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Rogers expects Q3 will show signs of recovery but pandemic's impact will remain

TORONTO — The usually busy back-to-school shopping season will likely look different for Rogers Communications Inc. this year, an uncertain outlook that comes as the COVID-19-related economic downturn took a toll during its most recent quarter.

TORONTO — The usually busy back-to-school shopping season will likely look different for Rogers Communications Inc. this year, an uncertain outlook that comes as the COVID-19-related economic downturn took a toll during its most recent quarter.

The Toronto-based wireless, cable and media company is cautiously predicting that its three main business units are past the worst parts of the pandemic, even as it missed analyst expectations for its second quarter as its net profit and adjusted earnings were cut in half, with a 17 per cent drop in revenues.

Shares in the company ended the day down 83 cents, or 1.5 per cent, at $54.96.

However, company executives stressed that Rogers performed well during the March-June quarter, given the unusual circumstances caused by widespread economic shutdowns due to COVID-19.

"In general, we anticipate modest sequential financial and operating improvements in Q3 for each of our businesses as the economy starts to open up and live sports slowly resume," chief financial officer Tony Staffieri told analysts Wednesday.

"We do not know what back-to-school will look like as customers are only now slowly getting back to shopping, but the economy is opening up, and that should help in our and the industry's recovery."

The September return to school is typically one of the telecom industry's busiest periods, as post-secondary students moving away from the family home buy internet and cable services and parents of teens equip their children with wireless phones.

This year, provincial officials are still working out how quickly they can safely resume classes, and there likely be increased use of video classes or other remote learning at colleges and universities.

In turn, the uncertainty over availability of childcare for school-aged children is causing some parents to wonder if they will be able to return to work, or continue to work from home if in-class education doesn't return to five-days per week.

Staffieri said that Rogers saw positive demand for its home internet and TV offerings during the early months of the pandemic, so additional growth could be more muted this year than usual.

On the other hand, he said Rogers plans to push through previously delayed increases to internet and television services in the fall. Further details weren't immediately available.

In terms of mobile phone sales and wireless services, about 90 per cent of Rogers stores across Canada have reopened but are at reduced capacity due to COVID-19 precautions, he said.

"In wireless, June saw a notable recovery in loading (new subscribers) as most stores were starting to open and July is trending a little bit better as well," Staffieri said.

On the other hand, he said, revenue from roaming away from the Rogers wireless network dropped almost $100 million year-over-year in the second quarter "and we expect the same year-over-year dollar decline in Q3."

Chief executive Joe Natale told analysts on the quarterly call that all parts of the business were affected by the COVID-19 pandemic as sales and new business activity essentially ground to a halt.

He said the Rogers sports and media business saw the most pressure in the second quarter, noting a "material loss" of advertising revenue due to cancelled live games and a lack of game-day revenue for the company's Toronto Blue Jays major league baseball team.

The Blue Jays will not be playing home games in Toronto, due to a 14-day quarantine that Canada would impose on U.S. travellers if games were played here.  

"Similar to wireless and cable, we're seeing some positive signs," Natale said. "with live sports scheduled to come back, advertisers are calling eager to participate in the return of live sports."

Nevertheless, overall profitability and adjusted earnings from the Sports and Media business likely won't return until fans can watch the Jays live, Steffieri said.

"We're quite optimistic about the revenue profile in Q3, and we'll see what Q4 brings," he said. "But to be clear . . . we still continue to expect a loss overall in media in Q3 and probably Q4 as well."

Earlier Wednesday, Rogers reported it earned $279 million or 54 cents per diluted share, down from $591 million or $1.15 per share a year earlier.

Adjusted net income was $310 million or 60 cents per share for the period ended June 30, compared with $597 million or 48 cents per share in the second quarter of 2019.

Revenue was $3.15 billion, down from $3.78 billion a year earlier.

Rogers was expected to report 71 cents per share in adjusted profits on $3.18 billion of revenues, according to financial markets data firm Refinitiv.

This report by The Canadian Press was first published July 22, 2020.

David Paddon, The Canadian Press