Rogers Communications Q2 2025 Earnings: Navigating 5G Competition and CAPEX Pressures While Unlocking Sports Media Value

Rogers Communications (TSX: ROC) delivered a mixed but strategically significant Q2 2025 earnings report, offering a snapshot of its ability to balance high-margin growth with the realities of 5G competition and capital expenditure (CAPEX) pressures. While revenue and adjusted EBITDA grew modestly, the company's bold moves in sports/media acquisitions and network innovation suggest a long-term playbook to outpace rivals like Telus and Bell. However, investors must weigh these positives against margin compression risks and the sustainability of its deleveraging strategy.

Financial Highlights: Growth, But at a Cost

Rogers reported $5.216 billion in revenue for Q2 2025, up 2% year-over-year, driven by 1% growth in Wireless and Cable segments and a 10% surge in Media revenue. Free cash flow soared 39% to $925 million, a testament to disciplined cost management and the $6.7 billion equity investment secured in July. This capital influx, led by Blackstone, reduced leverage to 3.6x debt/EBITDA (from 4.5x at year-end 2024), buying time to fund CAPEX.

However, net income plummeted to $157 million, down 63% from $394 million in Q2 2024. The decline stems from higher finance costs ($628 million vs. $576 million), restructuring expenses ($238 million), and depreciation ($1.184 billion). While adjusted EBITDA rose 2% to $2.362 billion, the operating margin contracted to 6.1% (income before tax of $321 million), down from 10.4% in the prior year.

5G Competition and CAPEX Pressures: A Double-Edged Sword

Rogers added 61,000 mobile subscribers (35,000 postpaid) in Q2, with postpaid churn dropping to 1.00%. Blended ARPU of $55.45 reflects competitive pricing pressures, as rivals like Telus and Bell aggressively roll out 5G Advanced and bundled services. Rogers responded by launching WiFi 7 (first in Canada) and 5G Advanced network trials, but these initiatives require heavy CAPEX.

The company's $3.8 billion CAPEX guidance for 2025 (up from $3.5 billion in 2024) underscores its commitment to maintaining wireless leadership. While this investment is critical for 5G dominance, it risks squeezing free cash flow. With CAPEX expected to consume ~40% of 2025 adjusted EBITDA ($2.36 billion), investors must monitor whether returns from these investments justify the spend.

MLSE Acquisition: A High-Risk, High-Reward Bet

The July acquisition of an additional 37.5% stake in Maple Leaf Sports & Entertainment (MLSE) for $1.4 billion is a strategic masterstroke. By becoming a 75% controlling owner of the Toronto Maple Leafs, Raptors, and other teams, Rogers has positioned itself to monetize sports content and live events in a streaming-driven era. The company estimates MLSE's value at $15 billion, with pro forma 2025 Media revenue and EBITDA expected to reach $3.9 billion and $250 million, respectively.

However, this acquisition is a long-term play. While it diversifies revenue streams, MLSE's sports teams are seasonal and subject to performance volatility (e.g., a weak NHL playoff run could dampen ad revenue). Moreover, programming costs for the Media segment rose sharply in Q2, cutting into EBITDA growth. Investors should assess whether Rogers can leverage MLSE's assets to create recurring revenue (e.g., through Sportsnet subscriptions or arena concessions) rather than relying on one-off events.

Deleveraging and Dividend Policy: A Balancing Act

Rogers' equity raise provided $700 million in immediate debt repayment and $6.7 billion in liquidity, accelerating its deleveraging. Yet, with $34.59 billion in adjusted net debt as of June 2025, the company faces pressure to maintain investment-grade credit ratings. The recent $0.50/share dividend (up 7% from Q1) signals confidence, but with free cash flow projected at $3.0–3.2 billion for 2025 (down from $3.5 billion in 2024), there's a risk of dividend cuts if CAPEX overruns or interest rates rise.

Investment Thesis: Buy for Growth, But Watch Margins

Rogers' Q2 results highlight its ability to execute on high-impact initiatives—5G innovation, MLSE integration, and cost discipline—while navigating a competitive landscape. The company's updated 2025 guidance (3–5% revenue growth, $3.8 billion CAPEX) aligns with a growth-at-a-reasonable-price strategy, supported by a strengthened balance sheet.

Historically, a simple buy-and-hold strategy around ROC's earnings release dates has shown positive returns, with a maximum gain of 0.31% on the day of the release since 2022. This suggests that earnings events have historically been a catalyst for short-term price momentum, reinforcing the importance of monitoring Q3 guidance for MLSE monetization and 5G CAPEX efficiency.

Key risks:
1. 5G pricing wars: Aggressive ARPU declines could erode margins.
2. MLSE underperformance: Sports teams and media assets may not deliver $15 billion in value.
3. Interest rate sensitivity: Rising debt costs could reverse the deleveraging progress.

Catalysts:
- Sports/media monetization: Subscription growth on Sportsnet and arena revenue synergies.
- 5G Advanced adoption: Early mover advantage in WiFi 7 and 5G Advanced could drive ARPU.
- Shareholder returns: $269 million in dividends returned in Q2, with a $0.50/share payout signaling confidence.

Conclusion

Rogers Communications is a compelling long-term investment for its strategic agility and market-leading position in wireless infrastructure. However, investors should prioritize margin resilience and MLSE integration progress over short-term revenue growth. With a forward P/E of 11.5x and a 4.28% dividend yield, the stock offers value for those willing to tolerate near-term volatility. For now, a conditional buy is warranted, contingent on Q3 guidance for MLSE monetization and 5G CAPEX efficiency.