Wireless Growth Is the Future and This Telecom Knows it

Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI) continues to offer investors a respectable dividend and solid earnings, but ongoing improvements in the wireless segment could lead to a massive growth opportunity.

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Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI) is one of the largest telecoms in the country, which makes the company an intriguing option for investors looking at adding a telecom to their portfolios.

Canada’s telecoms are very similar, both in service offerings as well as price points, which leads to frequent comparisons of which of the behemoths make better investments.

While Rogers’s compelling size alone doesn’t make the company a great investment option, there are several other factors for investors to contemplate that will.

Wireless is the wave of the future, and Rogers knows it

Rogers offers wireline, wireless, TV, and internet subscription services across the country, but of these segments, the wireless segment continues to draw the most attention and potential for growth.

In a little over a decade, wireless devices have gone from mere communication tools to invaluable daily smart devices that have taken the place of dozens of different devices from alarm clocks and flashlights to remote controls and encyclopedias. The added functionality comes at the cost of greater data needs, which Rogers is all too happy to provide for an additional cost.

Data consumption across the wireless industry has roughly doubled over each of the past few years, and as faster connections and newer, better devices get released to consumers, that trend is only set to continue for the foreseeable future.

And while many view the Canadian wireless market as saturated, there’s still plenty more growth to come from new subscribers. In the most recent quarter, Rogers added 95,000 new contract subscribers to the wireless segment, beating the 58,000 that analysts were forecasting.

Amazingly, that’s not the most impressive update from the recent quarterly update. That honour goes to the churn rate, which shows Rogers’s ability to retain customers from leaving to a competitor.

In the most recent quarter, Rogers’s churn rate saw a massive decrease from 1.48% in the previous quarter to an impressive 1.08%.

Rogers CEO Joe Natale attributed that improvement to a company initiative of improving customer service and eliminating long-standing issues that drove customers to ultimately move to one of Rogers competitors.

The strategy must be working, as the recent improvement brought the churn rate down to its lowest level in 15 years.

Strong results, strong growth, great dividend

The other segments of the company fared just as well in the most recent quarter. Rogers’s internet segment realized growth of 26,000 customers in the quarter, and the TV segment, which has struggled in recent quarters, continued to decline, but lost 12,000 subscribers, which represents half the number of subscribers the segment shed in the same quarter last year.

Overall, Rogers saw profits beat the same quarter last year by an impressive 37%, coming in at $425 million, or $0.83 per share. Total revenue for the quarter topped $3.63 billion, reflecting an increase of 8% over the same quarter last year, while EBITDA saw a 14% increase over last year, coming in at $1.34 billion.

In terms of a dividend, Rogers offers quarterly dividend that pays a respectable 3.11% yield. While that yield may not stack up against some of Rogers’s telecom peers, it is a solid and sustainable dividend that shouldn’t be dismissed.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Demetris Afxentiou has no position in any stocks mentioned.  

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