Rogers Communications Inc. (RCI)

Q2 2010 Earnings Call Transcript

July 27, 2010 8:30 am ET

Executives

Bruce Mann – VP, IR

Nadir Mohamed – President and CEO

Bill Linton – EVP, Finance and CFO

Rob Bruce – President, Communications

Analysts

Bob Bek – CIBC

Simon Flannery – Morgan Stanley

Tim Casey – BMO Capital Markets

Phillip Huang – UBS

Jeff Fan – Scotia Capital

Rick Prentiss – Raymond James

Vince Valentini – TD Newcrest

Glen Campbell – Merrill Lynch

Jonathan Allen – RBC Capital Markets

Dvai Ghose – Canaccord Genuity

Greg MacDonald – National Bank

Maher Yaghi – Desjardins Securities

Peter MacDonald – GMP Securities

Presentation

Operator

Good morning ladies and gentlemen and thank you for standing by. Welcome to the Rogers Communications, Inc. Q2 2010 results conference call. At this time all participants are on a listen-only mode. Following the presentation we will conduct a question-and-answer session. (Operator instructions) I would like to remind everyone that this conference call is being recorded today, July 27, 2010 at 8.30 am Eastern Time.

I’ll now turn the conference over to Bruce Mann of the Rogers management team. Please go ahead sir.

Bruce Mann

Thank you, John. Good morning, everybody. Thank you for joining us for Rogers’ second quarter 2010 investment community conference call and webcast.

Joining me on the line this morning here are Nadir Mohamed, Rogers’ President and Chief Executive Officer, Bill Linton, our Chief Financial Officer, Rob Bruce, who is the President of our Communications Division, Tony Viner, President of our Media Division and also Bob Berner, our Chief Technology Officer. We also have couple of members of their respective team with us as well.

We released our second quarter 2010 results earlier this morning, approximately 7 o’clock. The purpose of this call is to crisply provide you with a bit of additional background upfront and then answer as many questions as time permits.

As today’s remarks and the discussion that will follow undoubtedly touch on estimates and other forward-looking information from which our results could be different you should review the cautionary language in our earnings filings of this morning and also in our full year 2009 MD&A, including the factors, assumptions, risks, et cetera, about why those things could differ.

Those cautions apply equally to our dialogue on this morning’s conference call. If you don’t already have copies of this morning’s earnings release and/or our 2009 Annual Report, where that information can be found, they should accompany this call and they are both available on the Investor Relations section at rogers.com.

With that, I am going to 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 very much Bruce. Good morning everyone and thank you for joining us. As you can see from this morning’s earnings release, we delivered another solid quarter results despite an increase in the competitive environment in Q2. Our financial results were a strong continuation of what you saw from us in Q1, and at the same time in Q2, we delivered healthy subscriber results both at Wireless and Cable.

We delivered a healthy 5% consolidated revenue growth and generated double-digit adjusted operating profit and EPS growth. Our wireless data revenue grew a 39%. We had meaningful cost efficiencies that helped drive another quarter of margin expansion right across all of our three business units.

We added a healthy mix of high value customers while holding customer churn down to very respectable levels, and importantly, we delivered another strong quarter of free cash flow growth and returns to shareholders, so overall a strong second quarter for Rogers.

Let me quickly cover few of the operating highlights of the quarter and offer my perspective and then Bill will walk you through some of the financial nuances for the quarter. The most significant driver of top line growth is again the continued strong growth in our wireless data revenues, up a strong 39% and now representing 27% of Wireless segment revenue.

Rogers continues to lead in terms of wireless data metrics with our innovative offerings, high quality networks and focus on customer experience clearly continuing to pay off.

We activated more smartphones this past quarter than we did in Q2 of last year. Smartphone sales in new customers were not far behind last year’s levels and we had a meaningfully higher number of existing subscribers that upgraded smartphones at the same time.

We continue to make significant smartphone and customer experience enhancements during the quarter and made investments, such as our innovative new Handset Guarantee program, our self-activation process for iPads.

As a result, continued success, attracting an extremely high quality mix of higher APRU, lower churn, subscriber additions that are driving excellent network revenue and ARPU growth of very well controlled churn.

I think it’s clear that the targeted work we do on the retention side combined with our focus on customer experience and our proven network quality leadership has allowed us to continue to deliver excellent subscriber churn results. Even with these continued investments as a result of aggressively managing the cost side, we have delivered strong Wireless margin expansion.

Now, in early July, we announced the introduction of a new Wireless brand called chatr to focus on the growing unlimited talk and text category. This is something that’s been on the works for some time. It’s been designed to capture a piece of a new category that has been developing in the market.

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