Rogers Communications Inc. Reports Below-Expectation Earnings Due to Network Failure
Introduction
Rogers Communications Inc., a prominent Canadian cable and wireless firm, has announced its earnings for the third quarter, revealing that it fell short of analysts’ estimates due to a significant network failure in July. The company’s adjusted earnings per share came in at 84 cents, whereas the consensus estimate stood at 87 cents.
Revenue Impacted by Network Outage
Rogers reported revenue of $3.74 billion for the quarter, representing a 2% increase from the same period last year. However, if not for the network problem, revenue would have risen by 6%. The company attributed this difference to the costs incurred due to the July outage, which affected both consumers and businesses.
Network Failure: A Brief Overview
The network failure in question occurred in July, disconnecting users from the internet and disrupting various services. As a result, Rogers provided customers with credits worth five days of service. This incident had a substantial impact on the company’s revenue, as it would have otherwise contributed to higher earnings.
Financial Performance
- Earnings Per Share (EPS): 84 cents adjusted EPS in Q3, missing analysts’ estimates by 7 cents.
- Revenue: $3.74 billion, up 2% from Q3 of the previous year. Without the network issue, revenue would have increased by 6%.
- Postpaid Wireless Subscribers: Rogers added 164,000 new postpaid subscribers in the quarter, surpassing analysts’ estimates of about 129,000.
- Total Service Revenue: $3.2 billion, a 3% increase from Q3 of the previous year. The company noted that this growth would have been higher without the effects of the network outage.
Market Reaction
Rogers shares have declined by 5.6% year-to-date in Toronto as of Tuesday’s close, outperforming the S&P/TSX Composite Communications Services index’s drop of 6.5%.
Rogers and Shaw: A Multibillion-Dollar Merger Stalled
In a separate development, Rogers is currently embroiled in a takeover bid for Shaw Communications Inc., valued at approximately $20 billion. This deal has been stalled due to objections from Canada’s Competition Bureau. The case is now before the Competition Tribunal, which began hearings this week and will finalize its decision by mid-December.
Conclusion
Rogers’ quarterly earnings were affected by a significant network failure in July, which impacted revenue and led to an underperformance relative to expectations. Despite these challenges, the company continues to execute on its business strategies, with notable additions to its postpaid wireless subscriber base and growth in media revenue. The ongoing merger discussions between Rogers and Shaw highlight the complexities faced by major telecommunications players in navigating regulatory approvals.
Related Developments
- Rogers, Shaw face off against competition watchdog in court over $20-billion merger
- ‘I’m accountable for the outage’: Rogers CEO vows to make ‘urgent fixes’ during grilling before MPs