TORONTO (Reuters) - Rogers Communications Inc posted an unexpected 17 percent drop in quarterly profit on Monday as the cable, phone and media company struggled to hold on to customers during a period of industry-wide turbulence.
The Toronto-based company, already struggling to maintain its leading position in the wireless industry, had to deal with regulatory changes in both its wireless and television markets that make it easier for customers to switch to rivals.
Rogers lost 26,000 net postpaid wireless subscribers, who typically spend much more than those who prepay for service. It also lost 37,000 prepay customers.
Still, operating revenue rose 5 percent to C$3.175 billion as those who stayed chose more expensive plans, including some that pool data usage across multiple devices.
“They’re going to have to prove themselves now,” said Dave Heger, a senior equity analyst at Edward Jones. “The revenue trends seem to be going in the right direction, but I’m not convinced yet on earnings.”
Rogers said it spent one third more on subsidized equipment sales in the quarter, in part to target wireless customers whose contracts expire during the so-called “double cohort” zone. That refers to the expiration of three-year wireless contracts signed before the introduction of a wireless code that bans them, plus the newer two-year contracts up for renewal in the same period.
Rogers also lost 41,000 cable-TV subscribers, 7,000 Internet customers and 20,000 landline telephone lines in the first quarter.
It said much of that slip was caused by the elimination of a 30-day waiting period before TV, Internet and landline phone contracts could be canceled.
The company hopes to offset the loss of price-conscious customers with value-added services, such as unlimited use Internet plans launched earlier this year.
“The new plans have been received very well,” Rogers Chief Executive Officer Guy Laurence said on a call with analysts. “It’s clear that demand in the average family is growing quite quickly. The number of devices connected to a router is increasing.”
Rogers had net income of C$255 million ($209 million), or 48 Canadian cents a share, in the quarter, compared with C$307 million, or 57 cents a share, a year earlier.
Rogers said it earned 53 cents a share on an adjusted basis.
Analysts had, on average, expected Rogers to earn 63 Canadian cents a share on revenue of C$3.16 billion, according to Thomson Reuters I/B/E/S.
Editing by Chris Reese,; Peter Galloway and Andre Grenon