Rogers Communications, Inc Q1 2010 Earnings Call Transcript

Rogers Communications, Inc Q1 2010 Earnings Call Transcript
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Rogers Communications, Inc. (RCI)

Q1 2010 Earnings Call

April 28, 2010 8:30 am ET

Executives

Bruce Mann - VP of IR

Dan Coombes - Director of IR

Nadir Mohamed - President and COO of the Communications Division

Bill Linton - CFO

Rob Bruce - President of Communication Group

Tony Viner - President of Media division

Bob Berner - CTO

Analysts

Greg MacDonald - National Bank Financial

Glen Campbell - Bank of America/Merrill Lynch

Jonathan Allen - RBC Capital Markets

Peter MacDonald - GMP Securities

Phillip Huang - UBS

Maher Yaghi with Desjardins Securities

Jeff Fan - Scotia Capital

Dvai Ghose - Genuity Capital Markets

Vince Valentini - TD Newcrest

Randal Rudniski - Credit Suisse

Rick Prentiss - Raymond James

Tim Casey - BMO Capital Markets

Presentation

Operator

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Welcome to the Rogers Communications, Inc., First Quarter Earnings Conference Call. (Operator Instruction). I would like to remind everyone that this conference call is being recorded today, Wednesday, April 28, 2010 at 8:30 am Eastern Time.

I'll now turn the conference over to Mr. Bruce Mann of the Rogers Communication management team. Please go ahead.

Bruce Mann

Thanks, operator. Good morning, everyone and we appreciate you joining us for Rogers Communications' first quarter investment community conference call and webcast.

Joining myself and Dan Coombes here this morning in Toronto are Nadir Mohamed Rogers President and Chief Executive Officer, Bill Linton, our Chief Financial Officer, Rob Bruce the President of our Communications division and Tony Viner who is the President of our Media division and also Bob Berner our Chief Technology Officer, plus we got a couple of members of their respective team.

So, we released our first quarter 2010 results earlier this morning. The purpose of the call this morning 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 discussion will undoubtedly touch on estimates and other forward-looking information, our results could be different from that forward looking information and you should review the cautionary language in our earnings release of this morning and also in our full year 2009 MD&A and our annual report, especially the various factors and assumptions and risks about how our actual results could differ. Those cautions apply equally to our dialogue on the call this morning. If you don’t already have copies of this morning's quarterly release or 2009 annual report to accompany this call, they are both available on the IR section at rogers.com or on EDGAR or SEDAR.

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 Mohamed

Thanks, Bruce, good morning, everyone and thank you for joining us. As you can see from this morning's release, we delivered another solid quarter of results, despite what is an increasingly competitive environment in Q1. We generated double-digit adjusted operating profit growth. Our Wireless data revenue grew a strong 40%. We're delivering meaningful cost efficiencies that helped drive margin expansion across all three of our major business units.

We added a healthy mix of high value customers while holding churn down to a very respectable level and importantly, we delivered another strong quarter of free cash flow growth and returns to shareholders. So overall, a strong start to 2010.

Let me quickly cover up a few of the highlights for the quarter and then Bill will walk you through some of the financial nuances.

On the revenue line we delivered high single digit revenue growth in our Wireless network, cable operations and media businesses with consolidated top line growth up 5%. The most significant driver of top line growth is again the continued strong growth in our Wireless data revenues.

In Q1 Wireless data revenues were up 40% and now represent 26% of Wireless network revenue. Our 3G and Smartphone investments, combined with our innovative products offering, the quality of our networks and our focus on customer experience are continuing to pay off.

In Q1 we focused on the high end of the Wireless market and we are relatively quite on the mass marketing advertising front. Our expectations quite frankly was that during the Vancouver 20 Olympic periods, BCE was their major sponsorship with a very [healthy] advertising spend and so it would not be an effective use of our marketing to put weight on more advertising and promotion in to that environment.

We kept focused on Wireless data on our Wireless data strategy and we are successful in activating and upgrading an additional 348,000 Smartphone devices predominately Blackberry, iPhone and Android devices, and in fact we are activated more iPhones in Q1 than we did in Q1 of last year.

On average these are generating almost double the ARPU for our voice only subscribers, so a continued high quality mix of subscribers in what we expect was a relatively slow quarter dominated by the Olympics. Importantly even in the face of full quarter of new competitors in HSPA networks our postpaid churn has continue to hold down at a very respectable 1.10%.

Today, approximately 33% of our postpaid bases on high-end Smartphones up from the 23% level we were at same time last year. These are higher ARPU, lower churn, higher lifetime value sub and the impact is clear in our financial and operating metrics.

On the ARPU front, voice ARPU continue to decline albeit at the moderated rate, roaming in a particular continue to be down year-over-year in the 18% range, despite we would estimate $8 million benefit from the Vancouver Olympics.

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