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Rogers raises guidance, says Shaw deal on track to close by end of quarter

TORONTO — Rogers Communications Inc. says it will make more money than expected this year and is still "on track" to close its $26 billion takeover of Shaw Communications Inc. by the end of the quarter.
Rogers corporate head office and headquarters seen from Ted Rogers Way in Toronto on Monday, Oct. 25, 2021. Rogers Communications Inc. said it earned a first-quarter profit of $392 million, up from $361 million a year earlier, and raised its guidance for the year. THE CANADIAN PRESS/Evan Buhler

TORONTO — Rogers Communications Inc. says it will make more money than expected this year and is still "on track" to close its $26 billion takeover of Shaw Communications Inc. by the end of the quarter. 

Rogers said Wednesday it earned a first-quarter profit of $392 million, up from $361 million a year earlier. Rogers CEO Tony Staffieri said in a statement that the company is raising its guidance to reflect its "improved outlook" based on strong results across all businesses.

"We are very confident about the opportunities ahead, driven by the exceptional quality of our assets and the dedicated efforts of the Rogers team," said Staffieri, who became CEO earlier this year after a battle for control of the company's board of directors pitted members of the Rogers family against one another and resulted in the departure of previous chief executive Joe Natale.

The Toronto-based telecommunications company raised its guidance for total service revenue growth, saying it now expects it to grow six to eight per cent this year compared with an earlier forecast for growth between four and six per cent.

The company also raised its expectations for adjusted earnings before interest, taxes, depreciation and amortization to the range of eight to 10 per cent compared with earlier guidance for growth between six and eight per cent. This is in line with Telus Corp. and higher than BCE Inc.'s two to five per cent.

Free cash flow for the year is now expected to be between $1.9 billion and $2.1 billion, up from earlier guidance for between $1.8 billion and $2 billion.

"It is not common for telecom companies to increase their outlook this early in the year, which speaks to management's improved visibility on the company's operations amid the reopening," Desjardins analyst Jerome Dubreuil said in a note.

The cable, wireless and media company said its net income amounted to 77 cents per diluted share for the quarter ended March 31, up from 70 cents per diluted share in the first three months of 2021.

Revenue totalled $3.62 billion, up from $3.49 billion a year earlier.

Rogers said the increase came as wireless service revenue rose seven per cent in the quarter mainly as a result of higher roaming revenue associated with significantly greater travel as COVID-19-related global travel restrictions eased.

A larger postpaid mobile phone subscriber base also contributed to the increase.

Wireless equipment revenue fell 10 per cent, as a result of fewer device upgrades by existing subscribers and fewer of its new subscribers purchasing devices.   

Cable service revenue rose one per cent, while media revenue increased 10 per cent, boosted by higher sports-related revenue.

On an adjusted basis, Rogers said it earned 91 cents per diluted share for the quarter, up from an adjusted profit of 77 cents per diluted share a year earlier.

One analyst on the company's earnings call asked about a Globe and Mail report citing unidentified sources that said Rogers has presented Ottawa with a deal that would see Xplornet Communications Inc., a Canadian rural internet provider, acquire wireless carrier provider, Freedom Mobile, which is owned by Shaw.

It's expected that Shaw will have to sell its Freedom assets as a requirement of the deal's regulatory approval.

"We're not going to comment on any rumours that are out there," Staffieri said during the call. 

Some analysts nonetheless saw the report by the newspaper as a good sign for the deal, overall. 

"This represents another milestone toward merger approval," Dubreuil said.

On the call, Rogers added that it has started working with its vendors and is beginning to make leadership preparations for the merger, though it is still awaiting full regulatory approval. Rogers also said that the target remains $1 billion of cost synergies within two years of the deal closing. 

In March, the Canadian Radio-television and Telecommunications Commission (CRTC) approved the transfer of Shaw's broadcast services to Rogers. Rogers said Wednesday that teams from both Rogers and Shaw "continue to work constructively with the Competition Bureau and ISED Canada to ensure they have the information they need to assess the significant benefits the combined company will bring to Canadians and the Canadian economy."

Rogers held its annual meeting of shareholders Wednesday as well, where Staffieri said the acquisition of Shaw would give the company the scale to "meaningfully bridge the digital divide" and "drive competition," despite concerns from critics who see the transaction hampering competition.

This report by The Canadian Press was first published April 20, 2022.

Companies in this story: (TSX:RCI.B)

Adena Ali, The Canadian Press