Rogers Communications (RCI)

Q3 2011 Earnings Call

October 26, 2011 8:00 am ET


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

Bruce M. Mann - Vice President of Investor Relations

Keith Pelley - President of Rogers Media


Peter MacDonald - GMP Securities L.P., Research Division

Glen Campbell - BofA Merrill Lynch, Research Division

Blair Abernethy - Stifel, Nicolaus & Co., Inc., Research Division

Vince Valentini - TD Newcrest Capital Inc., Research Division

Matthew Niknam - Goldman Sachs Group Inc., Research Division

Phillip Huang - UBS Investment Bank, Research Division

Gregory W. MacDonald - Macquarie Research

Jeffrey Fan - Scotia Capital Inc., Research Division

Tim Casey - BMO Capital Markets Canada

Robert Bek - CIBC World Markets Inc., Research Division

Dvaipayan Ghose - Canaccord Genuity, Research Division



Ladies and gentlemen, thank you for standing by. Welcome to the Rogers Communications Third Quarter 2011 Results Conference Call. [Operator Instructions] I would like to remind everyone that this conference is being recorded today, Wednesday, October 26, 2011, at 8 a.m. Eastern Time. And I would now like to turn the conference over to Mr. Bruce Mann of the Rogers Communications management team. Please go ahead, sir.

Bruce M. Mann

Thanks very much, operator. Good morning, everyone. Thanks for investing some of your time this morning to join Rogers for our third quarter 2011 investment community teleconference. It's Bruce Mann here. Joining me this morning in Toronto are Nadir Mohamed, Rogers' President and Chief Executive Officer; Bill Linton, our Chief Financial Officer; Rob Bruce, who's the President of our Communications division; Keith Pelley, the President of our Rogers Media division; and Bob Berner, our Chief Technology Officer; and a couple of folks from their respective teams as well.

So we released our third quarter 2011 results earlier this morning. The purpose of this call is to, as crisply as possible, 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 types of information from which our actual results could be very different, would you please review the cautionary language that's in today's earnings release and also in our 2010 Annual Report. And these include the various factors and assumptions and risks about how our actual results could differ, and all those cautions apply equally to our dialogue on today's teleconference. So if you don't have copies of our 3Q MD&A and financials or our 2010 Annual Report to accompany the call, they're both available on the Investor Relations section of

With that, I'll turn it over to Nadir Mohamed and then Bill Linton for some brief introductory remarks and then the management team would be more than pleased to take your questions. Over to you, Nadir.

Nadir H. Mohamed

Thanks, Bruce. And welcome, everyone, and thank you for joining us. As you can see from this morning's earnings release, it was another balanced set of financial and subscriber results. The results clearly reflected strength of our asset mix as well as the continuation of what I believe is an extremely competitive market.

We've continued to demonstrate success both on the sales and retention front, have maintained strong margins and generated both solid EPS growth and significant free cash flow. We delivered this despite the planned increase in our capital spend as we continue to invest in maintaining our leading network position. Importantly, we returned $634 million of cash to shareholders in the third quarter through a combination of dividends and buybacks. That's up 21% from the third quarter of last year and the second highest quarterly return to shareholders ever.

Stepping back and looking at the quarter, the most notable of observations that I would point out are we delivered good customer growth with solid growth subscriber additions in both Wireless and Cable while continuing to maintain reasonable churn rates despite what's an intensely competitive environment in both of these business. In fact, this was our strongest quarter ever in terms of Wireless gross subscriber additions across our combined postpaid and prepaid categories. We continue to demonstrate very solid cost controls across the businesses, which helped us maintain respectable margins in each of our divisions.

We continue to drive rapid growth in our Wireless data business, growing Wireless data ARPU by 24%. We did, however, see continued pressure on voice ARPU, resulting in postpaid ARPU coming down by 3%, but it is noteworthy that the slope of the decline improved for the first time in a number of quarters. And finally, we executed very strong in our Media business, delivering terrific growth both on the top and bottom line while at the same time investing smartly for continued growth going forward.

So across Rogers, a solid performance as we continue to generate growth in a highly competitive environment. More specifically, on the Wireless side, we continue to execute strongly in our Wireless data strategy, selling the highest number ever of smartphones to new customers in a single quarter. We've also activated the second largest number of smartphones ever, those being a combination of new and upgrading subscribers, together totaling over 600,000.

So we're seeing continuous very solid success in the high-value smartphone category. In fact, we passed a significant milestone during Q3, where we now have more than 50% of our postpaid subscriber base on smartphones. The smartphone metrics, ARPU churn and upgrade rates remain healthy, and at the same time, we're both attracting and retaining our highest lifetime value customers.

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