Rogers Communications Inc. (RCI) declared financial results for the third quarter of 2010. Quarterly net income was $370 million or 6479 cents per share compared to a net income of $485 million or 79 cents per share in the year-ago quarter.
Third quarter adjusted EPS of 66 cents was significantly below the Zacks Consensus Estimate of 74 cents. This was primarily due to higher cost of sales and a huge loss on repayment of long-term debt.
Quarterly total revenue was $3,118 million, up 2.7% year-over-year and slightly above the Zacks Consensus Estimate of $3,104 million. This was primarily due to an increase in sales for all three segments, particularly the massive growth of the Wireless Data revenue.
Quarterly operating profit was $1,164 million, up 1.04% year-over-year. During the reported quarter, the company repurchased 9 million Class B Non-Voting shares for total consideration of $335 million and paid dividends totaling $187 million.
During the third quarter 2010, Rogers generated $831 million of cash from operations compared to $1,219 million in the year-ago quarter. Free cash flow during the reported quarter was $379 million compared to $703 million during the year-ago quarter.
At the end of the third quarter of 2010, Rogers had $913 million of cash and marketable securities on its balances sheet compared to $930 million at the end of fiscal 2009. Total outstanding debt, at the end of the same quarter was $9,067 million compared to $8,464 million at the end of fiscal 2009. At the end of the third quarter of 2010, debt-to-capitalization ratio was 0.687 compared to 0.665 at the end of fiscal 2009.
Wireless Segment
Quarterly revenue was $1,822 million, up 4% year-over-year. Postpaid revenue was $1,624 million, up 4% year-over-year and Prepaid revenue was $79 million, down 5% year-over-year. Equipment sales were $119 million, up 3% year-over-year.
Quarterly adjusted operating profit for the whole segment was $823 million, down 3% year-over-year. Operating margin was 48.3% in the reported quarter, compared to 51.4% in the year-ago quarter. In the third quarter 2010, wireless Data revenue was $477 million, up 28% year-over-year. Wireless Data revenue represented around 28% of total wireless network revenue compared to 23% in the prior-year quarter.
During the third quarter 2010, wireless segment activated approximately 529,000 smartphones. Most of those are either iPhone 3G, BlackBerry or Andriod-based handsets. At the end of the same quarter, Postpaid retail subscribers’ base was around 7.293 million, up 5.8% year-over-year.
Smartphone customers now constituted 37% of overall Postpaid subscribers compared to 28% in the year-ago quarter. Prepaid subscribers’ base was around 1.588 million, 5.8% year-over-year.
Cable Segment
Quarterly revenue of $1,020 million was up 3% year-over-year. Basic cable operations revenue was $797 million, up 3% year-over-year. RBS revenue was $146 million, up 16% year-over-year. Rogers Retail revenue was $89 million, down 84% year-over-year.
Quarterly adjusted operating profit for the whole segment was $379 million, up 15% year-over-year. Operating margin was 46.2% in the reported quarter compared to 42% in the year-ago quarter.
At the end of the third quarter 2010, Cable TV subscribers’ base was around 2.309 million, up 0.7% year-over-year. Internet subscribers’ base was 1.673 million, up 4.8% year-over-year. Digital cable terminal base was 1.719 million, up 3.9% year-over-year. Cable Telephony lines were 995,000, up 8.6% year-over-year.
Media Segment
Quarterly revenue of $376 million was up 3% year-over-year. Quarterly adjusted operating profit was $38 million, up 6% year-over-year. Operating margin was 10.1% in the reported quarter compared to 9.9% in the year-ago quarter.
Within this segment, Television, Sportsnet and Radio businesses delivered year-over-year increases in revenues driven by significant prime time ratings improvements, increased subscriber fees and improvements in advertising market. On the other hand, Sports Entertainment, Publishing, and the Shopping Channel divisions reported revenue declines in the same quarter.
Our Recommendation
We maintain our long-term Neutral recommendation for Rogers Communications. Currently it is a short-term Zacks #3 Rank (Hold) stock.
ROGERS COMM CLB (RCI): Free Stock Analysis Report
Zacks Investment Research
