Guy Laurence, CEO of Rogers Communications.Fred Lum/The Globe and Mail
Rogers Communications Inc. CEO Guy Laurence took a shot at BCE Inc. Thursday, calling his rival a "cry baby" for complaining to Canada's broadcast regulator over special hockey-viewing features available only to Rogers customers on its mobile app.
Mr. Laurence made the comment during a conference call with analysts Thursday morning following the company's release of its third-quarter earnings, which revealed a 28 per cent drop in profit, although revenue was up slightly.
The Toronto wireless, cable and media company said Thursday that overall sales grew 1 per cent in the third quarter to $3.25-billion, in line with analyst expectations.
But profit fell 28 per cent to $332-million or 64 cents per share, compared to net income of $464-million or 90 cents per share in the same quarter last year. Adjusted earnings per share of 79 cents fell short of analyst projections for 88 cents per share.
BCE filed an application with the Canadian Radio-television and Telecommunications Commission alleging Rogers' GamePlus mobile app – which lets users select customized camera angles for replays – gives its wireless and Internet divisions an anti-competitive edge, because it is only available to Rogers customers.
Rogers is paying $5.2-billion over 12 years for the national NHL rights and unveiled the GamePlus app on Oct. 6, just two days before the hockey season began. The company is looking for ways to ensure its investment on the rights pays off for its other businesses and hopes it can attract and keep more cellular and Internet customers.
But BCE says making the GamePlus app available only to Rogers customers violates the CRTCs vertical integration rules, which mandate that companies that both own and distribute content must make that content available to their competitors.
The fight over GamePlus will turn on whether the content was created specifically for an online or mobile experience, in which case it could be covered by an exemption for video streaming services.
BCE says Rogers uses the new camera angles it introduced this season, such as a camera on the referee's helmet, as part of its regular television broadcast, and should not be keeping it from customers of other Internet or wireless providers.
Mr. Laurence said Thursday that BCE is trying to "stifle innovation" with its application and repeated a claim Rogers made Tuesday that BCE lost the hockey rights in the bidding war last year because it did not put forth an innovative proposal.
"Having lost [the rights], here [BCE is] complaining and trying to stifle innovation in hockey instead of actually applauding it... Then [BCE has] taken this rather puerile attitude of filing a complaint," Mr. Laurence said. "Obviously we don't believe we transgressed any rules and we will continue to focus on delivering innovation for consumers and not fighting little petty fights such as this."
BCE countered Thursday that Canadians aren't "applauding" Rogers' move to "cut people off from access to the hockey they've paid for."
"Consumers clearly aren't happy and Rogers is blatantly breaking the CRTC's rules too," said BCE spokesman Mark Langton. "Restricting hockey access to a selected few when everyone's paid the same price and the features are on regular TV anyway, that's not innovation." (BCE owns 15 per cent of The Globe and Mail.)
Rogers shares were down 1.66 per cent, or 71 cents, to $42.72 by 2:30 Thursday afternoon on the earnings miss.
Mr. Laurence noted in a release Thursday that during the three-month period ended Sept. 30, Rogers completed the reorganization plan it announced in May and said the business is gaining momentum. He pointed to its rollout of new viewing options for the hockey season and announcement of the planned launch of Netflix Inc. competitor Shomi, a joint venture with Shaw Communications Inc.
"While it will take time to fully execute on our multiyear plan, Q3 results are where we expected them to be," Mr. Laurence said. "Wireless revenue and postpaid ARPU [average revenue per user] profiles improved again this quarter and we continue to generate strong margins and operating cash flow."
Rogers is Canada's largest wireless provider with 9.5 million subscribers and it reported growth in sales at the all-important division this quarter, with revenue up 2 per cent to $1.88-billion.
It added only 17,000 post-paid customers in the period, less than analysts forecast, but overall ARPU improved to $60.96, up 15 cents from this time last year.
The rate of customer turnover – known as churn – remained stubbornly high at 1.31 per cent for postpaid customers, up from 1.23 per cent this time last year.
Revenues at the cable division fell 1 per cent to $864-million as it shed 30,000 television subscribers but gained 16,000 Internet customers.
Rogers also said Thursday that it struck a deal this month to buy Source Cable Ltd., a cable and Internet business based in Hamilton, for $160-million. It said the deal is expected to close in the fourth quarter.
The company's media division – which includes its stable of magazines and broadcast assets as well as the Toronto Blue Jays – reported flat revenue of $440-million.
Sales at the enterprise business unit increased 3 per cent to $96-million.
Canaccord Genuity's Dvai Ghose noted that Rogers struggled during the quarter with lower than expected margins at the cable and media businesses and a still-high wireless churn rate.
"On the positive side, management continues to deliver gradual improvements in ARPU trends as expected," he said. "However, churn was much higher than expected and may take a long time to fix."
Barclays Capital Inc. analyst Phillip Huang noted the results were mixed and weaker than expected but added that he believes management, "more focused on longer-term profitability rather than near-term quarterly performance."