Rogers Communications reports second quarter 2015 results
Delivered Revenue Growth of 6% and Increased Adjusted Operating Profit
Growth to 2%
Strengthened Postpaid Wireless and Internet Subscriber Metrics
Delivered a Number of Key Customer Experience Improvements and
Successfully Delivered Year One of Our National NHL Licensing Agreement
Completed Acquisitions of Shaw's AWS Spectrum Licences and 100%
Ownership of Mobilicity
TORONTO, July 23, 2015 /PRNewswire/ - Rogers Communications Inc., a leading
diversified Canadian communications and media company, today announced
its unaudited financial and operating results for the second quarter
ended June 30, 2015.
Consolidated Financial Highrelights
|
|
|
Three months ended June 30
|
(In millions of Canadian dollars, except per share amounts, unaudited)
|
2015
|
2014
|
|
|
|
Operating revenue
|
3,403
|
3,212
|
As adjusted 1:
|
|
|
|
Operating profit
|
1,337
|
1,313
|
|
Net income
|
412
|
432
|
|
Basic earnings per share
|
$ 0.80
|
$ 0.84
|
|
Diluted earnings per share
|
$ 0.80
|
$ 0.84
|
|
|
|
Net income
|
363
|
405
|
Basic earnings per share
|
$ 0.70
|
$ 0.79
|
Diluted earnings per share
|
$ 0.70
|
$ 0.76
|
|
|
|
Free cash flow 1
|
476
|
436
|
Cash provided by operating activities
|
1,114
|
1,202
|
1
|
Adjusted amounts and free cash flow are non-GAAP measures and should not
be considered as a
substitute or alternative for GAAP measures. These 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.
|
"We grew both the top and adjusted operating profit lines in the quarter
while showing improvement in our Wireless and Internet subscriber
metrics," said Guy Laurence, President and Chief Executive Officer of
Rogers Communications Inc. "In addition, we completed a series of
strategic transactions to further enhance our spectrum position,
delivered a successful first year of our exclusive national NHL rights
agreement, and continued to implement key customer experience
improvements. Our Rogers 3.0 plan continues to gain traction, our
financials are trending in the right direction, and we're entering the
back half of the year with key regulatory decisions behind us."
Key Financial Highlights
Higher operating revenue
-
Consolidated revenue increased 6% this quarter, reflecting revenue
growth of 6% in Wireless and 23% in Media, with stable revenue in Cable
and Business Solutions. Wireless revenue increased as a result of
greater smartphone sales, higher network revenue from the continued
growth in data use by our subscriber base, as well as the adoption of
higher ARPU and ARPA generating Rogers Share Everything plans. Cable
revenue was stable as continued Internet revenue growth was offset by
modest revenue declines in Television and Phone. Excluding the effect
of a CRTC decision earlier in the year mandating that
telecommunications providers could no longer require customers to
provide a minimum of 30 days' notice when canceling services, Cable
operating revenue would have increased by $4 million this quarter.
Media revenue increased as a result of the NHL licensing agreement
together with growth at Sportsnet, the Toronto Blue Jays, and Next
Issue Canada, partially offset by continued softness in conventional
broadcast TV and print advertising.
-
Activated approximately 682,000 wireless smartphones this quarter, of
which 33% were new subscribers, with higher-value smartphone customers
representing 83% of Wireless postpaid subscribers as at June 30, 2015.
Higher adjusted operating profit
-
The 2% increase in consolidated adjusted operating profit this quarter
reflected stable adjusted operating profit in Wireless and an increase
in Media of 67% ($36 million) partially offset by decreases in Cable of
2% and in Business Solutions of 4%. The increase in Wireless network
revenues was partially offset by higher net costs associated with the
increased volume of subsidized smartphones sold primarily as a result
of the industry-wide transition from three to two-year contracts in
early June 2015. Cable results were impacted by investments in
programming and customer value enhancements, as well as the CRTC
decision discussed above and losses associated with competitive
intensity. Media's results improved as a result of increased
advertising revenues from our NHL licensing agreement, together with
the revenue changes discussed above, and production cost savings in the
broadcast and print areas.
-
Consolidated adjusted operating profit margin decreased by 160 basis
points to 39.3% this quarter with margins of 49.3% in Wireless and
47.6% in Cable.
-
The 5% decrease in adjusted net income and 10% decrease in net income
were primarily a result of a 6% increase in depreciation and
amortization and a 7% increase in income taxes, partially offset by the
2% increase in consolidated adjusted operating profit.
Cash flow and available liquidity
-
Generated $476 million of consolidated free cash flow this quarter, an
increase of 9% from the same quarter last year, primarily as a result
of higher adjusted operating profit, lower cash income taxes paid, and
lower interest on borrowings, partially offset by higher additions to
property, plant and equipment. Cash provided by operating activities
was $1,114 million this quarter.
-
Maintained $1.9 billion of liquidity available under our bank credit
facilities as at June 30, 2015.
-
Returned $248 million of cash to shareholders through the payment of our
quarterly cash dividend, which the Rogers Board of Directors increased
by 5% to $0.48 per share in January 2015.
-
Increased the full year 2015 guidance range for free cash flow by $175
million from the range initially issued on January 29, 2015. This
upward adjustment to our free cash flow guidance primarily reflects the
value of tax loss carry forwards acquired as part of the Mobilicity
transaction that closed on July 2, 2015. We expect to utilize these
loss carry forwards in 2015.
