Rogers axes 375 jobs
Vanessa Lu Business Reporter Jun 26 2012
Rogers Communications Inc. eliminated another 375 jobs Tuesday amid tightening competition in a move analysts warn may not be enough for the company to meet its profit projections.
“The cost-cutting is far less aggressive than what you’ve seen traditionally at Bell. A lot more needs to be done,” said Dvai Ghose, director of research at Canaccord Genuity, in an interview.
Tuesday’s cuts are on the heels of 300 job losses in March, mostly in the management ranks.
“The bite from competition might be actually happening,” said telecommunications consultant Eamon Hoey of Hoey and Associates, who said there has been rumblings for the past two months that Rogers is having trouble meeting its metrics. “If the rumblings that I’m hearing are correct and true, then Rogers will be in more for layoffs.”
Ghose also warned this level of cost-cutting is so late in the year it may be “too little too late” when it comes to Rogers’ profit targets for 2012.
It has forecast 0 to 4 per cent adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) growth in 2012, but its adjusted EBITDA was down 5.9 per cent in the first quarter.
In a research note, RBC Capital Markets analyst Drew McReynolds, who also doesn’t foresee Rogers meeting its target, said: “We continue to expect Rogers to ‘grind away’ in 2012 pending a more balanced competitive equilibrium on wireless and television.”
However, he said he believes the stock price has already adjusted to these pressures. Rogers Class B shares closed at $36.84 Tuesday, up 33 cents.
In December, Rogers, which owns the Blue Jays, teamed up with Bell to announce plans to buy a majority stake in Maple Leafs Sports and Entertainment for $1.3 billion. That deal is expected to close later this year.
Ghose noted that Bell began to make aggressive cuts to its workforce beginning in 2008, cutting about 13 per cent. By contrast, Rogers has almost 30,000 employees, so the layoffs announced Tuesday represents about 1 per cent.
But this doesn’t mean Rogers is in serious trouble. Simply put, the once proud growth company — which had cornered the lucrative business wireless market — is now facing declines in both cash and revenue, Ghose said.
That’s because it has been facing competition on several fronts, especially in the wireless market, with the arrival of new low-cost carriers like Wind Mobile as well as Bell and Telus, which have teamed up to build a faster network, and offer iPhone services.
Add in aggressive competition on the cable and Internet front — from the likes of Bell and Shaw with their Internet Protocol television, which offer certain bells and whistles traditional cable does not.
Ghose added it will cost Rogers more to upgrade customers to its NextBox.
Rogers spokeswoman Patricia Trott said employees affected by the layoffs are from all types of jobs in wireless, cable and Internet division, from front-line staff to managers, across Canada. The layoffs are mostly effective immediately.
The job cuts are part of an initiative to cut costs announced earlier in the spring, Trott said, although at the annual meeting, president and CEO Nadir Mohamed sidestepped any specific mention of layoffs.
“I think the competitive intensity carries on and so there’s clearly going to be pressure on the top line,” Mohamed said of Rogers’ revenues at the time. “But it’s very straightforward — in the short term we’re addressing the cost side of the equation.”
In April, Rogers delivered disappointing first-quarter earnings. It reported revenue of $2.95 billion in the quarter, which ended on March 31, down from $2.99 billion in the same period a year ago. Analysts had expected revenue of $3.05 billion.
Its adjusted profit was $356 million, down from $423 million in the same quarter, or 68 cents per share, which missed analyst estimates forecast of 75 cents.
“At that time, we announced that we recognized that we had to do better in terms of cost-cutting and improving productivity,” Trott said in an interview. “Layoffs are one part of that: Obviously, the most difficult part.”
Other efforts include improving the supply chain system, looking at discretionary spending, and finding ways to boost revenues. As well, Rogers has hinted it will look at the subsidies it gives customers on contracts for pricey smartphones.
Trott pointed out Rogers just announced a new mobile payment program with CIBC where consumers soon will be able to make credit card purchases through their smartphones. M2M, also known machine to machine services, is new technology, with a strong potential revenue stream, that allows businesses to monitor and manipulate remote equipment.
Rogers is due to deliver its second-quarter earnings on July 26.