Rogers Communications Inc. (RCI) continues to perform well as it has become the first wireless carrier in Canada to launch super-fast (4G) LTE networks. In the first half of 2011, the company achieved quite a few milestones including the sale of the highest number of smartphones to new customers, the second highest number of smartphone activation, and a significant increase in wireless data revenue.
However, the Canadian wireless market has become intensely competitive, which has already started putting pressure on Rogers’ margin. Meanwhile, Rogers is gradually deploying its high-speed HSPA+ wireless network and DOCSIS 3.0 cable network to sustain future growth.
Furthermore, Rogers has decided to diversify in the mobile banking segment. We believe this was primarily attributable to massive growth of smartphone, which can be used as an electronic wallet. We reiterate our long-term Neutral recommendation on the stock.
During the second quarter of 2011, Wireless segment activated 591,000 smart-phone devices (up 53.5% year over year). Of the total, around 40% were new smartphone subscribers, which is a historic high figure. In the previous quarter,
Rogers added 108,000 net subscribers for Postpaid wireless services. In the reported quarter, wireless data revenue was $591 million, up 31% year over year and represents 35% of total Wireless segment revenue compared with 27% in the year-ago quarter.
Intensifying competition in the wireless market may result into cut throat price competition as most of the new entrants are ready to offer low-price service in order to capture market share. This may put severe margin pressure on Rogers going forward. Incumbent competitors BCE Inc. (BCE) and Telus Corp. (TU) have already launched iPhone 4 of Apple Inc. (AAPL).
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