Rogers Communications discovers it pays to invest in service

Spending on customer service helped Rogers Communications Inc. boost net wireless additions in the first quarter as it reported revenue and adjusted income that topped analyst forecasts, sending shares ahead by nearly 5 per cent in extended trading.

The Toronto based company on Thursday posted a $ 425-million profit for the three months ended March 31, up 37 per cent from $ 310 million in the first quarter of 2017. Shares rose by $ 2.17 (U.S.) to $ 47.94 after hours on the Nasdaq.

Revenue of $ 3.63 billion (Canadian) was up 8 per cent from a year ago’s 3.37 billion, with wireless division revenue ahead by 9 per cent at $ 2.19 billion and accounting for more than half of the total.

According to new accounting rules adopted in the quarter, the wireless, cable Internet and media company earned $ 477 million in the period. Net profit amounted to 83 cents per share from 60 cents a year ago, while adjusted earnings rose to 93 cents from 64 cents.

Rogers reported its best postpaid wireless customer churn rate in 15 years, at 1.08 per cent, an improvement of nearly two basis points year over year after what CEO Joe Natale called a “systemic investment that will continue to pay dividends for us.

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“We are knocking down chronic customer service issues that have existed for a long time,” he told analysts on a conference call.

Rogers said it added 95,000 postpaid wireless customers in the quarter, versus 60,000 a year ago, in a growing wireless market in Canada that has yet to reach full penetration.

The result comes after technical problems during a price war with rivals during the seasonally important December quarter cost Rogers, with net additions of 75,000, well below the expected 100,000.

“This quarter appears to have fully recovered,” said Dave Heger of Edward Jones Equity Research.

Rogers posted growth in its other segments including media and said overall service revenue expanded by 5 per cent in the quarter, while adjusted operating earnings grew 13 per cent.

Heger said the company showed an improvement in margins and better than expected cable TV subscriber results. The media segment grew on contributions from Sportsnet, although the prepaid wireless segment which makes up about 4 per cent of total wireless revenue was a weak spot with the company saying it lost subribers to the more lucrative postpaid category.

Rogers operates: a wireless network under its Rogers, Fido and Chatr brands; the Toronto Blue Jays baseball team, and one of Canada’s largest cable TV networks.