Rogers posts Q4 loss on IPTV writedown, but adjusted earnings climb
Adjusted earnings top forecasts of analysts
Rogers Communications says its decision to shelve development of an in-house IPTV system in favour of Comcast's platform is less risky and likely to grow its video business, as cord-cutting continues to plague the industry.
Rogers said Thursday it lost $9 million in its fourth quarter, primarily because of its move to discontinue work on its IPTV product and instead partner with U.S. cable giant Comcast to offer its customers IPTV early next year. The decision resulted in a $484-million expense.
"This is a proven product," said Rogers chief financial officer Tony Staffieri during a conference call with analysts. "So the whole construct for it is much lower risk than the path we were otherwise on."
Staffieri added the company expects the service to help grow its video business.
The major telecommunications companies have been struggling to retain cable TV subscribers as cord-cutters turn away from traditional TV services in favour of Internet-based options, like Netflix.
In the three months ended Dec. 31, Rogers lost 13,000 TV subscribers, adding to an annual loss of 76,000. That's compared to the 128,000 TV subscribers it shed the previous year.
The cable company's financial loss for its fourth-quarter amounted to four cents per diluted share on $3.51 billion in revenue compared with a profit of $299 million or 58 cents per share on $3.45 billion in revenue in the fourth quarter of 2015.
On an adjusted basis, Rogers said it earned a profit of $382 million or 74 cents per diluted share in its latest quarter compared with an adjusted profit of $331 million or 64 cents per diluted share in same quarter the previous year.
Analysts had estimated 71 cents per share of earnings, excluding items such as asset impairments, according to Thomson Reuters. Revenue was slightly below the consensus estimate of $3.56 billion.
Rogers shares popped in the wake of the earnings report, climbing $3.46, or more than 6.5 per cent, to close at $56.04 on the TSX.
Staffieri said the Canadian Radio-television and Telecommunications Commission's pick-and-pay rules which came into full effect on Dec. 1 had a "very small" impact.
Canadian TV providers must now offer a basic cable package for a maximum $25 monthly fee, as well as the choice to either add channels to their subscriptions a-la-carte or through pre-packaged bundles of no more than 10 channels.
Staffieri did, however, blame a recent CRTC decision for dampening the company's cable and Internet revenue, which rose two and nine per cent, respectively.
In October, the CRTC set interim rates for what Rogers and other incumbents must charge smaller companies for access to their high-speed networks. For the most part, these rates are mostly lower than what the companies wanted to charge.
Excluding the impact of this decision, cable and Internet revenue would have risen five and 12 per cent, respectively.
The company also announced former Telus chief executive Joe Natale would join the company as CEO in July.
Rogers first announced Natale, who is bound by a non-compete contract with Telus, would be hired for the top role after its former CEO, Guy Laurence, left the company last October.