Rogers Earnings: Rerun of Good Wireless Subscriber Growth as Cost Savings Offset Cable Stagnation

Rogers RCI.B had a good first quarter, with results looking similar to what we saw throughout 2022. Highlights included continued impressive wireless subscriber growth and strong cable margins. On the other hand, cable subscribers and revenue are stagnant, and wireless average revenue per customer, or ARPU, growth is relying solely on a return of roaming revenue—a phenomenon that should peter out soon. The quarter also did not include Shaw, as that merger closed on April 3. After incorporating the first-quarter results and our estimates for exactly what Rogers will receive from Shaw, we’re raising our fair value estimate to CAD 75 from CAD 73.

We’re still awaiting exact details surrounding the status of the Shaw customers that Rogers acquired and how Shaw’s assets were split between Rogers and Quebecor, which acquired Shaw’s Freedom Mobile wireless business. We continue to believe that the acquisition is roughly valuation neutral and that success will rely on significant cost savings. However, management reiterated its expectation that it will achieve $1 billion in cost savings within the first two years, despite merger concessions, and its comments and 2023 guidance indicate a significant amount will come this year.

Rogers added 95,000 net postpaid wireless phone subscribers during the quarter, the best first-quarter result since 2018 as immigration and other foreign entrants drive continued strength, a dynamic we expect to continue. Growth in subscribers led to 7% year-over-year wireless service revenue growth, as ARPU was flat, and we estimate it would’ve been down about 2% year over year had it not been for a continuing return of roaming revenue. With roaming volume now at about 85% of prepandemic levels and Quebecor entering the national wireless market with a mandate to undercut competitors on price, we expect further ARPU growth to be minimal the next few years.