Rogers Communications CEO Discusses Q3 2010 Results - Earnings Call Transcript

Rogers Communications CEO Discusses Q3 2010 Results - Earnings Call Transcript
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Rogers Communications Inc. (

RCI

)

Q3 2010 Earnings Call

October 25, 2010 8:00 am ET

Executives

Bruce Mann - Rogers Management Team

Nadir Mohamed - President and CEO

Bill Linton - CFO

Rob Bruce - President, Communications Division

Keith Pelley - President, Rogers Media

Bob Berner - CTO

Analysts

Greg MacDonald - National Bank Financial

Simon Flannery - Morgan Stanley

Tim Casey - BMO Capital Markets

Phillip Huang - UBS Securities

Jonathan Allen - RBC Capital Markets

Bob Bek - CIBC

Vince Valentini - TD Newcrest

Rob Goff - Northland Capital Partners

Jeff Fan - Scotia Capital

Rick Prentiss - Raymond James

Peter MacDonald - GMP Securities

Presentation

Operator

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» Rogers Communications, Inc. Q3 2009 Earnings Call Transcript

Welcome to the Rogers Communications, Inc. third quarter 2010 investor community conference call. (Operator Instructions) I would like to remind everyone that this conference is being recorded today, Tuesday, October 26, 2010 at 8.00 am Eastern Time.

I would now like to turn the conference over to Mr. Bruce Mann in the Rogers management team.

Bruce Mann

Good morning, everyone. We appreciate you joining us for Rogers' third quarter 2010 investment community teleconference and webcast.

Joining me on the line this morning from Toronto are Nadir Mohamed, Rogers' President and Chief Executive Officer; Bill Linton, our Chief Financial Officer; Rob Bruce, President of our Communications Division; Keith Pelley, who is the new President of Rogers Media; Bob Berner, our Chief Technology Officer as well as a couple of other members of their respective teams.

We released our third quarter 2010 results earlier this morning. The purpose of the call is to crisply provide you with a bit of additional background upfront and then answer as many of your questions as time permits.

As today's remarks and discussion will no doubt touch on estimates and other forward-looking information from which our actual results could be very different, you need to please review the cautionary language in our earnings filing of this morning and also in our full year 2009 MD&A. They both include various factors and assumptions and risks and how our actual results could be different than what we might talk about today, and those cautions apply equally to our dialogue on this morning's call.

If you don't already have copies, both are available on the rogers.com website where they are both filed with SEDAR and the SEC.

So with that let me turn it over to Nadir Mohamed and then Bill Linton both, for some brief introductory remarks and some color on the results and then the management team will take your questions.

Nadir Mohamed

As you can see from this morning's earnings release, we delivered another quarter of continued growth in new subscribers, revenue and free cash flow across the business despite an increase in the competitive environment.

Our Q3 financial results were consistent with our guidance for the year, and reflect significantly heavier volumes of both smart phone sales as well as upgrades. Between our sales to new subscribers and upgrades by existing subscribers, we have never activated more smartphones in a single quarter. And on the growth additions front, it's the second highest quarter ever for the smart phone sales for new customers.

This was supported by the launch of the iPhone 4, of which we were somewhat supply-constrained during the quarter, but also the new Blackberry Torch, host of new Android and Windows Mobile devices. In fact, this was clearly one of our heaviest quarters of Blackberry activations ever.

You can clearly see both of these dynamics reflected in the results issued today. You can see the healthier mix to high value customer loads in our strong, postpaid wireless growth additions for the quarter, and you can see the impact of the heavy volume of sales and upgrades in our wireless equipment subsidies and margins.

As expected, the results reflect an incrementally more noticeable impact of increased competition, being really the first quarter where we had almost all of the new competitors up and running in multiple markets. You see the impact of this on our postpaid churn level, which ticked up incrementally, and the continued decline in wireless voice ARPU reflects this competitive environment as well as what we see as an increasing maturity of the voice market.

Importantly, in this environment, we strategically focused on and invested in our customers, with a sharp focus on retention to help ensure that we minimize churn in the most valuable segments of our base. Rogers continues to lead in terms of wireless data metrics, with our innovative offerings and high quality networks.

The continued strong growth in our wireless data revenues, which is again the most significant driver of top-line growth was not enough to completely offset the voice ARPU pressures, which in the net had the impact of moderating our top-line growth. We have also increasingly been applying more of the same methodical focus on retention and value-oriented segmentation on the cable side of the business.

You can see the improvements on the cable subscriber side, which are driven as much by lower churn as by new sales. At the same time, we have been driving meaningful cost efficiencies across the company, both in terms of OpEx and CapEx, which has helped us to maintain strong margins and continue to grow free cash flow.

Excluding the year-over-year change in the cost of equipment sales, we essentially held our OpEx flat year-over-year Q3 versus Q3. And coupled with our lower CapEx that we delivered this quarter, we had strong growth in free cash flow. We're up 16% on a per share basis, reflecting our ongoing stock buyback program. Free cash flow per share was in fact up 24%.

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