Rogers crosses 8 million postpaid subs in Q2, but higher costs lead to fewer smartphone sales

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Rogers posted its Q2 2014 results this week, and the company continued to be buoyed by strong wireless numbers, though its net income was lower than the same period a year ago.

Revenue amounted to $3.21 billion, the same as Q2 2013, while adjusted operating profit came in at $1.3 billion. Net income was $405 million, 24% lower year over year. Wireless revenue was down 1% year over year to $1.8 billion.

A few factors hindered growth this time around, especially in the wireless segment. Rogers complained that fewer existing customers are choosing to upgrade aging devices because, due to the implementation of two year contracts, handset prices have increased. While network revenue was up 4% y/y, equipment sales dropped 17% in the same period.

Rogers netted 38,000 total subscribers in Q2, with 312,000 gross additions, much higher than the 2,000 net adds in Q1. The total postpaid subscriber base rose above 8 million for the first time, to 8.11 million, partially at the expense of the prepaid base, which lost 31,000 customers overall. Postpaid ARPU was $66.40, down nearly $1 from the previous year, while blended ARPU remained motionless, losing $0.12 to $59.18.

Smartphone users now comprise 76% of Rogers’ postpaid user base, up 4% from a year ago. Data revenue continues to rise at the expense of voice usage, which positively affected both churn and ARPU, both of which were improved over last quarter. Rogers’ postpaid churn was down seven basis points to 1.13%, higher than TELUS but lower than Bell.

This quarter was another example of results from a wireless machine that is pretty difficult to disrupt. Rogers continues to roll out 700Mhz service across the country, and while it complains of lower revenue from roaming due to plentiful cheaper alternatives from competitors (and some reasonably-priced internal voice, text and data bundles), it still managed to activate 588,000 smartphones in the quarter.

The company said that 700Mhz spectrum has been deployed in select Vancouver, Calgary, Montreal and Toronto communities, and will expand further into BC in the coming year.