Rogers Communications Inc downgraded as double cohort looms

Rogers Communications is expected to see higher retention spending and profit pressures through the first half of fiscal 2015

Rogers Communications Inc. was slapped having a downgrade at National Bank Financial awaiting the stock pulling back around its first-quarter results due April 20.

Analyst Adam Shine expects Rogers’ average revenue per user will grow in the wireless business following gains within the second half of 2015, but he anticipates higher retention spending and profit pressures with the first half of fiscal 2015, specifically in Q1.

This is a result of the wireless industry’s so-called double cohort because of regulatory changes, as customers on three-year contracts can sign up for new deals simultaneously as those found on the first wave of two-year agreements.

“It is our knowning that the company is taking a more active approach to upgrading customers, specifically in 1Q, resulting in elevated retention spending,” Mr. Shine told clients.

He noted that hardware upgrade levels, which historically affect about 5.7% from the customer base early in the year compared to 7.7% closer to year end, could are available in closer to the average of these two levels in Q1.

In addition to cutting his rating to sector perform, the analyst also trimmed his price target on Rogers shares to $47 from $50.

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