Strategic Highlights
Overhaul the customer experience
-
Introduced a simplified customer bill for Rogers services, making it
easier for customers to understand their spending and addressing the
number one reason customers call Rogers with questions. The new format
makes usage details easier to understand, while creating a new layout
and interactive graphical features so customers can more easily see how
we calculated their bill. Our new bill is less complicated, is
available across multiple platforms, and is an important step in our
ongoing commitment to continuous improvement for our customers'
experiences.
-
Expanded Roam Like Home to over 35 European countries, further
simplifying how our Wireless consumers use the Internet, make calls,
and send texts and emails with their Rogers Share Everything plan when
traveling outside of Canada. Customers can access their identical
Canadian plan features while in Europe as well as in the US, all at a
reasonable and clear cost.
-
Expanded our online customer self-service offerings to make interacting
with Rogers even easier. This includes improved search and navigation
capabilities, accelerated response times, and the expansion of our
online Community Forums with a new look and feel. We have also improved
the 'MyRogers' customer self-serve portal to enhance usability and
optimize the site for mobile devices.
-
Increased the speed and responsiveness of our Rogers.com and Fido.ca
websites. In addition, we launched new, easier-to-navigate homepages
and mobile-friendly product landing and promotion pages to provide
customers with an improved digital experience.
-
Enhanced and simplified our customer-facing Integrated Voice Response
(IVR) system along with our technical support transfer process to
minimize the customers' time from when they dial Rogers to when they
talk to a live agent.
-
Closed the purchase of an investment of a 50% interest in Glentel Inc.,
previously Canada's largest independent wireless retail distribution
network with almost 360 Canadian retail outlets. Glentel will continue
to be run by an independent management team.
-
Launched our Retail Academy, a program to further enhance how we serve
and support our customers in our branded retail stores. In addition, we
started re-branding our footprint of national retail stores and
refreshing certain locations to a new design concept, which includes a
connected Home Zone lounge where customers can experience Rogers IGNITE
Internet bundles and Smart Home Monitoring.
Focus on innovation and network leadership
-
Announced the strategic acquisition of wireless provider Mobilicity and
completed the transaction to acquire Shaw Communication's AWS-1
spectrum licences. We added 20MHz of contiguous AWS-1 spectrum adjacent
to our existing 20MHz of AWS-1 holdings across all of British Columbia
and Alberta, and in July added 10MHz of contiguous AWS-1 spectrum
across Southern Ontario, the largest population centre in the country.
We also divested certain non-contiguous AWS-1 spectrum licences to WIND
Mobile Corp.
-
Augmented our already extensive 2500MHz spectrum holdings during the
recent 2500MHz spectrum auction. We successfully executed a tactical
fill-in and top-up strategy to acquire nearly our entire allowable
spectrum at an average cost of $0.10/MHz/pop, lower than other auction
participants. We now hold 40MHz of contiguous, paired 2500MHz spectrum
across nearly all of Canada, as well as an additional 20MHz of unpaired
2500MHz spectrum in many key population areas.
-
Announced broad industry support for Suretap, an innovative mobile
digital payment solution pioneered by Rogers. Canada's leading mobile
carriers have rallied behind the Rogers-developed solution to drive
adoption and provide banks and merchants with an easier, more
cost-effective way to deliver the value of mobile payments to their
customers.
-
Applauded the CRTC's partnership with SamKnows, a global leader in
Internet performance measurement, to launch an independent testing
program designed to give Canadians an objective assessment of their
Internet provider's performance. Rogers has been conducting independent
testing with SamKnows since 2013, proving each time that we
consistently delivered on advertised Internet speed and reliability.
-
First in Canada to launch Voice over LTE (VoLTE) technology, giving our
Wireless customers across the country access to higher-quality
high-definition voice and video calls, faster call setup and connection
times, and the ability to simultaneously place calls, browse the web,
and stream video at considerably greater LTE speeds.
-
Extended Rogers Smart Home Monitoring services to Calgary and Edmonton,
allowing residents to remotely connect to, protect, and manage their
homes using their mobile devices or laptops.
-
Introduced complimentary high-speed Wi-Fi service throughout the Rogers
Centre, our multi-purpose event venue and home to the Toronto Blue
Jays, in yet another example of Rogers' commitment to deliver the
best-connected experience to Canadians.
Deliver compelling content everywhere
-
Sportsnet was the #1 most-watched televised sports brand in Canada, as
verified by data collected by Numeris between May 2014 and May 2015.
Following a year of double-digit audience growth and record-setting
ratings, for the first time in its 17-year history, more Canadians
tuned in to Sportsnet channels than to the competition.
-
Successfully and profitably completed the first year of our exclusive
12-year national NHL licensing agreement while bringing the NHL to more
Canadians than ever before. We provided Canadians with new ways to
experience games, through NHL GameCentre Live and NHL GamePlus, and on
multiple platforms such as their computer, mobile phone, or tablet. We
announced Rogers Hometown Hockey will be returning for a second season
and will roll into 24 new Canadian communities during the 2015-2016 NHL
season with even more hockey festivities and entertainment.
-
Announced a five-year renewal agreement through 2020 as the title
sponsor for the Rogers Cup professional tennis tournament, with
Sportsnet garnering coverage rights for a comprehensive suite of
televised, online, mobile, and multimedia platforms. The Rogers Cup is
a renowned international professional tennis tournament and supports a
key pillar in our strategy of delivering world-class content and
experiences to Canadians.
