Rogers Communications Inc.'s Wireless Division Continues to Shine

Rogers Communications' (RCI +0.00%) wireless division continued to do the bulk of the heavy lifting by once again supplying most of the company's top- and bottom-line growth. That helped offset mixed results across its other three operating segments during the second quarter. 

Note: All figures are in Canadian dollars.

Rogers Communications results: The raw numbers

Data source: Rogers Communications.

Image source: Getty Images.

What happened with Rogers this quarter?

Rogers' wireless division performed exceptionally well this quarter.

• Revenue in the wireless segment rose 6% to $2 billion thanks to an increase the subscriber base and the continued shift of the company's customer base to higher-rate plans. Those two factors, along with the lowest customer churn rate since 2009, helped drive a 9% increase in adjusted operating profit, which came in at $924 million. 
• The cable division continues to battle cord-cutting, which resulted in another quarter of flat revenue at $869 million. The company benefited from a 7% uptick in internet sales, which offset a 4% decline in television revenue and 9% lower phone sales. That said, profitability rose 3% in the quarter to $428 million thanks to lower operating expenses.
• Revenue in Rogers' business solutions segment slipped 1% to $96 million due to the continued decline in the legacy business. Still, profitability was up 3% due to lower expenses.
• Finally, media segment revenue was up 4% to $637 million thanks to higher sports-related revenue and higher merchandise sales on The Shopping Channel. However, operating profit plunged 30% to $63 million due to a higher payroll for the Toronto Blue Jays and an increase in sports-related programming and production costs.
• Overall, Rogers' adjusted operating profit rose 5% to $1.4 billion. Meanwhile, adjusted net income spiked more than 20%, due to the increase in adjusted operating profit and lower depreciation and amortization expenses during the quarter. Finally, free cash flow was a robust $626 million, up 26% year over year, due to the rise in profitability and lower capital expenses.

What management had to say

Newly installed CEO Joe Natale had this to say about the quarter:

Our second quarter results reflect the strong efforts of our highly engaged and committed team, underpinned by an incredibly rich mix of business assets. We reported strong revenue and adjusted operating profit growth from continued momentum and operating leverage in our largest segment, Wireless. Our team delivered excellent Wireless results across the board, including substantially lower churn, and significantly grew adjusted operating profit and expanded margins. In Cable, we also grew adjusted operating profit and margins.

One of the highlights of the quarter was the big reduction in the customer churn rate, which fell to 1.05% in the company's postpaid subscriber base (customers under long-term contracts) and was the company's best result since 2009. Reducing churn is a key target for Natale since his background is in improving customer service and retention. When he was at Telus (TEL +0.00%), the company consistently led the industry with the lowest churn rate. One reason he was hired to lead Rogers was so he could implement the best practices that made Telus such a success in the industry. 

Looking forward

Another of Natale's objectives is "intensifying our companywide focus on cost efficiency to help generate further margin expansion." These efforts, along with others to improve the customer experiences, should enable the company to grow revenue and profitability at a faster clip in the future. One of the biggest challenges will be to stem the cord-cutting in its cable division. The company hopes it can accomplish that aim by rolling out a new TV platform based on U.S. cable giant Comcast's (CMCSA 0.01%) X1 system. That platform has been instrumental in improving Comcast's subscriber performance and in reducing the customer churn rate, which is what Rogers hopes to see when it starts rolling the service out next year. A successful TV segment would give the company another profit growth driver to complement its wireless segment.