Q2 income falls as new Rogers takes shape

New strategic plan introduced in May should be almost fully implemented by September

Introducing a comprehensive makeover of its operations in May, Rogers Communications president and CEO Guy Laurence said that quarterly results would likely be impacted in the short-term, but that the plan would ultimately create a new, more customer-focused company.

That point was reflected in the communications giant’s second-quarter earnings report last week, with net income falling 24% to $405 million on flat revenues of $3.2 billion.

Rogers is approximately eight weeks into the implementation of its new “Rogers 3.0” business plan, a seven-point, multi-year strategy that it says will lay the groundwork to “significantly enhance” the customer experience and “re-accelerate” growth relative to its peers.

Guy Laurence

Guy Laurence

Laurence told analysts the company has made “modest progress” in the plan’s implementation since its introduction, and that it would be largely complete by September.

Echoing Laurence’s earlier warning that the plan would see dismissals at the management level, the company recently announced the elimination of approximately 15% of employees at the vice-president or higher level, as well as “several hundred” mid-level positions.

Laurence told analysts that the plan is to reinvest the “vast majority” of savings achieved through those cuts, particularly with an eye to enhancing the customer experience.

“We are going to improve customer experience; we’ve talked about it a lot but we are going to do it,” Laurence told analysts. “We are going to expand our investment in enterprise, and we are investing in how we’re going to use content to promote the overall business.”

Laurence said there are no current plans in place to grow the company through mergers and acquisitions. “We have a great train set here at Rogers, and we intend to play with what we’ve got,” he said.

Revenue for the company’s media operations in the quarter was $475 million, a 1% increase from $470 million in the year-earlier period.

The company attributed the increase to growth at Sportsnet and The Shopping Channel, as well as its radio operations and the Toronto Blue Jays, with gains partially offset by lower TV advertising revenue and the impact of broadcasting 25 fewer NHL games in the quarter.

During a call with analysts, VP of investor relations, Bruce Mann, said the company is experiencing “modest continued deterioration” in advertising revenue for both broadcast TV and print.

Mann said the company’s new NHL rights deal will be accretive to media earnings “from the get-go,” but said that most of the upside of the new deal will come during the second half of the season (the first and second quarter for Rogers).

Adjusted operating profit for the media division fell 16% to $54 million, which the company attributed to a combination of factors, including increased investment in player salaries for the Blue Jays, increased programming costs, as well as ramp-up costs associated with the launch of the digital magazine service Next Issue Canada and the NHL licensing agreement.

In addition to the unveiling of its 2014-15 NHL schedule, quarterly highlights included the launch of Sportsnet NOWan offering of live HD-quality streaming services of the seven Sportsnet channels that is available free on all mobile devices and PCs for people with a subscription to the service.

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