Rogers exceeds expectations in first quarter subscriber additions

Rogers Communications posted a drop in first-quarter profit on Wednesday, hurt by higher costs from the acquisition of Shaw Communications, sending shares of the Canadian telecom company down more than 3%.

The company saw a 23% jump in operating expenses in the quarter, as it booked C$142 million ($103.6 million) in restructuring costs mainly for severance, including about C$30 million for its acquisition of Shaw Communications. The C$20 billion deal closed last year.

“Finance costs, the acquisition of Shaw Telecom, and lower media subscription revenues are all weighing on net earnings,” said Michael Ashley Schulman, chief investment officer at Running Point Capital.

Net income fell 50% to C$256 million. However, adjusted profit was in line with expectations. The net income drop took the shine off strong growth in Rogers’ wireless business.

The company added 98,000 net monthly bill-paying wireless phone subscribers in the quarter, topping the Visible Alpha consensus estimate of 77,530 net additions, helped by demand from rising population driven by temporary foreign workers and immigrants.

Revenue for the company’s media business, which owns the Toronto Blue Jays baseball team, fell 5% to C$479 million in the quarter ended March 31 due to lower subscriber revenue and higher media content costs. The business also saw a 7% rise in operating costs to C$582 million because of programming and production costs and higher payroll-related expenses for its baseball team.

In the quarter, Rogers’ free cash flow, a metric closely watched by investors as it helps determine dividend payouts, rose 58% from a year earlier to C$586 million, beating a Visible Alpha estimate of C$501.8 million.

The company’s total revenue rose about 28% to C$4.90 billion, compared with analysts’ average estimate of C$4.92 billion, according to 12 analysts polled by LSEG data. Reuters