Rogers and Shaw applications are pictured on a cellphone in Ottawa on Monday, May 9, 2022.Sean Kilpatrick/The Canadian Press
The integration of Shaw Communications Inc. into Rogers Communications Inc. RCI-B-T after a $20-billion takeover is ahead of schedule, Rogers said Wednesday in reporting second-quarter results that fell shy of analyst expectations despite a strong gain in wireless subscribers.
The Toronto-based telecom reported revenue of $5.05-billion for the three-month period ended June 30, up 30 per cent from the $3.87-billion of a year ago.
Profit was $109-million, down 73 per cent from the $409-million of last year’s second quarter. It amounted to 20 cents a share, down from 76 cents.
The results incorporate a full quarter of Shaw’s financial results for the first time.
Rogers attributed the significant drop in its net income to a continuing increase of roughly $500-million in quarterly depreciation and amortization related to its takeover of Shaw, which closed April 3.
After adjusting for some of that depreciation and amortization, as well as other items, the company made $544-million in profit, up from $463-million. The adjusted earnings amounted to $1.02 a share, up from 86 cents.
That still fell short of analyst expectations of $1.13 of adjusted earnings a share and revenue of $5.07-billion, according to the consensus estimate from S&P Capital IQ.
Rogers chief financial officer Glenn Brandt said the company will divest as much as $1-billion of non-core assets, primarily surplus real estate, after taking on billions of dollars of debt to fund the acquisition.
The company added 170,000 net new postpaid wireless subscribers during the quarter, up from 122,000 during the same period last year. (Postpaid subscribers are those who are billed at the end of the month for the services they have used, whereas prepaid customers pay up front for wireless services.)
TD Securities analyst Vince Valentini called the growth of the wireless division “very strong, with record-breaking and better-than expected postpaid adds.”
The telecom also boosted its annual guidance for adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and free cash flow. Rogers is now projecting an adjusted EBITDA increase of 33 per cent to 36 per cent for 2023, up from a 31-per-cent to 35-per-cent increase. Its free cash flow for this year is expected to be in the range of $2.2-billion to $2.5-billion, up from its previous guidance of $2-billion to $2.2-billion.
The company also reaffirmed its earlier guidance of realizing at least $200-million in synergies this year from the acquisition and annualized cost synergies of at least $600-million by the end of the first quarter of 2024.
Roughly a quarter, or $48-million, of the $200-million has already been identified and realized, the company said.
“Over all, in these first 15 weeks we are tracking ahead of our integration targets and we continue to be impressed with the quality and commitment of the Shaw team,” Rogers chief executive officer Tony Staffieri told analysts during a conference call Wednesday.
Desjardins analyst Jérome Dubreuil said “recent industry turmoil” such as the price wars that erupted between telecoms in the wake of the acquisition have yet to show up in financial results.
“Overall, we see the results as a good start to the Shaw integration and are encouraged in light of the increased wireless competition and recent share price underperformance,” Mr. Dubreuil said in a note to clients.
“That said, we remain on the sidelines as the impact of shifts in competition could be gradual,” he added.
Rogers shares rose 4.5 per cent, or $2.69, on the Toronto Stock Exchange in late morning trading to $61.84.