Rogers Communications (NYSE: RCI), headquartered in Toronto, Ontario, sees light at the end of the tunnel as Canada emerges from COVID-19. With almost 80 percent of Canada’s population already vaccinated, people are getting out more as businesses slowly resume operations. Consequently, Rogers is realizing growth across its wireless, cable and media businesses despite the third wave of the pandemic and varying degrees of lockdowns across the Canadian provinces.
Wireless makes up nearly 60 percent of the company’s revenues and corresponding capital expenditures. Cable accounts for around 30 percent and Media the balance.
Rogers reported 2Q21 wireless service revenues of almost $1.3 billion* (C$1.6 billion), up two percent on a year-over-year basis from $1.2 billion in 2Q20, mainly due to a larger postpaid subscriber base, lower postpaid churn and higher roaming revenue as global travel restrictions are gradually eased. Revenue growth was partially offset by lower data overage revenue, as customers continue to opt for Rogers Infinite™ unlimited data plans. Adjusted EBITDA grew 10 percent YoY to $791 million.
The company attracted 99,000 net wireless postpaid subscribers in the quarter growing its total retail postpaid and prepaid subscriber base to 11 million, up three percent from 10.7 million in 2Q20.
Wireless capital expenditures jumped 67 percent YoY to $333 million as Rogers maintained its focus on 5G expansion. Capital intensity (capex/service revenues) for the quarter came in at 26 percent, indicating a very high level of network expansion.
At the end of 2Q21, Rogers’ 5G network reached more than 700 communities and over 50 percent of Canada’s population. The plan is to extend its 5G network to more than 1,000 communities, reaching over 70 percent of Canadians, by the end of 2021.
Tony Staffieri, Rogers CFO comments, “5G is happening now across our footprint. We’re also increasing capacity and coverage in the major corridors. Bear in mind that the very first application, the killer app on 5G, is really about spectrum efficiency, so it is really important that we continue to make those investments as a whole, and bear in mind, it’s a very efficient spend. We made a commitment to go all Ericsson as a result, and now we’re just lighting up those cell sites.”
Rogers is exploring the potential of 5G in other areas. It launched 5G-enabled fixed wireless access for home internet services to neighborhoods. In a demo, Rogers provided 5G connectivity for Canada’s first driverless 5G shuttle bus with the University of Waterloo, as Inside Towers reported, and Canada’s first 5G drone flight with the University of British Columbia and InDro Robotics.
Joe Natale, Rogers CEO adds, “The one everybody talks about is mobile edge computing, and there, I would say, it’s more in the medium term. We’re busy building relationships and partnerships to provide mobile edge computing capability across our 9,000 wireless sites and there it’s a lot of analysis and showcasing type work going on but not really at sort of the key material economic level.”
Two seminal events this year will impact Rogers’ 5G future.
In March, the company announced it would acquire Shaw Communications, as Inside Towers reported. The transaction is expected to close in the first half of 2022. The combined company will invest roughly $2.0 billion to build 5G networks across Western Canada over the next five years and establish a new $785 million Rogers Rural and Indigenous Connectivity Fund dedicated to connecting rural, remote, and indigenous communities across Western Canada.
In July, Rogers was the big winner in the 3500 MHz spectrum auction conducted by Innovation, Science and Economic Development Canada (ISED), also reported by Inside Towers. Rogers spent $2.6 billion for 325 new licenses and 509 “transitioned” existing licenses across the 172 Tier 4 service areas that the licenses were offered.
In addition to its low-band 600 MHz and high-band millimeter wave frequencies, Rogers gains valuable 3500 MHz mid-band spectrum for 5G coverage of nearly 35 million Canadians.
Staffieri points out, “While we are in a peak investment period, we are making generational investments that are 100 percent consistent to our core operations and multi-decade strategy to grow our networks and connect Canadians. As we have proven over multiple decades, the investments we have made have created long term value for our customers and our shareholders. … we’re excited with the value we expect these investments will create for decades to come.”
Although reluctant to provide full-year 2021 financial guidance given the pandemic overhang, Staffieri comments on the company’s 3Q21 outlook, “In our wireless business, our traditional retail distribution channels are fully open. … Pent-up consumer demand, people becoming mobile again, and students returning to school will drive this growth. We believe service revenue will grow modestly on a sequential basis. … we expect strong wireless Adjusted EBITDA margin performance to continue … and [capital] intensity to be approximately 19 percent.”
* All figures in $U.S.
By John Celentano, Inside Towers Business Editor
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