Rogers Communications (RCI) Down On Intense Competition

On Jun 20, 2017, leading diversified Canadian communications and media company, Rogers Communications Inc. (NYSE:RCI) was downgraded to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Rogers Communications operates in an intensely competitive wireless and cable TV industry. The company continues to face tough competition from market incumbents like TELUS Corp. (NYSE:TU) and BCE Inc. (TO:BCE) along with other small regional cable TV operators in the wireless market of Canada. Moreover, Shaw Communications Inc.’s (NYSE:SJR) entry into the market with the WIND Mobile acquisition has heightened competition.

Roger Communication’s media segment remains exposed to persistent softness in the advertising market. The company, like other cable companies, has lost viewers to video streaming service providers like Netflix (NASDAQ:NFLX) because of their cheap source of TV programming. Such competitive threats from video streaming service providers led to the discontinuation of Shomi video streaming services, which was a major setback.

In spite of such downturns, shares of Rogers Communications have outperformed the Zacks categorized Cable TV industry’s gain in the past three months. The stock price rose 10.99%, outshining the industry’s gain of 8.63% over the same time frame.

We are impressed with Rogers Communications’ efforts to reward its shareholders with a quarterly dividend of 48 cents per share on each of its outstanding Class B Non-Voting and Class A Voting shares. The cash dividend will be paid on Jul 4, 2017, to shareholders of record on Jun 12, 2017.

Moreover, the company remains the first wireless operator in Canada to offer Internet of Things services like End-to-End Incident Management, Farm & Food Monitoring, and Level Monitoring to business enterprises. Its decision to purchase Tillsonburg Broadcasting Company Limited and its offering of Rogers Unison (a new mobile solution) to small businesses bode well for high-speed Internet customer growth.

We further believe that the company’s plans to dump its Internet Protocol TV (IPTV) platform and adopt Comcast Corp (NASDAQ:CMCSA).’s cloud-based X1 video platform should help it grow in its cable segment in the upcoming quarters.

Recent Events

On Jun 6, 2017, Rogers Communications’ subsidiary, Rogers Media, Inc., signed two major deals which are likely to boost its business and open up scope for newer opportunities in the entertainment and media industry. Rogers Media inked a new deal with The Weather Company, which is a subsidiary of the Data and Analytics Platform business unit of International Business Machines Corporation (NYSE:IBM) and with Iowa-based media conglomerate company, Meredith Corporation (NYSE:MDP) .

We believe through this deal, Rogers Media will be able to expand and deliver brand-safe and premium-content environments to its advertising partners which will focus on lifestyle, entertainment, news and information verticals. Every month, more than 13.8 million Canadians visit Rogers Media digital properties across all devices. On the back of these new deals, Rogers Media digital network is expected to reach 24.7 million.

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