Rogers rings in loss with 375 job cuts
Jun 26, 2012 / 11:00 am
Rogers Communications Inc. (TSX:RCI.B) will cut 375 jobs, a move that comes as the wireless, cable and Internet provider faces shrinking profits and tougher competition on all fronts.
The cuts are part of a cost-cutting strategy announced earlier this year and include employees in the business, wireless, and wireline divisions. They follow 300 job cuts announced in March.
The latest downsizing covers a variety of skills and includes some management and sales positions, Rogers spokeswoman Patricia Trott said Tuesday.
"Going forward, we're managing costs where it makes sense but we're continuing to invest in driving the business forward and obviously we have a focus as well on driving revenue, new sources of revenue," Trott said.
"This is sort of Part 2 of our cost cutting initiative that we announced earlier."
Rogers hopes to get increased revenues from its mobile banking initiative, Internet-connected devices such as parking meters and machines and other business services.
"Again, a difficult day for everyone but we're really focused in the future on alternative revenue sources and driving the growth of the business," Trott said.
Trott wouldn't address any competitive pressures that Rogers is facing.
The Toronto-based company's wireless division, which has the largest base of subscribers in Canada, has faced competition from players big and small, while its cable division is battling fellow industry giant Bell (TSX:BCE).
The layoffs in March focused on management and head office positions. At the end of 2011, Rogers had almost 29,000 employees.
RBC Capital Markets analyst Drew McReynolds said the cuts are indicative of competition and reflect's management's goal of maintaining its profit margins.
"We continue to expect Rogers to 'grind away' in 2012 pending a more balanced competitive equilibrium on wireless and television (our estimates and consensus are below 2012 guidance)," McReynolds wrote in a research note.
McReynolds said the discount that Rogers trades relative to its large-cap peers reflects these competitive headwinds. He is targeting a $43 per share price for Rogers, which would be about $6 above the current market value.
In April, CEO Nadir Mohamed told shareholders that Rogers would cut costs to help deal with competition in the wireless and cable TV markets that has resulted in slower revenue growth.
In its first quarter, Rogers said it lost 7,000 cable customers in a highly competitive period with Bell's IPTV service. UBS analyst Phillip Huang said at that time the loss of subscribers was not a "one-off event'' and he predicted Rogers will lose 86,000 cable subscribers in 2012.
For its first quarter, Rogers posted a profit of $305 million or 57 cents per diluted share on $2.95 billion in revenue for the first quarter.
That compared with a profit of $335 million or 60 cents per diluted share on $2.99 billion in revenue a year ago.
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