Rogers Communications reports third quarter 2015 results

Rogers Communications Inc., a leading diversified Canadian communications and media company, announced its unaudited financial and operating results for the third quarter ended September 30, 2015.

Consolidated Financial Highlights

"It was a busy and productive quarter. We delivered solid financial and operating metrics again this quarter whilst delivering a number of new and exciting services to our customers," said Guy Laurence, President and Chief Executive Officer, Rogers Communications. "We also announced a significant enhancement to our residential proposition by introducing a 1-gigabit Internet service. It's clear the 'need for speed' is already becoming evident as the majority of new customers are moving to 100Mbps+ speeds. This, combined with our commitment to becoming the world's largest broadcaster of 4K sports content next year, sets us up well for the future. We also made steady progress on the customer experience and introduced the first in a series of leapfrog technologies to our business customers. To top it all, the Toronto Blue Jays made it to the American League Championship Series. It's been amazing to see the city and the country rally behind Canada's baseball team."

Key Financial Highlights

Higher operating revenue
Consolidated revenue increased 4% this quarter reflecting revenue growth of 5% in Wireless, 1% in Cable, and 8% in Media. Wireless revenue increased on greater smartphone sales and higher network revenue from the continued adoption of higher ARPA-generating Rogers Share Everything plans. Cable revenue increased due to continued Internet revenue growth and Media revenue increased primarily as a result of growth at Sportsnet and the Toronto Blue Jays.

Higher adjusted operating profit
The 3% increase in consolidated adjusted operating profit this quarter largely reflects the flow-through of the revenue growth discussed above, as well as cost efficiency improvements throughout the business. Wireless adjusted operating profit declined 1% primarily due to higher acquisition and retention costs.

Free cash flow growth improving financial flexibility
In the third quarter, we continued to generate strong operating cash flow and free cash flow at $1,456 million and $660 million, respectively. Our solid financial results enable us to continue to make investments in our network and still return substantial capital to shareholders. We paid $247 million in dividends this quarter, which represents a 5% increase from the same quarter last year.

Outlook
The company reiterates its 2015 outlook 1 as follows:

Strategic Update

Our Rogers 3.0 plan is a multi-year plan intended to:

• re-accelerate revenue growth in a sustainable way
• continue the company's track record of translating revenue into strong margins and free cash flow, a solid return on assets, and ultimately increasing returns to shareholders

Since the launch of 3.0, we have completed a company-wide reorganization that included removing three layers of management and a restructuring to ensure an enhanced customer focus. We remain committed to executing the pillars of 3.0:

• Be a Strong Canadian Growth Company
• Overhaul the Customer Experience
• Deliver Compelling Content Everywhere
• Focus on Innovation and Network Leadership
• Drive Growth in the Business Market
• Invest In and Develop Our People
• Go to Market as One Rogers

Our disciplined, steady execution during the quarter delivered the following against our 3.0 plan:

• solid growth in revenue and adjusted operating profit at 4% and 3%, respectively
• strong operating cash flow and free cash flow of $1,456 million and $660 million, respectively
• flat churn in our wireless business despite a seasonally competitive quarter and the "double cohort", as customer experience investments and value-added propositions gain traction
• Wireless net postpaid subscriber additions of 77,000 – over four times greater than the prior year quarter
• ARPA up 4% and blended ARPU up 3% excluding Mobilicity, roaming, and Wireless Home Phone
• higher-value smartphone activations of 737,000 devices, up 20%
• Internet net subscriber additions up 50% on strong adoption of IGNITE Internet offerings

Introduced Rogers IGNITE Gigabit Internet; expected to cover Rogers' entire cable footprint by the end of 2016
Today over 3.4 million homes in Ontario can get Rogers' Internet speeds up to five times faster than the competition. In October 2015, we announced plans to deliver 1-gigabit speeds to our entire cable footprint of over four million homes by the end of 2016. We can offer 1-gigabit services in 2016 using available spectrum capacity on our fibre-coaxial network at an incremental capital cost of less than $50 per home. As demand grows over time, we will need to augment capacity, but our ongoing investments will continue to be success-based. Our capital efficiency advantage will position us to earn attractive returns on investment for our shareholders.

Launched 4K TV and 4K set-top box; will broadcast over 100 live sporting events in 4K, including every 2016 Toronto Blue Jays home game and over 20 marquee NHL games
Rogers will deliver the next big innovation in home entertainment with the launch of 4K-ready gigabit Internet speeds, a new 4K set-top box, Rogers 4K TV, and the world's largest commitment to live sports broadcasting in 4K. These initiatives will allow our customers to enjoy four times the amount of pixels in standard HDTV for higher resolution and improved motion video. This launch highlights the unique mix of Rogers' assets:

• the delivery of 4K content requiring considerably more bandwidth, and allowing us to leverage our fibre-coaxial network advantage; and
• Rogers' sports content portfolio, which differentiates Sportsnet from its competitor.

Beginning in 2016, Rogers' customers will be able to access over 500 hours of live sports, movies, and shows, in addition to an ever-growing catalogue of original series, in 4K through a partnership with Netflix.

Compelling value propositions to attract higher lifetime value subscribers
We continued to introduce value-for-money offerings with leading content that increases the use of mobile devices and monetizes increasing data usage. We remain disciplined in how we attract value-accretive customers. During the quarter, we:

• expanded Roam Like Home from 35 to 75 countries with the addition of Mexico, the Caribbean, and South and Central America, further simplifying how our Wireless consumers use the Internet, make calls, and send texts and emails with their Share Everything plans; now representing over 2.1 million Roam Like Home customers;
• broadened the popular shomi video streaming service to be available to all Canadians coast to coast; and
• enhanced our Share Everything Plans by launching Share Everything+, allowing customers to choose from one of three content experiences: Texture by Next Issue, shomi, or Spotify Premium. This builds upon existing value offerings of Roam Like Home and Rogers NHL GameCentre LIVE, growing our Share Everything subscribers to 33% of our current postpaid base.

Launched LTE Extended Coverage so that Rogers offers unsurpassed LTE coverage nationally
Since January, the Rogers LTE network has grown over 3 times larger across Canada. We activated AWS-1 spectrum, just one month after acquiring it, increasing LTE network capacity and the speed millions of customers can experience in key population centres in BC and Alberta. Rogers continues to roll out our prime "lower block" 700 MHz LTE spectrum, which provides better in-building penetration and rural LTE coverage. Our 700 MHz spectrum coverage now stands at 71% of Canada's population.