Rogers Q1 2012 wireless Results

Rogers Q1 2012 wireless Results

Looking at the Q1 2012 Rogers wireless results, it is difficult to find any good news.   It seems that every single metric (with the exception of Data revenue) actually went in the wrong direction.

 

Churn

Overall churn was high for Rogers, with some 513,000 subscribers leaving Rogers during the quarter.  Bringing them very close to losing 2 million customers in the last 12 months (1,987,000).  That is a lot of customers to lose in one year!

Rogers Wireless Q1 2012 Prepaid Nets

Rogers Wireless Q1 2012 Prepaid Nets

Prepaid churn is cyclical and always high in Q1, but this time, Rogers lost a significant number of prepaid subscribers.  They had negative nets of 72,000 which is the biggest loss in the last 7 years.  This compares with a net loss of only 10,000 prepaid subscribers in Q1 2011.  We have yet to see what TELUS and Bell did in terms of losses in prepaid, but the signs are that the incumbents lost significant prepaid share to the new entrants.

Even postpaid churn was high.  While 1.26% is not significantly higher than the Q1 2011 number of 1.23%, it was definitely going in the wrong direction with 287,000 postpaid customers leaving (Q1 2011 was 271,000), despite upgrading 422,000 subscribers to smartphones (some of these were already on smartphones, but required a newer smartphone).

ARPU

ARPU has long been a Rogers strength, but no more, it is heading down quickly.  Voice ARPU declined in terms of both rate per minute (almost a whole cent) but the minutes of use declined also.  Together these suggest that there is not only a change in the Rogers mix (which means they are not getting their fair share of high value customers), but also some base reprice on the voice side.  Behavioral changes away from voice to messaging suggests that Rogers are not gaining the lost voice revenue in data revenue.  iPhones using iMessage, Blackberries using BBM and applications like whatsapp are also repricing text messaging.

For the second quarter in a row, postpaid ARPU was below the key $70 mark at $67.39.  Apart from Q4 2011, Rogers has had postpaid ARPU above $70 every quarter since Q1 2007!  Oops.  This is also nearly $3 down over Q1 2011 when postpaid ARPU was $70.18.

Prepaid ARPU was up, but only marginally at $14.99 (Q1 2011 was $14.32), but this is significantly below the reported ARPUs of Public Mobile, WIND and Mobilicity which all have ARPU around $30.

Gross

Even gross was down.  At 488,000 subscribers, Rogers was short of Q1 2011 by nearly 10K subscribers.  Some of this could have come from closing the video stores, except they said they kept the wireless parts of these stores open.  Assuming that they continued to expend their points of distribution, this means same store sales were significantly down.  They did mention saving some channels costs, but at what price – not getting your fair share?

 

EOP

Total subscribers went down for the first time in living memory, maybe the first time ever – we will have to check as our current data only goes back to Q1 2005.  This loss was driven by prepaid losses, which they point out only account for 5% of revenues, but still this might suggest that the three brand strategy is no longer working.

 

Revenue & EBITDA

Both Down.  Total wireless revenue was $1,706m down from $1,721m in Q1 2011.  This was driven by lower network and handset revenue, but more on the handset side.

EBITDA was down at $717m from $790m in Q1 2011.  On the conference call they were proud of their margin being 46%, but this was down from 48.9% in Q1 2011.  A closer look also shows that Operating profit (not adjusted Operating profit which excludes stock-based compensation expense and Integration) slipped more dramatically from 49% to 44% – that looks like a 5% margin decline!

Rogers Wireless Q1 2012 summary

Overall this was a poor quarter for Rogers, for their sake, one can only hope that Bell also struggled, because most signs suggest TELUS had a great quarter.

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