-
Introduced Fido Pulse wireless plans, delivering more value by including
a 24-month subscription to Spotify Premium, one of the world's most
innovative music streaming services, and original exclusive DAILY VICE,
an edgy, ground-breaking news app.
-
Announced that availability of the popular shomi video streaming service
will be expanded throughout Canada later this summer. shomi offers
numerous exclusive series and expert-recommended collections, including
programming for kids and families, not offered on other services. shomi
is accessible on the platforms Canadians want in addition to their TVs,
including tablets, mobile, online, Xbox 360, Apple TV, and Chromecast.
-
Expanded Next Issue Canada (the North American digital magazine
newsstand) for French-speaking and bilingual Canadians by adding 20
Québec-based French magazines, including Châtelaine, L'actualité,
LOULOU, Sélection du Reader's Digest, and Ricardo, to the more than 150
Canadian and US English magazines already on offer.
Drive growth in the business market
-
Recognized, along with AT&T, Verizon, and Vodafone, as a world leader in
the machine-to-machine (M2M) retail space by prominent global market
research firm Research and Markets. Rogers is a Canadian leader in M2M
and this recognition affirms that our in-market solutions for business
are world class.
-
Expanded our third Toronto data centre, doubling our available floor
space capacity. This next-generation data centre is 'Uptime Certified
Tier III' for design and construction, providing customers with
best-in-class uptime guarantees for their mission-critical
applications.
-
Introduced Rogers Voice with Skype for Business, a cloud-based tool that
lets businesses experience the commercial version of Skype with
enhanced features and better communication with their teams, partners,
and customers.
Invest in and develop our people
-
Recognized again as a Top Employer for Young People by the editors of
Canada's Top 100 Employers in May 2015.
-
Named one of Canada's Greenest Employers for 2015 by the editors of
Canada's Top 100 Employers in April 2015, an award that recognizes
employers with innovative environmental programs and earth-friendly
policies that actively involve their employees.
-
Named one of the 50 Best Corporate Citizens in Canada by Corporate
Knights in June 2015, an award that recognizes employers that
incorporate social, economic, and ecological benefits and costs in
their normal course of business.
Be a strong Canadian growth company
-
Appointed Rick Brace as President, Media Business Unit effective August
10, 2015. Mr. Brace brings more than 35 years of operational experience
within the sports and media industries, including a number of senior
leadership positions. He will oversee Rogers' $1.8 billion annual Media
sales portfolio, including Sportsnet, sports investments including the
Toronto Blue Jays, the NHL, and MLSE, its broadcast business,
publishing brands, and The Shopping Channel.
About non-GAAP measures
This earnings release contains non-GAAP measures such as adjusted
operating profit, adjusted operating profit margin, adjusted net
income, free cash flow, adjusted net debt, adjusted net debt to
adjusted operating profit, and adjusted basic and diluted earnings per
share. These are non-GAAP measures and should not be considered as a
substitute or alternative for GAAP measures. These are not defined
terms under International Financial Reporting Standards (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.
This earnings release contains important information about our business
and our performance in the three and six months ended June 30, 2015, as
well as forward-looking information about future periods.
This earnings release should be read in conjunction with our Second
Quarter 2015 MD&A, our Second Quarter 2015 Interim Condensed
Consolidated Financial Statements and Notes, which have been prepared
in accordance with International Accounting Standard 34, Interim
Financial Reporting, as issued by the International Accounting
Standards Board (IASB), our 2014 Annual MD&A, our 2014 Audited
Consolidated Financial Statements and Notes thereto, which have been
prepared in accordance with IFRS as issued by the IASB, and our other
recent filings with Canadian and US securities regulatory authorities,
which are available on SEDAR at sedar.com or EDGAR at sec.gov, respectively.
For more information about Rogers, including product and service
offerings, competitive market and industry trends, and our overarching
strategy, see "Understanding Our Business", "Our Strategy", and
"Capability to Deliver Results" in our 2014 Annual MD&A. For our key
performance drivers and objectives, see "Key Performance Drivers and
Highlights" in our 2014 Annual MD&A and the section "Key Highlights" on
pages 2 to 5 of our Second Quarter 2015 earnings release for our second
quarter 2015 key achievements.
All dollar amounts are in Canadian dollars unless otherwise stated. All
percentage changes are calculated using the rounded numbers as they
appear in the tables. This earnings release is current as at July 22,
2015 and was approved by the Audit Committee of our Board of Directors
on that date. This earnings release includes forward-looking statements
and assumptions. See "About Forward-Looking Information" for more
information.
We, us, our, Rogers, Rogers Communications, and the Company refer to Rogers Communications Inc. and its subsidiaries. RCI refers to the legal entity Rogers Communications Inc., not including
its subsidiaries. RCI also holds interests in various investments and
ventures.
We are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and
RCI.B) and on the New York Stock Exchange (NYSE: RCI).
In this earnings release, this quarter refers to the three months ended June 30, 2015 and year to date refers to the six months ended June 30, 2015. All results commentary is
compared to the equivalent periods in 2014 or as at December 31, 2014,
as applicable, unless otherwise indicated.
