On Aug 22, 2014, we issued an updated research report on
Rogers Communications Inc.
Rogers has delivered negative earnings surprises in all four
quarters last year, with an average surprise of negative 7.46%. The
company reported lackluster second-quarter 2014 financial results,
wherein both its top and bottom line missed the Zacks Consensus
Rogers was the first company in Canada to launch the LTE (Long
Term Evolution) network. Initially, the network was deployed across
90 Canadian cities, which now covers over 60% of Rogers' footprint.
Furthermore, the company has entered into a 20-year deal with
Videotron to expand the 4GLTE coverage across Québec and the Ottawa
region in Canada. Both the companies will share the newly-built
network across these rural areas of Canada, bridging the gap
between rural and urban network speed.
Meanwhile, Rogers landed a 10-year broadcasting deal with WWE
Entertainment. Per the agreement, Rogers will be the exclusive
distribution partner of all WWE pay-per-view events in Canada.
Also, the company recently received its first major National Hockey
League (NHL) sponsorship from one of Canada's leading banks,
Scotiabank. Rogers also renewed its contract with a major baseball
team for the next eight years. Interestingly, the deal will allow
Rogers' customers to watch all games on multiple platforms.
Earlier, the company launched a first-ever mobile wallet called
Suretap, which is expected to encourage mobile payments in Canada.
The company also unveiled a digital subscription magazine called
Next Issue Canada. Moreover, the launch of the Share Everything
service plan - which allows individuals, families and small
businesses to share wireless data - provides unlimited nationwide
talk and text, call display and voicemail facilities across 10
wireless devices. This will not only drive ARPU but also subscriber
On the flip side, Rogers' Cable operations are currently facing
increased competition. BCE Inc.'s (
) entry into cable TV services is imposing competitive pressure and
may also slash Rogers' market share and impede cap margin
Likewise, Rogers' Media segment was affected by continued
softness in the advertising market. We believe that much of the
Media segment's growth is dependent on the strong viewership rating
of Rogers' radio and TV broadcasting operations. To remain
competitive, the company needs to heavily invest in new TV programs
and TV channels. However, this may result in considerable cash
Moreover, a highly leveraged balance sheet, weaker smartphone
activations in the fourth quarter of 2013 and stiff competition
from other industry players like TELUS Corporation (
) and Shaw Communications Inc. (
) will continue to act as headwinds for the company while moving
Rogers currently carries a Zacks Rank #3 (Hold).
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