While Rogers Cantel Mobile Communications Inc. showed dramatic fourth quarter and year-end income loss for 1995, the company said it was the strongest quarter ever for adding cellular customers.
The majority of net loss is attributed to acquisition costs associated with subscriber additions. For the three months ended Dec. 31, Cantel reported a net loss of $66.6 million compared with net income of $4.4 million for the comparable period in 1994. Year-end net loss totaled $59.6 million, compared with a $2.7 million loss in 1994.
However, the net number of cellular subscribers added in the fourth quarter was 163,771, about 2.5 times net fourth quarter additions a year earlier, said David Robinson, Cantel’s director of investor relations. “By definition, if you have a high acquisition quarter you will have weak financial performance in that quarter,” explained Robinson.
Acquisition cost per subscriber averaged $539 in fourth quarter 1995, up 16 percent from $465 a year earlier. This figure includes sales and marketing expenses, commissions paid to resellers and agents and a portion of phone costs for phones purchased through lease programs.
More than 60 percent of those net new customers were acquired in December, said Robinson. The quarter’s subscriber additions brought the company’s cumulative net subscribers to about 1.05 million.
“Amigo” is Cantel’s lease-to-own cellular service. A method of bundling and simplifying service, customers pay a monthly fee of about $49 plus airtime over a contracted term, usually between 18 and 36 months.
However, the North York, Ontario, Canada-based company swallows most of that $539 per subscriber acquisition cost up front. So at quarter’s end, explained Robinson, the 100,000 new subscribers had only paid about $35 Canadian, or $49 U.S. dollars, each, accounting for a huge income loss.
Other fourth quarter and year-end loss was attributed to the valuation of Claircom Communications Inc., an air-to-ground cellular service provider owned 10 percent by Cantel and 90 percent by AT&T Wireless Services Inc. “Last year we had it on the balance sheet as ($47 million). We’ve decided it’s not worth that.” At the end of 1995 Claircom “was worth almost nothing on the balance sheet,” said Robinson.
Both owners determined, “the estimated future operating cash flows may not be sufficient to recover the carrying value of their investment in Claircom,” stated Cantel in its 1995 earnings report.