Summary of Consolidated Financial Results
|
|
|
|
Three months ended June 30
|
Six months ended June 30
|
(In millions of dollars, except margins and per share amounts)
|
2015
|
2014
|
% Chg
|
2015
|
2014
|
% Chg
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
|
|
Wireless
|
1,903
|
1,800
|
6
|
3,697
|
3,527
|
5
|
|
Cable
|
869
|
872
|
-
|
1,739
|
1,732
|
-
|
|
Business Solutions
|
94
|
95
|
(1)
|
188
|
189
|
(1)
|
|
Media
|
582
|
475
|
23
|
1,046
|
842
|
24
|
|
Corporate items and intercompany eliminations
|
(45)
|
(30)
|
50
|
(92)
|
(58)
|
59
|
Operating revenue
|
3,403
|
3,212
|
6
|
6,578
|
6,232
|
6
|
|
|
|
|
|
|
|
Adjusted operating profit
|
|
|
|
|
|
|
|
Wireless
|
841
|
843
|
-
|
1,606
|
1,633
|
(2)
|
|
Cable
|
414
|
423
|
(2)
|
816
|
832
|
(2)
|
|
Business Solutions
|
27
|
28
|
(4)
|
55
|
56
|
(2)
|
|
Media
|
90
|
54
|
67
|
58
|
30
|
93
|
|
Corporate items and intercompany eliminations
|
(35)
|
(35)
|
-
|
(74)
|
(77)
|
(4)
|
Adjusted operating profit 1
|
1,337
|
1,313
|
2
|
2,461
|
2,474
|
(1)
|
|
|
|
|
|
|
|
Adjusted operating profit margin 1
|
39.3%
|
40.9%
|
(1.6 pts)
|
37.4%
|
39.7%
|
(2.3 pts)
|
|
|
|
|
|
|
|
Net income
|
363
|
405
|
(10)
|
618
|
712
|
(13)
|
Diluted earnings per share
|
$ 0.70
|
$ 0.76
|
(8)
|
$ 1.19
|
$ 1.33
|
(11)
|
|
|
|
|
|
|
|
Adjusted net income 1
|
412
|
432
|
(5)
|
687
|
772
|
(11)
|
Adjusted diluted earnings per share 1
|
$ 0.80
|
$ 0.84
|
(5)
|
$ 1.33
|
$ 1.49
|
(11)
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
621
|
576
|
8
|
1,096
|
1,064
|
3
|
Free cash flow 1
|
476
|
436
|
9
|
742
|
792
|
(6)
|
Cash provided by operating activities
|
1,114
|
1,202
|
(7)
|
1,341
|
1,610
|
(17)
|
1
|
Adjusted operating profit, adjusted operating profit margin, adjusted
net income, adjusted diluted earnings per share, and free cash flow are
non-GAAP measures and
should not be considered as a substitute or alternative for GAAP
measures. These 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.
|
Key Changes in Financial Results Compared to 2014
Operating revenue
Wireless network revenue increased this quarter and year to date as a
result of the continued adoption of higher ARPU and ARPA generating
Rogers Share Everything plans and the continued growth in usage of
wireless data, partially offset by a continued decline in roaming
revenue as a result of our newly-introduced roaming plans.
Cable operating revenue was stable this quarter and year to date as
Internet revenue growth and the impact and timing of pricing changes
across most product types were offset by TV and Phone subscriber losses
over the past year. The implementation of a Canadian Radio-television
and Telecommunications Commission (CRTC) decision, effective January
23, 2015, mandating that telecommunications providers could no longer
require customers to provide a minimum of 30 days' notice when
canceling services, caused a $7 million decrease in Cable revenue this
quarter. Excluding the effect of the CRTC decision, Cable operating
revenue would have increased by $4 million this quarter.
Business Solutions operating revenue was stable this quarter and year to
date as the continued growth in on-net next generation services,
including our data centre businesses, was offset by the continued
planned reduction in lower-margin, off-net legacy services revenue.
Media operating revenue increased this quarter and year to date
primarily as a result of revenue generated by our exclusive National
Hockey League (NHL) licensing agreement together with growth at
Sportsnet, the Toronto Blue Jays, and Next Issue Canada, partially
offset by continued softness in conventional broadcast TV and print
advertising.
Adjusted operating profit
Wireless adjusted operating profit was stable this quarter as the impact
of the network revenue growth described above and cost reductions was
offset by higher costs associated with the increased volume of
subsidized smartphones sold. Wireless adjusted operating profit
decreased modestly year to date as a result of the significantly higher
volume of subsidized smartphones sold during the first quarter as we
proactively early-upgraded existing customers prior to the final
expiration of three-year service contracts in early June 2015.
Cable adjusted operating profit decreased this quarter and year to date
as a result of investments in programming and customer value
enhancements and the revenue changes discussed above.
Business Solutions adjusted operating profit decreased marginally this
quarter and year to date as a result of the continued decline in
off-net legacy services, partially offset by the continued growth in
on-net and near-net next generation businesses and productivity
improvements.
Media adjusted operating profit increased this quarter and year to date
primarily as a result of the NHL licensing agreement, together with
growth in subscription revenue and greater programming and production
cost savings in the broadcast and print areas.
