Long-Term Stock Investing in Canada’s Telecom Sector

Rogers Communication (TSX:RCI.B)(NYSE:RCI) is an iconic Canadian telecommunications company. During the COVID-19 pandemic, the company’s networks were strong and resilient. Rogers demonstrated leadership in delivering 5G to Canadians, the company’s balance sheet remained sound, and it supported Canada’s most vulnerable communities.

In fiscal 2020, while Rogers prioritized the actions it needed to take as a result of COVID-19, the company’s results started to improve over the second half of the year. Rogers ended the year with a strong balance sheet and solid efficiency gains across all businesses. While consolidated revenue was down 8%, the company was able to expand consolidated adjusted earnings margins by 90 basis points.

Digital transaction options

Rogers’ wireless business ended the year with 2.5 million unlimited data customers, which grew 79% year over year. This represents the largest customer base in Canada that is no longer paying overage charges due to travel restrictions.

Rogers felt the impacts of global business travel restrictions and reduced store traffic due to the pandemic’s retail restrictions, but increased the company’s customer base in the second half of the year and attracted 245,000 net new wireless subscribers as customers embraced the company’s digital transaction options.

In Rogers’ cable business, revenue was consistent with last year, adjusted earnings grew 1%, and the company expanded margins by 50 basis points. Rogers saw significant growth in the company’s subscriber base, which grew 67% on a year-over-year basis to over 540,000 subscribers. The company also achieved capital efficiency gains through the growing popularity of customer self-install options for the internet and television.

Incredible sports assets

Finally, Rogers’ sports and media business was notably impacted by COVID-19. The company experienced lower sports-related revenue associated with the Toronto Blue Jays not being able to play in front of fans at the Rogers centre, as well as overall declines in television and radio advertising revenue across the country.

However, Rogers has the best sports assets in the country, and fans appear excited with the prospects of watching and supporting favourite teams as major sports leagues continue to recover.

The company has a healthy balance sheet, strong cash flow generation ability, and delivers results for shareholders. Despite pandemic-driven pressures affecting Rogers’ 2020 results, the company’s underlying assets remain very strong. The company generated free cash flow of $2.4 billion, an increase of 4%, and returned $1.0 billion in dividends to shareholders.

Healthy balance sheet

As the economy moves past the COVID-19 environment, the company anticipates solid improvements in Rogers’ business, underpinned by a healthy balance sheet and targeted and consistent investments in the company’s networks. The company has undergone an operational transformation in real-time to keep Rogers’ employees safe and the company’s customers connected, while still pursuing opportunities to grow and innovate.

Further, the company is investing for the future and has launched Canada’s largest and most reliable 5G network. This innovation was demonstrated as Rogers solidified the company’s 5G leadership position, launching and expanding Canada’s first and largest 5G network to more than 170 cities and towns.

The company also began Rogers’ rollout of Canada’s first 5G standalone core network in Montreal, Ottawa, Toronto, and Vancouver.

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.

The Motley Fool recommends ROGERS COMMUNICATIONS INC. CL B NV. Fool contributor Nikhil Kumar has no position in any of the stocks mentioned.

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