Rogers Communications (RCI)

Q4 2011 Earnings Call

February 22, 2012 8:00 am ET

Executives

Bruce M. Mann - Vice President of Investor Relations

Nadir H. Mohamed - Chief Executive Officer, President, Director of Communications Division and Director

William W. Linton - Chief Financial Officer and Executive Vice President of Finance

Robert Bruce - President of Communications Division

Robert Berner - Chief Technology Officer and Executive Vice President of Network

Analysts

Robert Bek - CIBC World Markets Inc., Research Division

Glen Campbell - BofA Merrill Lynch, Research Division

Robert Goff - NCP Northland Capital Partners Inc., Research Division

Vince Valentini - TD Securities Equity Research

Maher Yaghi - Desjardins Securities Inc., Research Division

Phillip Huang - UBS Investment Bank, Research Division

Jeffrey Fan - Scotiabank Global Banking and Market, Research Division

Drew McReynolds - RBC Capital Markets, LLC, Research Division

Tim Casey - BMO Capital Markets Canada

Presentation

Operator

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Ladies and gentlemen, thank you for standing by. Welcome to the Rogers Communications Fourth Quarter 2011 Analyst Conference Call. [Operator Instructions] I would like to remind everyone today this conference is being recorded, Wednesday, February 22, 2012, at 8 A.M. Eastern time. And I would now like to turn the call over to Mr. Bruce Mann with the Rogers Communications Management Team. Please go ahead.

Bruce M. Mann

Well, thanks, operator. Good morning, everyone, and thanks for investing some of your time with us this morning to join Rogers Q4 2011 Investment Community Teleconference. It's Bruce Mann here. Joining me on the line this morning are Rogers President and Chief Executive Officer, Nadir Mohamed; Bill Linton, our Chief Financial Officer; Rob Bruce, who's the President of our Communications Division; Keith Pelley, who runs Rogers Media; Bob Berner, our Chief Technology Officer; and Ken Engelhart from our Regulatory team.

We released our Q4 results earlier this morning. The purpose of this 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 undoubtedly touch on estimates and other forward-looking information from which our actual results could be very different, please review the cautionary language in today's earnings release and importantly in our 2010 annual report that includes various factors, assumptions, risks as to how our actual results could differ, and all those cautions apply equally to our dialogue on this morning's conference call. If you don't already have copies of our release from this morning or our 2010 annual report, they're all available on the Investor Relations section of rogers.com.

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

Nadir H. Mohamed

Thanks, Bruce. Welcome, everyone, and thank you for joining us. As you can see from this morning's earnings release, we delivered a relatively balanced set of financial and subscriber results. The results certainly reflect the strength of our asset mix as well as the continuation of what we see as an extremely competitive period in the market.

In terms of asset mix, we are uniquely positioned as Canada's largest wireless provider, complemented by our healthy and growing broadband and Media businesses, and you can see this reflected in our results for the quarter and the year, as well as the guidance that we provided for 2012.

So getting to some specifics of the quarter. We continue to demonstrate success on the sales front where we gained approximately 34% share of postpaid gross adds of the 3 large wireless players and, frankly, could have generated even higher gross adds if we had not been constrained on supply of the iPhone 4S during the quarter.

And on the Cable side, we increased total service unit net adds by 59% year-over-year. And as a result of continued effective cost controls, we also maintained strong margins, generating significant free cash flow and solid EPS growth. And we delivered this despite the planned increase in our capital spend as we continued to invest in maintaining our leading network position.

Importantly, we returned $564 million of cash to shareholders in the fourth quarter through a combination of dividends and buybacks, and that's up 6% from Q4 of last year. And as you saw from our dividend and share buyback announcement this morning, we intend to continue returning significant amounts of cash to shareholders in 2012.

So stepping back and looking at the quarter, the most notable observations I would point out are: First, on the Wireless side, we continue to execute strongly on our wireless data strategy. Despite what was an intensely competitive environment in Q4, we activated the highest number of smartphones ever, those being through a combination of new and upgrading subscribers totaling well over 790,000 new activations or activations. That's 25% higher than the next highest quarter ever, which was in Q4 of 2010. Importantly, this was also our strongest quarter ever in terms of number of smartphone sales to new customers, including the highest quarter ever of iPhone sales. At 277,000 new smartphone subscribers added, that's 8% higher than our previously highest quarter, which was Q3 of this year.

On the Wireless net adds front, we did see a tick-up in postpaid churn, particularly at the lower end of the market. We've got some work to do here, and we can do better on this metric, and this is a very key focus for us from an executional perspective. And we're already seeing a sequential improvement in this quarter -- in this key metric so far in this quarter. Having said that, it's early.

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