Rogers will cut costs and improve customer service to fight competition

Rogers Communications Inc. will cut costs and improve customer service to deal with competition in the wireless and cable TV markets that has resulted in slower revenue growth, CEO Nadir Mohamed said Wednesday.

“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.

“But it’s very straightforward — in the short term we’re addressing the cost side of the equation,” he said after the company’s annual meeting in Toronto.

Shares in Rogers (TSX:RCI.B) closed down almost six per cent Wednesday after the company reported disappointing first-quarter financial results. The stock was down $2.21 at $36.81 per share on the Toronto Stock Exchange.

The Toronto-based company’s wireless division has faced tougher competition from players big and small, while its cable division is battling fellow industry giant Bell (TSX:BCE).

Mohamed said Rogers is working to allow customers to use their devices to get the information they need for self-service when they have problems.

“To me, the best way to drive out costs is to improve our service. Where we would like to get to is customers using their own device to actually get the information they want, or service their requirement,” he said.

Mohamed added that Rogers, which maintained its financial guidance for 20120, will also look at trimming discretionary spending and supply costs, but did not mention any further job cuts.

Rogers laid off about 300 employees in March, with the cuts focused on management and head office positions.

Mohamed assured analysts Tuesday that the company intends to improve its earnings before the end of the year and repeated the message to shareholders Wednesday.

“As I look to the balance of the year, I expect this competitive intensity to continue, and with moderating revenue growth…cost management is absolutely imperative,” he told the meeting.

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.

The company reported adjusted earnings of $356 million or 67 cents per diluted share, below analyst expectations of 76 cents per share, according to Thomson Reuters.

Revenue of $2.95 billion also missed analyst expectations, which on average were for $3.05 billion for the first quarter of fiscal 2012.

In its first quarter, Rogers said it lost 7,000 cable customers in a highly competitive quarter with Bell’s IPTV service.

UBS analyst Phillip Huang said the loss of subscribers was not a “one-off event.”

As Bell expands its service, available in the Toronto and Montreal areas, Rogers will lose 86,000 cable subscribers in 2012, Huang estimated in a research note.

Huang noted that Rogers has stepped up the pace of cutting costs to sustain operating profits and cash flows.

“Nonetheless, we believe there is a high likelihood that we will see management lower guidance when they release Q2 results.”

Mohamed said Rogers’ cable TV service will move to Internet Protocol TV (IPTV) over the next two years, a system already used by Telus (TSX:T) and Bell. That means TV will be delivered over an Internet Protocol network and allow users to watch sports, for example, while pulling up stats.

“Think about it as one big pipe into the home, a pipe that will allow consumers to access any type of content and entertainment whether it’s broadcast, on demand, or user generated. In the future your TV and your computer will be one and the same.”