Results of our Business Segments
WIRELESS
Wireless Financial Results
|
|
|
Three months ended June 30
|
Six months ended June 30
|
(In millions of dollars, except margins)
|
2015
|
2014
|
% Chg
|
2015
|
2014
|
% Chg
|
Operating revenue
|
|
|
|
|
|
|
|
Network revenue
|
1,707
|
1,674
|
2
|
3,379
|
3,310
|
2
|
|
Equipment sales
|
196
|
126
|
56
|
318
|
217
|
47
|
Operating revenue
|
1,903
|
1,800
|
6
|
3,697
|
3,527
|
5
|
Operating expenses
|
|
|
|
|
|
|
|
Cost of equipment 1
|
(423)
|
(333)
|
27
|
(816)
|
(630)
|
30
|
|
Other operating expenses
|
(639)
|
(624)
|
2
|
(1,275)
|
(1,264)
|
1
|
|
(1,062)
|
(957)
|
11
|
(2,091)
|
(1,894)
|
10
|
Adjusted operating profit
|
841
|
843
|
-
|
1,606
|
1,633
|
(2)
|
Adjusted operating profit margin as a % of network revenue
|
49.3%
|
50.4%
|
(1.1 pts)
|
47.5%
|
49.3%
|
(1.8 pts)
|
Additions to property, plant and equipment
|
256
|
254
|
1
|
436
|
435
|
-
|
1
|
Includes the cost of equipment sales and direct channel subsidies.
|
|
Wireless Subscriber Results 1
|
|
|
|
Three months ended June 30
|
Six months ended June 30
|
(In thousands, except churn, ARPU, and ARPA)
|
2015
|
2014
|
Chg
|
2015
|
2014
|
Chg
|
Postpaid
|
|
|
|
|
|
|
|
Gross additions
|
313
|
312
|
1
|
590
|
605
|
(15)
|
|
Net additions (losses)
|
24
|
38
|
(14)
|
(2)
|
40
|
(42)
|
|
Total postpaid subscribers 2,3
|
8,163
|
8,114
|
49
|
8,163
|
8,114
|
49
|
|
Churn (monthly)
|
1.19%
|
1.13%
|
0.06 pts
|
1.22%
|
1.17%
|
0.05 pts
|
|
ARPU (monthly)
|
$ 67.24
|
$ 66.40
|
$ 0.84
|
$ 66.73
|
$ 65.79
|
$ 0.94
|
|
ARPA (monthly)
|
$ 110.14
|
$ 105.55
|
$ 4.59
|
$ 108.79
|
$ 104.32
|
$ 4.47
|
Prepaid
|
|
|
|
|
|
|
|
Gross additions
|
154
|
128
|
26
|
280
|
204
|
76
|
|
Net additions (losses)
|
8
|
(31)
|
39
|
(29)
|
(104)
|
75
|
|
Total prepaid subscribers 3
|
1,348
|
1,325
|
23
|
1,348
|
1,325
|
23
|
|
Churn (monthly)
|
3.63%
|
3.92%
|
(0.29 pts)
|
3.81%
|
3.73%
|
0.08 pts
|
Blended ARPU
|
$ 60.01
|
$ 59.18
|
$ 0.83
|
$ 59.38
|
$ 58.39
|
$ 0.99
|
1
|
Subscriber counts, subscriber churn, ARPU, and ARPA are key performance
indicators. See "Key Performance Indicators".
|
2
|
Effective January 1, 2015 and on a prospective basis, our Wireless
postpaid subscriber results included Wireless Home Phone subscribers
resulting in a base adjustment of
approximately 92,000 cumulative subscribers. Excluding the impact of the
Wireless Home Phone subscribers, postpaid ARPU would have increased by
3% or $1.73 this
quarter and 3% or $1.67 year to date. Blended ARPU would have increased
by 3% or $1.52 this quarter and 3% or $1.54 year to date.
|
3
|
As at end of period.
|
Network revenue
The 2% increase in network revenue this quarter and year to date was a
result of:
-
continued adoption of the customer-friendly Rogers Share Everything
plans, which generate higher ARPU and ARPA, bundle in certain calling
features and long distance, grant the ability to pool data usage with
other devices on the same account, and entice customers with access to
our other products, such as Roam Like Home and Rogers NHL GameCentre
LIVE; partially offset by
-
a 14% decrease in roaming revenue this quarter and a 16% decrease in
roaming revenue year to date as a result of roaming plans, including
the introduction of Roam Like Home in both the US and Europe, which
simplify the customer experience, provide greater customer value, and
are increasing roaming usage.
Excluding roaming revenue, Wireless:
-
network revenue would have increased by 3% this quarter and 4% year to
date;
-
postpaid ARPU would have increased by 3% this quarter and year to date;
and
-
ARPA would have increased by 6% this quarter and year to date.
The 1% increase in postpaid ARPU this quarter and year to date was a
result of increased network revenue and wireless data usage. The 4%
increase in postpaid ARPA this quarter and year to date was a result of
the continued adoption of Rogers Share Everything plans relative to the
number of subscriber accounts as customers are increasingly utilizing
the advantages of accessing their shareable plans with multiple devices
on the same account.
The modest increase in postpaid subscriber churn and lower net additions
to our postpaid subscriber base this quarter and year to date compared
to the prior year were expected in the short-term as a result of:
-
our strategic focus on optimizing subscriber value;
-
a focus on migrating existing customers to current pricing plans;
-
adjustments to the required rate plans for subsidized premium device
eligibility; and
-
the impact of the industry's "double cohort".
