Rogers Communications Inc. RCI-BT reported higher revenue and profit in its most recent quarter, helped by a rebound in wireless roaming, as it braced for the impact of a massive network outage on its third-quarter results .
The Toronto-based wireless giant also announced that it has reached an agreement with Shaw Communications Inc. SJR-BT to extend the deadline for its contested $26 billion merger until the end of the year, pending regulatory approvals.
The telecom said it will spend $150 million in the third quarter to compensate customers for the outage, which left millions without wireless, Internet and home phone service and crippled the Interac debit system. The company will credit its customers with five days of services.
The service outage outraged consumers and is expected to weigh on the company’s subscriber numbers in the third quarter.
“Since the July 8 outage, we’ve seen an impact on our subscriber bottom line, but we’re encouraged by the patience our customers have shown,” Rogers CEO Tony Staffieri told analysts during a conference call Wednesday to discuss the company’s second quarter. results
Scotiabank analyst Maher Yaghi said in a research note that telcos expected churn, which represents the monthly rate of customer turnover, to increase as a result of the outage.
Mr. Staffieri has committed to making changes and investments to improve the resilience of the company’s networks.
Rogers had revenue of $3.87 billion in the three months ended June 30, up 8% from $3.58 billion in the same period last year. The company said it benefited from a pick-up in travel, which allowed it to charge roaming charges when customers used their devices abroad, as well as higher levels of immigration and better performance from your team
The telco reported quarterly profit of $409 million, up 35% from a year ago, when it had profit of $302 million. Earnings came to 76 cents a share, up from 60 cents a share.
Rogers added 122,000 net new postpaid wireless subscribers in its most recent quarter, up from 60,000 in the same period last year. (Postpaid subscribers are billed at the end of the month for the services they used, compared to prepaid customers, who pay in advance for wireless services.)
RBC analyst Drew McReynolds said the telco benefited from strong performance in its wireless division, which grew revenue by 7%, as well as improvement in its cable business, which increased its revenue by 2%.
The Competition Bureau is trying to block the merger of Canada’s two largest cable companies, arguing it would lead to higher prices and poor service, especially for wireless customers.
Rogers has reached an agreement to sell Shaw’s Freedom Mobile, Canada’s fourth-largest wireless carrier, to Quebecor Inc. QBR-BT for $2.85 billion in an attempt to address these concerns.
Rogers said in a statement Wednesday that it continues to work with Quebecor to produce definitive transaction documents for the sale of Freedom Mobile and will provide an update “in due course.”
“It’s a big thing. It’s approaching $3 billion and contains a lot of complexities as we work through it,” Mr. Staffieri said, adding that Rogers and Quebecor remain committed to the sale.
Rogers, Shaw and the Shaw family trust have agreed to extend the merger deadline to Dec. 31, with an option to extend it to Jan. 31, provided Rogers has the financing to complete the deal .
In March, Rogers tapped the credit markets to replace a $19 billion bridge loan to finance the deal. The telco raised $7.05 billion from the sale of five bond issues south of the border and $4.25 billion from four Canadian bond issues. The bonds contain a clause requiring them to be redeemed at 101 percent of their value if the deal does not close by December 31.
Rogers CFO Glenn Brandt said that if the merger is delayed beyond that date, the telco has several options to finance the acquisition, including seeking bank financing, extending the bond redemption date or raising money through capital markets.
However, Mr. Brandt said Rogers is “confident there is plenty of time between now and the end of the year to close the transaction and use these bonds to fund the acquisition.”
Mr Yaghi said the deadline extension shows Shaw remains committed to the deal and “should ease investor concerns as the deal is taking longer to close than originally anticipated”.
“The decision was also taken to take into account the possibility that the acquisition may have to be dealt with in a competition court trial,” Yaghi added.
The Competition Bureau has asked for more time to review the potential sale of Freedom Mobile to Quebecor, saying in court documents that a definitive agreement between Rogers and Quebecor has not yet been provided.
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