Rogers Communications SWOT and PESTLE Analysis

Strength

1. Largest provider of wireless communication services in Canada: With revenue of almost $8 billion, wireless is definitely the largest segment for Rogers with a contribution of 57%, operating profit of 63% and Canada’s largest provider of wireless services. The investments for expansion of the wireless multi-band LTE network have resulted in coverage to 95% of Canada’s population and the roll-out of prime 700 MHz spectrum now covers 91% of the population. Rogers thus enjoys a huge operational and customer base. Rogers wireless business segment distributes its products through various channels like independent dealer networks, retail stores and chains, ecommerce sites, call centres and outbound telemarketing, door-to-door agents and other distribution channels. As of 2016, it had 10.3 million subscribers. This has been made possible thanks to the wholly owned and operated 100% fibre optic backbone that provides wholesalers with seamless cross-border coverage.

2. Diverse business operations and strong brand portfolio: Rogers has been successful in creating a strong brand portfolio across 4 key segments viz. wireless, media, cable and business solutions along with widespread product distribution. Some major brands include Rogers and Fido in wireless, Maclean’s, Hello! Canada in publications, 50 radio stations including Sportsnet, the FAN, KiSS, JACK FM, and SONiC, VICE, a global youth media company, 20 TV channel and specialty channels including Sportsnet, FX (Canada) and FXX (Canada), OMNI, VICELAND. With a market share of more than 35% as of 2016, the company’s growth is said to be primarily driven by wireless services segment where it is the largest player by market share.

3. Strong top-line performance: The Company delivered strong top-line performance in FY2016. Revenue increased by 2% from $13.4 billion in FY2015 to $13.7 billion in FY2016. This was primarily driven by wireless service revenue growth of 5%.With a free cash flow of $1.7 billion and healthy liquidity of $2.5 billion; Rogers have a strong balance sheet to account for. There is increased full year Adjusted Operating Profit (AOP) growth to 5-6% with plans to invest incremental profit in networks. The company has been offering healthy quarterly dividends of $0.48 per share since Jan 2015 and $0.25 to $0.45 since 2008. There is also a Dividend Reinvestment Plan (“DRIP”) wherein Class A and B shareholders can have all or portion of dividends received reinvested with no brokerage or service charges applicable.

Weakness

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Opportunity

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Threat

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References

1. Rogers CommunicationAnnual Report 2016: https://investors.rogers.com/2016-annual-report/

2. Rogers Communication Investor Presentation 2016: https://investors.rogers.com/investor-presentation/

3. BCE's profit beats expectations as it adds wireless, internet and TV subscribers: https://business.financialpost.com/telecom/update-1-canadian-bces-profit-beats-estimates-on-wireless-additions

4. New Rogers CEO Joe Natale plans to ‘obsess’ over customer service: https://www.theglobeandmail.com/report-on-business/new-rogers-ceo-joe-natale-plans-to-obsess-over-customer-service/article34753531/

5. https://www.reuters.com/finance/stocks/overview/RCI

6. Size of small-to-medium-sized business (SMB) cloud services market in Canada in 2015 and 2018 https://www.statista.com/statistics/499386/canada-smb-cloud-services-market/

7. Rogers and Telus step up wireless promotions to counter serious threat from Freedom Mobile https://business.financialpost.com/technology/rogers-and-telus-step-up-wireless-promotions-as-shaw-enters-the-market-with-freedom-mobile

8. Dividend Information https://investors.rogers.com/shareholder-information/dividend-information/

9. Company Overview of Rogers Communications Inc. https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=378755

Political

1. Tax reforms mulled by government: The Canadian liberal government has been mulling to enforce a so-called Netflix tax on digital services purchased by Canadians from foreign-based firms over the internet. Companies like US-based Netflix do not apply federal or provincial sales taxes to monthly billings sent to Canadian customers for its streaming services. On the other hand, Canadian firms selling digital services within the country are forced to collect and remit federal and provincial sales taxes — such as BCE Inc.'s Bell, which has a service called Crave TV. Such a trend can place domestic digital suppliers at unfair competitive disadvantage. The briefing by the govt. said that countries like Australia have begun efforts to collect sales tax from firms like Amazon, Google and iTunes. In 2014, Rogers had urged Ottawa to require that taxes be levied and remitted by billing agencies hired by foreign suppliers.

2. Threat to net neutrality in Canada: The Canadian Radio-television and Telecommunications Commission (CRTC) received a draft proposal to develop the Internet Piracy Review Agency (IPRA) to maintain a list of websites that according to the proposal were peddling pirated materials and hence force all internet service providers to block them. The draft proposal is backed by three of the biggest telecom companies in Canada – Bell, Rogers and Cineplex along with some smaller companies working to limit access to websites they deem make use of pirated content. But without court oversight or a legal process to look into the proposal, the internet regulation undertaken by CRTC could pose a serious threat to net neutrality in Canada.

Economic

1. Increased competition expected: The Innovation, Science and Economic Development (ISED) Canada has announced a future auction for a 600 MHz spectrum, proposed to happen in the next couple of years. The outcome of this auction could increase competition in the telecom industry. For spectrum in the 614 MHz-698 MHz, ISED believes demand will exceed supply for the licence conditions in this band and so has proposed to adopt competitive measures in the form of a 30 MHz set-aside. This will be a reservation for active mobile network operators with less than 10% of national subscriber market share (a category which would include Shaw’s Freedom mobile and exclude Rogers, Telus and Bell). ISED believes this set-aside would help smaller operators to increase their low-band spectrum holdings to a level closer to the incumbent providers’.

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Social

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Technological

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Legal

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Environmental

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References

1. Rogers Communication Annual Report 2016: https://investors.rogers.com/2016-annual-report/

2. Rogers Communication Investor Presentation 2016: https://investors.rogers.com/investor-presentation/

3. Telus, Rogers say they can’t meet wireless regulations deadline: https://www.thestar.com/business/tech_news/2017/11/20/telus-rogers-say-they-cant-meet-wireless-regulations-deadline.html

4. Internal document raises possibility of taxing Netflix and other digital services: https://www.cbc.ca/news/politics/sales-tax-netflix-bell-rogers-digital-melanie-joly-bill-morneau-internet-1.3937955

5. Canadian 600 MHz auction consultation launched https://www.telegeography.com/products/commsupdate/articles/2017/08/08/canadian-600mhz-auction-consultation-launched/

6. The Exchange Rate Opportunity https://www.mnp.ca/en/posts/the-exchange-rate-opportunity

7. Rogers introduces IoT as a service for Canadian Businesses https://www.rtinsights.com/rogers-iot-as-a-service-blue-rover/

8. Discover the potential of the Internet of Things https://www.rogers.com/enterprise/products-and-solutions/internet-of-things

9. Internet use in Canada https://cira.ca/factbook/domain-industry-data-and-canadian-Internet-trends/internet-use-canada