The "double cohort" refers to the greater-than-usual number of
subscriber contracts that ended as both three-year and two-year
contracts expired near the same time. The final expiration of remaining
three-year contracts for consumers occurred in early June 2015.
We activated and upgraded approximately 682,000 smartphones for new and
existing subscribers this quarter, a 16% increase compared to
approximately 588,000 in the same period last year. This increase in
smartphone activations was primarily a result of a greater number of
hardware upgrades by existing subscribers and drove much of the 11%
increase in retention spending discussed below.
The percentage of subscribers with smartphones was 83% of our total
postpaid subscriber base as at June 30, 2015. In our experience,
smartphone subscribers typically:
-
generate significantly higher ARPU; and
-
are less likely to churn than customers on less-advanced devices.
Equipment sales
The 56% increase in revenue from equipment sales this quarter and 47%
increase year to date were a result of:
-
increased device upgrades by existing subscribers;
-
a shift in the sales mix to smartphones, which included a higher
proportion of iPhone devices;
-
changes in equipment sales prices; and
-
the impact of the industry's "double cohort".
Operating expenses
The 27% increase in the cost of equipment sales this quarter and 30%
increase year to date were a result of:
-
a shift in the product mix of device sales towards higher-cost
smartphones; and
-
increased equipment sales volumes surrounding the industry's "double
cohort", resulting in 14% more upgrades this quarter and 16% more
upgrades year to date, compared to the same periods in the prior year.
The majority of the upgrades were higher-cost smartphones including 19%
more iPhones this quarter and 32% more iPhones year to date, compared
to the same periods in the prior year.
There was more upgrade activity in the first quarter relative to the
second quarter this year as we took initiative to early-upgrade more
subscribers in the first quarter, prior to the expiration of their
service contracts. This resulted in a sequentially smaller increase in
the cost of equipment sales in the second quarter of 2015 compared to
the first quarter of 2015.
Total customer retention spending (primarily consisting of subsidies on
handset upgrades) was 11% higher this quarter and 23% higher year to
date with more existing subscribers upgrading their hardware this
quarter combined with the shift in product mix as described above. The
lower sequential change in customer retention spending this quarter
compared to the first quarter of 2015 was primarily a result of a lower
average subsidy cost per upgrade.
Other operating expenses (excluding retention spending) increased this
quarter and year to date as a result of higher service and roaming
costs, partially offset by improvements in cost management and
efficiency gains.
Adjusted operating profit
The stable adjusted operating profit this quarter and 2% decrease year
to date were a result of the revenue and expense changes discussed
above.
Other Wireless developments
Investment in Glentel
In May 2015, we completed our purchase of 50% of the common shares of
Glentel Inc. (Glentel) from BCE Inc. (BCE) for cash consideration of
$473 million. The investment is now jointly owned with BCE. Glentel is
a large, multicarrier mobile phone retailer with several hundred
Canadian wireless retail distribution outlets, as well as operations in
the US and Australia. Our investment in Glentel is accounted for as a
joint venture using the equity method.
Acquisition of Mobilicity
On July 2, 2015, we completed the acquisition of 100% of the outstanding
common shares of Data & Audio-Visual Enterprises Wireless Inc.
(Mobilicity) for cash consideration of approximately $440 million,
subject to customary closing adjustments. Assets acquired include tax
losses valued at approximately $175 million. Mobilicity provides
wireless telecommunication services to Canadians in Toronto, Ottawa,
Calgary, Edmonton, and Vancouver, has approximately 150,000
subscribers, and owns AWS-1 spectrum licences across Canada.
Subsequent to the acquisition of Mobilicity, Rogers and Wind Mobile
Corp. (WIND) undertook an AWS-1 spectrum licence asset exchange in
Southern Ontario to create an additional 10MHz of contiguous, paired
AWS-1 spectrum for Rogers. In addition, Rogers transferred certain
non-contiguous AWS-1 spectrum licences to WIND in British Columbia,
Alberta, and various regions in Ontario for nominal cash proceeds.
Spectrum Licence Acquisitions
In April 2015, we participated in the 2500 MHz spectrum licence auction
in Canada. We were awarded 41 spectrum licences consisting of 20 MHz
blocks of contiguous, paired spectrum in Canada's major geographic
markets. We recognized the spectrum licences as intangible assets of
$27 million, which includes $3 million of directly attributable costs.
We now hold approximately 40MHz of contiguous 2500MHz spectrum across
Canada, as well as an additional 20MHz of unpaired 2500MHz spectrum in
many key population areas.
In June 2015, we obtained AWS-1 spectrum licences in British Columbia
and Alberta from Shaw Communications Inc. (Shaw) after exercising a
previously acquired option and paying the final $100 million
installment. We recognized the spectrum licences as intangible assets
of $351 million, which includes $1 million of directly attributable
costs. The spectrum licenses will provide us with an additional 20MHz
of contiguous spectrum in British Columbia and Alberta. Subsequent to
exercising the option, certain non-contiguous spectrum licences
acquired from Shaw were transferred to WIND for nominal cash proceeds.
