Rogers Communications (TSX: RCI.A, RCI.B) reported its financial results for the third quarter of 2024, posting a total revenue of $5.13 billion for Q3 2024, marking a 1% year-over-year increase compared to $5.09 billion in Q3 2023.

This modest revenue growth was driven by the company’s strong wireless business and its media segment, which saw a significant increase in sports-related revenues.

Wireless service revenue grew by 2% year-over-year to $2.07 billion, up from $2.03 billion in the same period last year. This growth reflects the ongoing expansion of Rogers’ mobile phone subscriber base, with the company adding 101,000 postpaid subscribers in the quarter. Wireless adjusted EBITDA rose by 5%, from $1.29 billion in Q3 2023 to $1.37 billion in Q3 2024, benefiting from efficiency gains and cost control, with the segment’s EBITDA margin improving by 220 basis points to 66.1%.

On the other hand, cable revenue fell slightly by 1%, totaling $1.97 billion compared to $1.99 billion in the third quarter of 2023. The decline was attributed to ongoing competitive pressure and a shrinking subscriber base in legacy services such as home phone and satellite TV. However, cable adjusted EBITDA grew by 5%, reaching $1.13 billion due to continued cost efficiencies and synergies from the integration of Shaw Communications, which Rogers acquired in April 2023. The cable segment’s EBITDA margin also improved by 330 basis points, hitting 57.5% compared to 54.2% last year.

Media revenue posted an 11% year-over-year increase, rising from $586 million in Q3 2023 to $653 million in Q3 2024. The growth was fueled primarily by higher sports-related revenues, particularly from the Toronto Blue Jays and other sports properties. Media adjusted EBITDA surged 25%, from $107 million last year to $134 million in Q3 2024. However, higher expenses related to the Blue Jays, including game-day costs, partially offset this gain.

Rogers also reported an improvement in its bottom line, with net income for the quarter reaching $526 million, a stark contrast to the $99 million loss in Q3 2023. This boost was largely driven by improved operational performance and the absence of one-off charges that had impacted last year’s results, such as a $422 million loss related to an obligation to purchase a non-controlling interest in a joint venture. Adjusted net income rose by 12% year-over-year to $762 million, up from $679 million last year.

In terms of cash flow, Rogers generated free cash flow of $915 million in the quarter, representing a 23% increase from $745 million in Q3 2023. The rise in free cash flow was driven by higher adjusted EBITDA and lower capital expenditures, which decreased by 4% year-over-year to $977 million. For the first nine months of 2024, free cash flow stood at $2.17 billion, up 36% from $1.59 billion during the same period in 2023.

A key highlight of Rogers’ financial strategy in Q3 was the announcement of a $7 billion structured equity financing deal with a leading global financial investor. The deal, expected to close in Q4 2024, is designed to significantly reduce Rogers’ debt load. The proceeds will be used to pay down a portion of the company’s $37.7 billion long-term debt, which had increased following the acquisition of Shaw. As of the end of Q3 2024, Rogers’ debt leverage ratio stood at 4.6 times adjusted EBITDA, down from 5.0 times at the end of 2023.

The company projects that, with the completion of the equity financing, its leverage ratio will decrease further to 3.7 times adjusted EBITDA by year-end 2024, improving its financial flexibility. CEO Tony Staffieri emphasized that this transaction will strengthen the company’s balance sheet and position it for future investments in 5G technology and network expansion.

Segments

Wireless continues to be a key growth engine for Rogers. The company added a total of 101,000 postpaid mobile subscribers in Q3 2024, although this was down from 225,000 postpaid net additions in Q3 2023. Prepaid net additions were stronger, reaching 93,000 compared to 36,000 in the same period last year, aided by Rogers’ competitive offerings in that segment.

On the internet front, Rogers added 33,000 net new subscribers in Q3 2024, a slight improvement from 18,000 in the same quarter last year. The company’s continued investment in next-generation broadband technology, including the deployment of DOCSIS 4.0, positions it to remain competitive in the increasingly data-hungry market.

The cable division, despite facing declining revenue, remains profitable. The revenue drop reflects ongoing competition and customer shifts away from traditional services like cable TV and home phone. Rogers’ total video subscribers fell by 39,000 during the quarter, and the home phone subscriber base contracted by 29,000. However, adjusted EBITDA for the cable division rose 5%, bolstered by synergy savings from the Shaw acquisition and other operational efficiencies.

In addition to its strong financial performance, Rogers made headlines in September 2024 with its agreement to acquire Bell’s 37.5% stake in Maple Leaf Sports & Entertainment (MLSE) for $4.7 billion. The acquisition will give Rogers a controlling 75% interest in MLSE, further expanding its media and sports portfolio.

MLSE owns several iconic sports teams, including the Toronto Maple Leafs (NHL), Toronto Raptors (NBA), and Toronto FC (MLS).

This acquisition solidifies Rogers’ position as a dominant force in Canadian sports media, building on its existing ownership of the Toronto Blue Jays and the Rogers Centre.

Rogers reaffirmed its 2024 outlook, maintaining its guidance for total service revenue growth of 8-10% and adjusted EBITDA growth of 12-15%. The company also expects capital expenditures to range between $3.8 billion and $4.0 billion, focusing heavily on network expansion, 5G deployment, and fibre upgrades.

Rogers Communications Class B shares last traded at $54.28 on the TSX.

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