Rogers Communications: A Canadian Cable Operator With Significant Growth Potential

| About: Rogers Communications (RCI)
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Rogers Communications Inc. (NYSE:RCI) provides cable television, high-speed Internet access, and video retailing through its wholly-owned subsidiary, Rogers Cable and Telecom. The company also provides wireless voice, data, and messaging services through its owned subsidiary, Rogers Wireless.

Rogers Communications has a $16 billion market cap. During the second quarter of 2012, Rogers Communications generated $1,068.3 million of cash from operations, compared to $911 million in the year-ago quarter.

Free cash flow during the reported quarter was $615 million, compared to $400 million in the year-ago quarter. At the end of the second quarter of 2012, Rogers Communications had $1,639 million of cash and marketable securities on its balance sheet, compared to $1,107 million at the end of 2011. As with most cable companies, Rogers has a significant amount of debt.

The company has a current dividend yield of 3.9%. Rogers Communications has a $1.58 annual dividend payment, which is a 50% payout.

As of now, Rogers has expanded its superfast LTE network to 60% of Canada. Management has aimed to achieve a 100% foothold by the end of 2013. Deployment of the LTE network has resulted in an 80% year-over-year increase of Internet usage by its subscribers. Growing demand for mobile data and huge activation of the latest smartphones will pave the way for Rogers' future growth.

Rogers Communications continues to grow by acquiring new assets in popular demand in Canada. Rogers recently announced it is acquiring all of the outstanding shares of Score Media Inc., and will wholly own theScore Television Network and related television assets.

Score Media owns theScore Television Network, closed captioning service Voice to Visual Inc., and mixed martial arts promotion The Score Fighting Series, as well as the digital media business being spun out to its shareholders. theScore Television Network is a national specialty television service providing sports news, information, highlights and live event programming across Canada. It is Canada's third largest specialty sports channel, with 6.6 million television subscribers, generating approximately $45 million of annual subscription and advertising revenues, and approximately $15 million of annual earnings before interest, taxes, depreciation and amortization (EBITDA).

Last August, Rogers Communications, together with Bell Canada, a division of BCE Inc. (NYSE:BCE) completed the joint acquisition of a 75% stake in Maple Leaf Sports & Entertainment (MLSE). With this acquisition, Rogers will be able to deliver highly quality sports content to its subscribers anywhere, anytime, on any platform through its wireless/cable networks and robust portfolio of media assets. The sports contents of MLSE are in high demand in Canada.

Despite facing a challenging environment, Rogers Communications is able to maintain profitability. This was primarily due to effective cost control, technical innovation and a double-digit increase in cash flow generation.

Rogers Communications has an equity summary score of 10 out of 10 for a VERY Bullish outlook. Zacks Investment Research has a #1 ranking on Rogers.

Rogers Communications has a 12-month price target of $50.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.