CABLE
Cable Financial Results
|
|
|
|
Three months ended June 30
|
Six months ended June 30
|
(In millions of dollars, except margins)
|
2015 1
|
2014
|
% Chg
|
2015 1
|
2014
|
% Chg
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
|
|
Internet
|
327
|
312
|
5
|
651
|
617
|
6
|
|
Television
|
425
|
437
|
(3)
|
851
|
868
|
(2)
|
|
Phone
|
115
|
121
|
(5)
|
233
|
242
|
(4)
|
|
Service revenue
|
867
|
870
|
-
|
1,735
|
1,727
|
-
|
|
Equipment sales
|
2
|
2
|
-
|
4
|
5
|
(20)
|
Operating revenue
|
869
|
872
|
-
|
1,739
|
1,732
|
-
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
Cost of equipment
|
(1)
|
(1)
|
-
|
(2)
|
(3)
|
(33)
|
|
Other operating expenses
|
(454)
|
(448)
|
1
|
(921)
|
(897)
|
3
|
|
(455)
|
(449)
|
1
|
(923)
|
(900)
|
3
|
Adjusted operating profit
|
414
|
423
|
(2)
|
816
|
832
|
(2)
|
|
|
|
|
|
|
|
Adjusted operating profit margin
|
47.6%
|
48.5%
|
(0.9 pts)
|
46.9%
|
48.0%
|
(1.1 pts)
|
Additions to property, plant and equipment
|
254
|
239
|
6
|
478
|
490
|
(2)
|
1
|
The operating results of Source Cable Ltd. (Source Cable) are included
in the Cable results of operations from the date of acquisition on
November 4, 2014.
|
|
|
Cable Subscriber Results 1
|
|
|
|
Three months ended June 30
|
Six months ended June 30
|
(In thousands)
|
2015
|
2014
|
Chg
|
2015
|
2014
|
Chg
|
|
|
|
|
|
|
|
Internet
|
|
|
|
|
|
|
|
Net additions (losses)
|
4
|
2
|
2
|
(3)
|
22
|
(25)
|
|
Total Internet subscribers 2,3
|
2,008
|
1,983
|
25
|
2,008
|
1,983
|
25
|
Television
|
|
|
|
|
|
|
Net losses
|
(32)
|
(33)
|
1
|
(73)
|
(53)
|
(20)
|
|
Total television subscribers 2,3
|
1,951
|
2,074
|
(123)
|
1,951
|
2,074
|
(123)
|
Phone
|
|
|
|
|
|
|
|
Net (losses) additions
|
(11)
|
1
|
(12)
|
(31)
|
11
|
(42)
|
|
Total phone subscribers 2,3
|
1,119
|
1,164
|
(45)
|
1,119
|
1,164
|
(45)
|
|
|
|
|
|
|
|
Cable homes passed 2,3
|
4,106
|
4,004
|
102
|
4,106
|
4,004
|
102
|
Total service units 4
|
|
|
|
|
|
|
|
Net losses
|
(39)
|
(30)
|
(9)
|
(107)
|
(20)
|
(87)
|
|
Total service units 2,3
|
5,078
|
5,221
|
(143)
|
5,078
|
5,221
|
(143)
|
1
|
Subscriber counts are key performance indicators. See "Key Performance
Indicators".
|
2
|
On November 4, 2014, we acquired approximately 16,000 Internet
subscribers, 16,000 Television subscribers and 11,000 Phone subscribers
from our acquisition
of Source Cable. The acquisition also increased homes passed by 26,000.
|
3
|
As at end of period.
|
4
|
Includes Internet, Television, and Phone subscribers.
|
Operating revenue
Cable revenue was stable this quarter and year to date primarily as a
result of:
-
the movement of Internet customers to higher speed and usage tiers,
combined with a higher subscriber base for our Internet products; and
-
the impact and timing of pricing changes implemented over the past year;
offset by
-
Television and Phone subscriber losses over the past year; and
-
the effect of a recent CRTC service cancellation notification policy
change.
The implementation of a CRTC decision mandating that, effective January
23, 2015, telecommunications providers could no longer require
customers to provide a minimum of 30 days' notice when canceling
services contributed a $7 million decrease in Cable revenue this
quarter and a $10 million decrease year to date. Excluding the effect
of the CRTC decision, Cable operating revenue would have increased by
$4 million this quarter and $17 million year to date compared to the
same periods in the prior year.
Internet revenue
The 5% increase in Internet revenue this quarter and 6% increase year to
date were a result of:
-
general movement of customers to higher speed and usage tiers;
-
a larger Internet subscriber base;
-
the impact and timing of changes in Internet service pricing; and
-
the launch of our new IGNITE broadband Internet-based bundled offerings
that provide subscribers with better choice on usage and incorporate
value-added content; partially offset by
-
declines in Internet overage revenues as portions of the subscriber base
move to higher-value unlimited usage plans.
Television revenue
The 3% decrease in Television revenue this quarter and 2% decrease year
to date were a result of:
-
the decline in Television subscribers over the past year primarily
associated with heightened pay TV competition; partially offset by
-
the impact and timing of pricing changes implemented over the past year;
and
-
higher pay-per-view revenue.
The digital cable subscriber base represented 90% of our total
Television subscriber base as at June 30, 2015, compared to 86% in the
same period last year. We expect to complete our ongoing
analog-to-digital network transition by early 2016.
Phone revenue
The 5% decrease in Phone revenue this quarter and 4% decrease year to
date were a result of:
-
a decreased subscriber base; and
-
increased promotional bundling pricing activity; partially offset by
-
the impact and timing of pricing changes implemented over the past year.
