Rogers defends higher cellphone rates; misses forecasts despite bigger profits

TORONTO – Rogers CEO Guy Laurence on Wednesday defended the communications giant’s decision to raise cellphone rates despite higher revenue and profits, saying it was necessary to cover the high cost of building and maintaining mobile networks.

Laurence said that fourth-quarter competition in the wireless sector was the most intense in Canadian history as it competed hard against BCE Inc. (TSX:BCE) and Telus Corp. (TSX:T) for the first wave of customers who signed two-year contracts following a 2013 CRTC decision limiting cancellation fees.

Despite the scramble to sign new customers, all three major providers raised their prices for new plans by $5 earlier this month.

Laurence said the higher cost of network equipment after the Canadian dollar’s recent drop was one of the increased expenses that made it necessary to raise prices, adding that the daily cost of a wireless plan is still less than a premium latte.

“If you think about how much work it takes to build, run and upgrade a national mobile network, trust me it’s a lot more work than making a cup of coffee,” he said.

The company said its wireless expenses increased by five per cent in the fourth quarter and nine per cent on the year, while its wireless revenues increased by four per cent in the quarter and five per cent on the year.

Rogers Communications Inc. (TSX:RCI.B), one of Canada’s largest telecom, Internet and media companies, said it posted a profit of $299 million in the fourth quarter and $1.38 billion for the whole of 2015, both up slightly from 2014.

However, quarterly earnings missed analyst expectations as cable and media properties weighed on the company’s results.

A playoff run by its Toronto Blue Jays and the addition of 31,000 post-paid wireless subscribers helped push revenue higher, offset by continued soft ad sales for conventional TV and print publications as well as stagnation in cable revenues.

Operating revenue in the fourth quarter was $3.45 billion, up from $3.37 billion in the same period the year before but short of the estimate of $3.48 billion.

The company also said it would not increase its dividend, despite the predictions of some analysts, because of concerns about debt on its balance sheet.

Rogers has spent big in recent years, doling out $5.2 billion for NHL rights in 2014 after spending $3.3 billion in a government auction for wireless spectrum earlier that year. In June 2015, the company said it would buy struggling wireless carrier Mobilicity for $465 million.

Rogers saw its fourth-quarter adjusted net income fall to $331 million from $355 million, missing estimates of by five cents per share, while the company’s adjusted operating profit, another benchmark of its performance, fell to $1.226 billion for the fourth quarter from $1.233 billion.