Rogers Communications Reports First Quarter 2014 Results

Rogers Communications Inc., a leading diversified Canadian communications and media company, today announced its unaudited consolidated financial and operating results for the first quarter ended March 31, 2014, prepared in accordance with International Financial Reporting Standards (IFRS).

Financial Highlights

		Three months ended March 31
(In millions of dollars, except per share amounts)		2014	2013	% Chg
Operating revenue		$    3,020	$    3,027	–
As adjusted 1 :
	Operating profit	1,161	1,179	(2)
	Net income	340	414	(18)
	Basic and diluted earnings per share	0.66	0.80	(18)
Free cash flow 1		356	428	(17)
Net income		307	353	(13)
Basic earnings per share		0.60	0.69	(13)
Diluted earnings per share		0.57	0.68	(16)
Cash provided by operating activities		408	805	(49)

1 Adjusted amounts and free cash flow are non-GAAP measures and should not be considered as a substitute or alternative for GAAP measures. They are not defined terms under IFRS, and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.

"During the first quarter, we made a significant investment in 'beachfront property' 700MHz spectrum to give our customers an unsurpassed wireless experience, building on our unprecedented NHL rights deal late in 2013" said Guy Laurence, President and Chief Executive Officer of Rogers Communications Inc. "We made these long-term strategic investments while maintaining our balance sheet at investment grade."

Laurence continued, "Over the past three months I have met with and listened to thousands of customers, stakeholders and employees across the country. I can see a number of opportunities to improve the performance of the business over time, while further enhancing our customer experience. As is apparent from our first quarter results, while there are some areas of strength, there are also areas where we clearly need to and will improve. Over the coming weeks I will be meeting with our Board and management team to lay out my plan and priorities for going forward. I remain excited about the opportunities I see in front of us for Rogers."

Quarterly Highlights

Operating revenue

• Consolidated operating revenue was nominally lower than the first quarter of 2013, reflecting a 2% decline in Wireless revenue, offset by growth at Business Solutions (up 1%) and Media (up 8%). The decline at Wireless was mainly related to pricing changes associated with new customer friendly simplified plans and lower priced roaming plans introduced mid-2013. Cable revenue was flat as continued Internet revenue growth was offset by television subscriber losses, promotional activity and the timing of pricing changes.
   
• Wireless data revenue grew 10% exceeding voice revenue for the first time and now represents approximately 51% of total network revenue. Activated 579,000 smartphones, of which 30% were new subscribers, and high-value smartphone customers now make up 76% of Wireless postpaid subscribers.
   
• Basic cable subscriber losses moderated, both sequentially from the fourth quarter of 2013 and year-over-year, to 20,000.

Adjusted operating profit and net income

• The modest decline in consolidated adjusted operating profit reflects increases in Wireless (up 3%) and Business Solutions (up 22%) which were offset by a 5% decrease at Cable and a $17 million decrease at Media. Cable's results were negatively impacted by higher investment in customer care and incremental costs associated with Mountain Cable, while Media's results were negatively impacted by increased programming costs, higher merchandise costs at The Shopping Channel and ramp-up costs for Next Issue Canada. Additionally, Cable and Media results in 2013 benefitted from one-time adjustments associated with the CRTC's Part II licence fees.
   
• The reductions in adjusted net income and earnings per share are primarily the result of higher depreciation and amortization expenses, finance costs, and the adjusted operating profit impacts discussed above. Net income and diluted earnings per share were 13% and 16% lower, respectively, than the first quarter of 2013.

Enhanced our leading networks to monetize rapid data growth

• Secured "beachfront" spectrum consisting of two 12 MHz blocks of contiguous, paired lower 700 MHz band spectrum covering the vast majority of the Canadian population for $3.29 billion. This prime spectrum was the most sought after and is the spectrum Rogers went into the auction intending to win for its customers. Cash investment was in line with recent 700 MHz spectrum transactions in the US.
   
• Deployed newly acquired 700 MHz spectrum in communities in Vancouver, Calgary and Toronto to begin providing customers with the ultimate mobile experience on Rogers' LTE network while carrying wireless signals deep into basements, elevators and in buildings with thick concrete walls.
   
• Expanded data centre operations to 15 locations nationwide with Business Solutions opening Alberta's first Tier III certified data centre giving business customers reliable, secure data services.

Enriched the customer experience with premium products and sports content

• Launched Rogers Next, an early upgrade program for wireless devices, offering subscribers for a monthly fee the freedom to get a new premium device every year for $0 on select 2-year plans, with no early upgrade or connection fees.
   
• Launched easier international wireless travel packs that offer customers voice, text and data in one all-inclusive package. Also launched a data-only daily rate for international travellers who only want wireless internet access.
   
• Launched suretap™ wallet, a new application that lets customers use their smartphones to safely store eligible payment cards and make payments at tens of thousands of retailers across the country.
   
• Following blockbuster NHL rights deal, announced broadcast anchors for coverage across all hockey programming including Hockey Night in Canada with George Stroumboulopoulos, Daren Millard, Jeff Marek and the continuation of Don Cherry and Ron MacLean. This star team will deliver with more games and more choices to fans, including the NHL Playoffs and the Stanley Cup Final, "Hometown Hockey" every Sunday night, more than 500 regular season games across 13 networks, and expanded NHL content on all Rogers broadcast, wireless, digital and print channels.
   
• Announced 12-year extension of our Canadian Hockey League (CHL) partnership as the exclusive broadcaster of the CHL and Memorial Cup in Canada including television, online and mobile rights through the 2025-2026 seasons.
   
• Introduced MLB Network, a 24-hour network dedicated to baseball, to Canada for the first time on Rogers digital cable. In addition, Sportsnet signed 8-year multi-platform broadcast rights extension with MLB Properties and MLB Advanced Media to show live and in-progress games and highlights within Canada.
   
• Launched FXX, a younger-focused premium programming extension of FX Canada which will deliver original FX series, acquired movies and series, and original Canadian programs.

Maintained strong balance sheet and available liquidity

• Generated $356 million of consolidated quarterly free cash flow, while cash provided by operating activities was $408 million.
   
• Issued $2.1 billion of debt securities at historically low rates for Rogers, consisting of $250 million of three year floating rate senior notes, $400 million of five year 2.80% senior notes, $600 million of ten year 4.00% senior notes, and US$750 million (Cdn$832 million) of thirty year 5.00% senior notes.
   
• Repaid or repurchased US$750 million of 6.375% senior notes due in 2014 and US$350 million of 5.50% senior notes due in 2014.
   
• $4.4 billion of available liquidity at March 31, 2014 includes $2.2 billion cash on hand, $2.0 billion available under the bank credit facility and $0.2 billion available under the accounts receivable securitization program.

Returning cash to shareholders

• Increased dividend by 5% to $1.83 per share effective April 4, 2014, to be paid in quarterly amounts of $0.4575 per share.