Hunter Harrison’s now-legendary tenure with Canadian Pacific Railway was characterized by an obsessive – and hugely successful – drive to lower CP’s operating ratio, Natale’s time at Rogers will largely be judged on whether or not he can deliver better churn numbers.  As operating ratio (a measure of costs versus revenue) steadily fell during Harrison’s time at CP, shares of the company staged an historic rally.

Rogers shareholders are hoping Natale can drive churn down and keep it down, and believe the stock will respond positively if he does.

Indeed, second-quarter churn dipped to 1.05 per cent from 1.10 per cent in the previous quarter and 1.14 per cent a year earlier.

Just after Natale took the CEO job this spring, veteran telco analyst Phillip Huang at Barclays said he was reluctant to advise clients to buy Rogers stock “until we gain greater visibility to Mr. Natale’s plans.”

Natale, of course,  was a senior Telus executive for years (including a brief stint as CEO), and is widely credited for reducing churn there.

Natale sees churn and customer satisfaction as tightly related. Improve customer satisfaction, he believes, and churn will take care of itself.

Churn rates were persistently north of 1.20 per cent since 2012. The ousted Guy Laurence deserves some credit for that improvement during his time as CEO.

But Rogers needs that number to drop below one per cent – and stay there.

At Telus, churn stood at 0.95 per cent in 2016, the third straight year of sub-one-per-cent churn, after dropping steadily since 2011. Natale was Telus’s chief commercial officer from 2003 to 2014, and chiefly responsible for a “customer first” strategy that pushed those churn numbers down.

At Rogers, Natale has already taken action. In late June, he abruptly dismantled the management structure his predecessor Laurence had created to enhance Rogers’ customer satisfaction scores. Chief Customer Officer Deepak Khandelwal and Chief Brand Officer Dale Hooper were let go, and responsibility for improving customer experience was handed to Rogers’ consumer division. Natale sees customer service as an “end to end” job that must include all interactions with customers, and didn’t like the management silos inherent in Laurence’s approach.

There has already been a recent complication, however. The highly regarded executive who led the consumer division, Dirk Woessner, has decided to leave Rogers later this year for a job in his native Germany.  Woessner was recruited by Laurence, but was nonetheless a big part of Natale’s plans. Expect analysts to ask whether a search for Woessner’s replacement has started yet.

Rogers reported $3.6 billion in quarterly revenue Thursday, with adjusted earnings per share beating estimates at $1.00. Closely-watched wireless net postpaid subscriber additions jumped to 93,000 from 65,000 a year earlier.