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Rogers Communications (NYSE: RCI) reported its third-quarter results a couple of days earlier than expected after announcing an unexpected CEO transition. The company said that Guy Laurence was stepping down as CEO effective immediately, with the current board chairman, Alan Horn, stepping into the role on an interim basis. The company has already appointed a successor in former Telus (NYSE: TU) CEO Joe Natale, who will transition into the role as soon as he is available. Because of the abrupt CEO change, Rogers Communications released its third-quarter results early to alleviate any questions about the quarter in light of the transition.
Rogers Communications results: The raw numbers
Q3 2016 Actuals
Q3 2015 Actuals
Adjusted operating profit
Adjusted earnings per share
Data source: Rogers Communications. YOY = year over year.
What happened with Rogers this quarter?
Rogers' wireless division continues to drive growth.
- Rogers' wireless segment delivered its best revenue performance and subscriber additions since 2010. Overall, revenue was up 3%, to more than $2 billion, while adjusted operating profit edged up 1%, to $884 million. Strong subscriber growth and the continued adoption of the company's Share Everything plans drove growth during the quarter.
- The cable segment delivered its best net subscriber additions since 2011, adding 30,000 net subscribers, primarily from new internet customers. That said, cable revenue still declined by 1%, to $865 million, due to continued cord-cutting by TV customers. However, offsetting the decline in revenue was a 5% drop in operating expenses, which resulted in adjusted operating profit rising by 4%, to $431 million.
- Rogers' business solutions segment was stable during the quarter, with revenue up 1%, to $95 million, while adjusted operating profit was flat at $31 million.
- The company's media segment was strong with revenue rising 13%, to $533 million, while adjusted operating profit jumped 36%, to $79 million. Driving this growth was higher sports-related revenue, due in part to the success of the Toronto Blue Jays.
- While the company's adjusted operating profit rose 3%, net income slumped 9.5%, or 9.8% on a per-share basis. Driving this decline were higher investment-related expenses due to the wind-down of the company's Shomi investment, which was its streaming-service joint venture with Shaw Communications (NYSE: SJR). Rogers and Shaw launched the service two years ago as a Canadian competitor to Netflix (NASDAQ: NFLX). However, only about half a million Canadian households used Shomi on a monthly basis, compared to about 5.4 million regular Netflix users in the country.
What management had to say
Given the current CEO transition, Rogers' management did not offer its usual commentary on the quarter. Instead, it provided some comments on Joe Natale, the soon-to-be CEO. The press release noted that Natale is a "highly respected executive" who is "well known to the Canadian telecommunications industry, bringing many years of experience to the company." During his time with Telus, the company maintained one of the highest growth rates as well as some of the best operating metrics in the industry. In addition, he was one of the key players behind Telus' "customer first" strategy.
That said, Natale's role as CEO at Telus was short-lived. He assumed the top spot in May 2014 before stepping down the next August citing that residing in Western Canada did not work for his family as he preferred living in Toronto, where he is deeply involved in the community. As part of that transition, Natale signed a non-compete agreement, which is why he is not immediately available to assume the CEO role at Rogers.
Despite the abrupt leadership change, the company will continue to move forward on the current initiatives of its Rogers 3.0 plan, which it implemented to restart growth and improve the customer experience. That latter aim is a strong suit of Natale's, and Rogers' management hopes he can replicate his success at Telus.
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