Rogers Communications Inc. (RCI) declared financial results for the fourth quarter of 2010, which were almost in line with the Zacks Consensus Estimates. However, in order to increase its shareholders’ wealth, the Board of Directors has taken two important decisions.
Firstly, Rogers Communications raised its annualized dividend rate by 11% to $1.42 from its existing $1.28 for every Class A Voting and Class B non-Voting shares, effective immediately. Secondly, the Board of Directors also authorized a share buy-back program of $1.5 billion within the next 12 months.
Quarterly net income was $323 million or 57 cents per share compared with a net income of $306 million or 50 cents per share in the year-ago quarter. However, the fourth quarter adjusted EPS was 63 cents, a penny above the Zacks Consensus Estimate.
Quarterly total revenue was $3,111 million, up 3% year over year and slightly below the Zacks Consensus Estimate of $3,128 million.
Quarterly operating profit was $1,070 million, up 3% year over year. During the reported quarter, the company repurchased 10.1 million Class B Non-Voting shares for $347 million and paid dividends totaling $184 million.
During the fourth quarter of 2010, Rogers Communications generated $957 million of cash from operations compared with $1,007 million in the year-ago quarter. Free cash flow during the reported quarter was $365 million compared with $436 million during the year-ago quarter.
At the end of fiscal 2010, Rogers had $2,201 million of cash and marketable securities on its balance sheet compared with $930 million at the end of fiscal 2009. Total outstanding debt, at the end of fiscal 2010 was $8,718 million compared with $8,464 million at the end of fiscal 2009. At the end of fiscal 2010, debt-to-capitalization ratio was 0.69 compared with 0.67 at the end of fiscal 2009.
Wireless Segment
Quarterly total revenue was $1,761 million, up 3% year over year. Postpaid revenue was $1,554 million, up 3% year over year and Prepaid revenue was $77 million, up 3% year over year. Equipment sales were $130 million, down 3% year over year.
Quarterly adjusted operating profit for the entire segment was $688 million, down 6% year over year. Adjusted operating margin was 42.2% in the reported quarter compared with 46.6% in the year-ago quarter. In the fourth quarter of 2010, wireless Data revenue was $506 million, up 32% year over year. Wireless Data revenue represented around 31% of total wireless network revenue compared with 24% in the prior-year quarter.
During the fourth quarter of 2010, wireless segment activated a record-high 635,000 smartphones, up 58.8% year over year. Most of these smartphones are either iPhone of Apple Inc. (AAPL), BlackBerry of Research In Motion Ltd. (RIMM) or Google Inc. (GOOG)-developed Andriod-based handsets. Out of the total, around 29% were new smartphone subscribers, which is also a historic high figure. Quarterly consolidated ARPU (average revenue per user) was $60.9, down 2.4% year over year.
On December 31, 2010, Postpaid retail subscribers’ base was around 7.325 million, up 5% year over year. Smartphone customers now constituted 41% of overall Postpaid subscribers compared with 31% in the year-ago quarter. Quarterly Postpaid ARPU was $70.9, down 2.2% year over year. Monthly churn rate was 1.35% compared with 1.08% in the prior-year quarter.
Prepaid subscribers’ base was around 1.652 million, up 9% year over year. Quarterly Prepaid ARPU was $15.9, down 1.8% year over year. Monthly churn rate was 3.04% compared with 2.80% in the prior-year quarter.
Cable Segment
Quarterly total revenue was $1,018 million, up 1% year over year. Basic cable operations revenue was $798.5 million, up 2% year over year. RBS revenue was $139.2 million, up 14% year over year. Rogers Retail revenue was $89.8 million, down 17% year over year.
Quarterly adjusted operating profit for the whole segment was $365.2 million, up 16% year over year. Adjusted operating margin was 46.1% in the reported quarter compared with 40.5% in the year-ago quarter.
On December 31, 2010, Cable TV subscribers’ base was around 2.305 million, up 0.4% year over year. Internet subscribers’ base was 1.686 million, up 4.1% year over year. Digital cable terminal base was 1.733 million, up 4.2% year over year. Cable Telephony lines were 1,003 million, up 7% year over year.
Media Segment
Quarterly total revenue was $422.4 million, up 9% year over year. Quarterly adjusted operating profit was $34.6 million, down 33% year over year. Adjusted operating margin was 8.2% in the reported quarter compared with 13.2% in the year-ago quarter.
Within this segment, Television, Sportsnet, Publishing and Radio businesses delivered a year-over-year increase in revenues, driven by prime time ratings improvements, increased subscriber fees and improvements in advertising market. On the other hand, Sports Entertainment and the Shopping Channel divisions reported revenue declines in the same quarter.
Future Financial Outlook
Rogers Communications has given guidance that its fiscal 2011 adjusted operating will be C$4,600 million – C$4,765 million. After-tax free cash flow will be C$1,850 million – C$1,975 million. Wireless network revenue will be C$6,525 million-C$6,725 million. Wireless adjusted profit will be C$3,050 million-C$3,200 million.
Cable revenue will be C$3,250 million-C$3,325 million. Cable adjusted profit will be C$1,450 million-C$1,500 million. Media revenue will be C$1,625 million-C$1,710 million. Media adjusted profit will be C$160 million-C$180 million.
Our Recommendation
We maintain our long-term Neutral recommendation on Rogers Communications. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock.
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