Rogers Communications Inc. (RCI:US) Chief Executive Officer Nadir Mohamed plans to retire next January, a surprise move that sent Canada’s largest wireless carrier in search of a new leader for the second time in four years.
The board will appoint a search firm and begin looking internationally for a replacement, the Toronto-based company said yesterday in a statement. Neither Ed Rogers nor Melinda Rogers, the children of founder Ted Rogers, will put their names forward for the top job, the company said. Rogers is controlled by a family trust through a dual-class stock structure.
While Mohamed’s decision was unexpected, the fact the Rogers children aren’t in the running signals that the move wasn’t forced on him, said Maher Yaghi, an analyst at Desjardins Securities in Montreal. A global CEO search also provides the opportunity to look for someone with a fresh approach, he said.
“If you need new ideas, new ways of thinking, you might look outside Canada,” Yaghi said. “An executive from an international firm could bring some insight into what works in other countries.”
Separately, Rogers reported fourth-quarter profit that beat analysts’ estimates, helping bolster the stock today. The shares rose 4.1 percent to C$47.32 at the close in Toronto, the biggest gain since July. Rogers shares have climbed 25 percent in the past year, outpacing its biggest rivals.
Mohamed, 56, took over as CEO in March 2009, following the death of Ted Rogers at the end of 2008. During his tenure, Mohamed has sought to fend off a challenge from new low-cost carriers like Mobilicity by introducing Rogers’s own no-frills brand Chatr. He’s also made acquisitions to bolster the range of programming it could offer customers, including buying a stake in pro-sports business Maple Leaf Sports & Entertainment Ltd.
“I feel very good about what we’ve achieved as a company,” Mohamed said in an interview. “If you look at where the company is at right now from a financial perspective, our balance sheet has never been stronger.”
Rogers’s fourth-quarter profit rose to 88 cents, excluding one-time charges. Analysts had predicted 72 cents on average, according to data compiled by Bloomberg. Sales climbed 3.4 percent to C$3.26 billion ($3.24 billion), helped by consumer spending on data-hungry devices such as Apple Inc. (AAPL:US)’s new iPhone 5. Analysts had projected C$3.19 billion on average.
The company’s board also authorized the buyback of as much as C$500 million in stock and increased its annual dividend 10 percent to C$1.74 a share.
Rogers is plowing profits back into its mobile-phone business, the fastest-growing part of the company, to bolster its network and satisfy demand for Web surfing and video on wireless devices. Rogers agreed last month to spend C$300 million for wireless capacity from Shaw Communications Inc. to keep up with what Mohamed has called a data-use “explosion.”
Still, Rogers added less than half as many mobile-phone users on lucrative long-term contracts as its rivals. BCE Inc.’s Bell Mobility, the country’s No. 2 mobile provider, gained 143,834 contract subscribers, while Telus Corp. added 123,000.
While Rogers stock is up today, Desjardins’s Yaghi expects the slow subscriber gains to weigh on the shares this year.
“Rogers continues to underperform Telus and Bell in wireless subscriber additions, which we believe will continue in 2013,” said Yaghi, who has a hold rating on the shares. “Given the uncertainty presented by the upcoming CEO transition period and the stock’s premium valuation versus Telus and BCE, we see limited upside.”
Telus, Canada’s No. 3 carrier, reported quarterly profit today of 86 cents a share, excluding tax gains. That was just below the 87 cents analysts predicted. Sales climbed 6 percent to C$2.85 billion in the period. Telus, based in Vancouver, expects sales to climb as much as 6 percent this year, with earnings per share rising as much as 14 percent.
Average revenue per customer at Telus climbed 3.2 percent to C$60.95. At Rogers, the figure grew 2.8 percent to C$60.48.
Rogers’s net income climbed to C$529 million, or C$1.02 a share, from C$327 million, or 63 cents, a year earlier.
Operating profit, excluding acquisition costs and other expenses, will be C$4.87 billion to C$5.05 billion this year, Rogers said. Network revenue at its main wireless business will be C$6.79 billion to C$6.96 billion, the company said.
Mohamed said that now is the time to seek a new leader, while the company is strong. Before becoming CEO, he was president of Rogers Wireless (RCN:US) from 2001 to 2005 and built up the company’s smartphone business just as devices like the BlackBerry began to gain mainstream appeal. From 2005 to 2009, he was Rogers’s chief operating officer.
“It really felt like now was a good time to pass on the helm to the next generation of leadership,” he said.
Mohamed wants to use the next 12 months to make the most of recent investments and acquisitions he’s made, including the 37.5 percent stake in Maple Leaf Sports for which he paid C$533 million. The Toronto Blue Jays baseball team, which Rogers owns, also has made a number of high-profile trades.
“I’ve got a year to continue what we’ve been doing and build on the platforms we have,” Mohamed said. Referring to Paul Beeston, president of the Blue Jays, he said, “I’m fully counting on Beeston delivering the World Series for us.”
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