Rogers Communications is paying Apple a “significant” subsidy for the new iPhone3G handsets it has begun to sell, according to the company’s latest quarterly financial results.
The documents released Tuesday don’t specify what the cost of underwriting the price of the $199 8MB and $299 16MB devices are, which only went on sale July 11. However, it does say that Rogers has so far committed to buying at least $150 million worth of them.
The handsets, which receive data faster than the original iPhones, which Rogers didn’t sell, have proved to be wildly popular around the world. It took a while for Rogers and Apple to come to a deal for selling iPhones. Industry analysts have speculated it was because the cableco resisted Apple’s pressure to boost sales by having aggressive prices for the phones and data rates. It’s not uncommon for providers to subsidize handsets, which eats into their profits, but some feel the iPhone should command a premium.
The impact of their sales on Rogers financials isn’t included in the latest results, which cover the three months ending June 30. Nor does it reflect the just under $1 billion Rogers will pay for spectrum it bought at the just-concluded AWS auction.
During the three-month period overall revenues increased 11 per cent for the same period a year ago to $2.8 billion, while operating profit lept to $996 million from $431 million. Net income for the period was $301 million.
During the quarter Rogers added 92,000 postpaid wireless subscribers, down from the 133,000 it gained in the same period a year ago. The company believes the introduction of wireless number portability was one of the main reasons for the jump last year.
Still, for the quarter wireless data revenue increased by 34 per cent (40 per cent for the first six months of the year). “This increase in data revenue reflects the continued growth of text and multimedia messaging services, wireless Internet access, BlackBerry and other PDA devices, downloadable ring tones, music and games, and other wireless data services,” the company said in a news release. Wireless data revenue now represents just over 15 per cent of total network revenue, compared to 13 per cent last year.
During the second quarter Rogers launched its converged Fido UNO and Rogers Home Calling Zone plans which allow customers to make unlimited calls within their home using their wireless phone via a home WiFi broadband connection. The idea is to encourage subscribers to have one phone.
Amongst other figures in the report is that Rogers spent $120 million in the quarter to continue rolling out its high speed packet access (HSPA) network, up from $74 million in the same period a year ago. Rogers says users can get up to 7Mbps download speeds where available.
The figures also show trouble in the Rogers Business Solutions (RBS) division, which sells Internet access, hosting, VoIP and long distance services to business. Revenue dropped in the quarter to $130 million from $146 million in the same period in 2007.
Rogers is turning to the cable division to sell these services to home and small businesses, leaving RBS to focus on larger organizations. Late last year, the company said in notes accompanying the financials, it suspended "aggressive" sales and marketing efforts to acquire new medium and large business customers to concentrate on companies that have already signed up, as well as service providers that resell its services.
Meanwhile the cable division is trying to grow Rogers’ penetration of Internet and telephony services into the small business and small office home office markets, it said.
As a result of its change in strategy, RBS had an operating profit of $14 million in the quarter, compared to a $10 million loss in the same period.