Operating expenses
The 1% increase in operating expenses this quarter and 3% increase year
to date were a result of:
-
higher investments in programming and customer value enhancements;
partially offset by
-
various cost efficiency and productivity initiatives.
Adjusted operating profit
The 2% decrease in adjusted operating profit this quarter and year to
date was a result of the revenue and expense changes discussed above.
BUSINESS SOLUTIONS
Business Solutions Financial Results
|
|
|
|
Three months ended June 30
|
Six months ended June 30
|
(In millions of dollars, except margins)
|
2015
|
2014
|
% Chg
|
2015
|
2014
|
% Chg
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
|
|
Next generation
|
73
|
67
|
9
|
143
|
131
|
9
|
|
Legacy
|
20
|
27
|
(26)
|
43
|
56
|
(23)
|
|
Service revenue
|
93
|
94
|
(1)
|
186
|
187
|
(1)
|
|
Equipment sales
|
1
|
1
|
-
|
2
|
2
|
-
|
Operating revenue
|
94
|
95
|
(1)
|
188
|
189
|
(1)
|
|
|
|
|
|
|
|
Operating expenses
|
(67)
|
(67)
|
-
|
(133)
|
(133)
|
-
|
Adjusted operating profit
|
27
|
28
|
(4)
|
55
|
56
|
(2)
|
|
|
|
|
|
|
|
Adjusted operating profit margin
|
28.7%
|
29.5%
|
(0.8 pts)
|
29.3%
|
29.6%
|
(0.3 pts)
|
Additions to property, plant and equipment
|
48
|
39
|
23
|
81
|
65
|
25
|
Operating revenue
The 1% decrease in service revenue this quarter and year to date was a
result of:
-
the continuing decline in the legacy off-net voice and data business, a
trend we expect to continue as we focus the business on on-net and
near-net opportunities and customers move to more advanced and
cost-effective IP-based services and solutions; partially offset by
-
continuing execution of our plan to grow higher-margin on-net and
near-net next generation IP-based services revenue; and
-
higher revenue from data centre operations, which is a component of our
next generation IP-based services revenue.
Next generation services, which include our data centre operations,
represented 78% (2014 - 71%) of total service revenue in the quarter
and 77% (2014 - 70%) of total service revenue year to date.
Operating expenses
The stable results this quarter and year to date in operating expenses
were a result of:
-
lower legacy service costs related to planned lower usage volumes and
customer levels; and
-
ongoing initiatives to reduce costs and increase productivity; offset by
-
higher on-net next generation service costs associated with higher
volumes.
Adjusted operating profit
The 4% decrease in adjusted operating profit this quarter and 2%
decrease year to date were a result of the revenue and expense changes
discussed above.
MEDIA
Media Financial Results
|
|
|
|
Three months ended June 30
|
Six months ended June 30
|
(In millions of dollars, except margins)
|
2015
|
2014
|
% Chg
|
2015
|
2014
|
% Chg
|
|
|
|
|
|
|
|
Operating revenue
|
582
|
475
|
23
|
1,046
|
842
|
24
|
|
|
|
|
|
|
|
Operating expenses
|
(492)
|
(421)
|
17
|
(988)
|
(812)
|
22
|
Adjusted operating profit
|
90
|
54
|
67
|
58
|
30
|
93
|
|
|
|
|
|
|
|
Adjusted operating profit margin
|
15.5%
|
11.4%
|
4.1 pts
|
5.5%
|
3.6%
|
1.9 pts
|
Additions to property, plant and equipment
|
11
|
29
|
(62)
|
20
|
43
|
(53)
|
Operating revenue
The 23% increase in operating revenue this quarter and 24% increase year
to date were a result of:
-
revenue generated by our national NHL licensing agreement that became
effective for the 2014-2015 season, which included playoff games this
quarter that commanded a premium in advertising revenue;
-
higher subscription revenue generated by our Sportsnet properties; and
-
higher Toronto Blue Jays and Next Issue Canada revenue; partially offset
by
-
continued softness in conventional broadcast TV and print advertising.
Operating expenses
The 17% increase in operating expenses this quarter and 22% increase
year to date were a result of:
-
higher programming and production costs as a result of the increased
number of NHL hockey games associated with the national and regional
NHL licensing agreements, though a seasonally smaller portion of NHL
games are played and broadcast in the second versus the first quarter;
partially offset by
-
lower conventional broadcast TV programming costs;
-
lower publishing costs; and
-
operating efficiencies across various Media divisions.
Adjusted operating profit
The 67% increase in adjusted operating profit this quarter and 93%
increase year to date reflect the revenue and expense changes described
above. Media adjusted operating profit increased this quarter in line
with our expectations primarily as a result of the NHL playoff season
impact, which saw seasonally higher advertising revenue per game
without a corresponding increase in the programming costs per game,
combined with the revenue and expense changes discussed above.
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
Three months ended June 30
|
Six months ended June 30
|
(In millions of dollars, except capital intensity)
|
2015
|
2014
|
% Chg
|
2015
|
2014
|
% Chg
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
|
|
|
|
|
Wireless
|
256
|
254
|
1
|
436
|
435
|
-
|
|
Cable
|
254
|
239
|
6
|
478
|
490
|
(2)
|
|
Business Solutions
|
48
|
39
|
23
|
81
|
65
|
25
|
|
Media
|
11
|
29
|
(62)
|
20
|
43
|
(53)
|
|
Corporate
|
52
|
15
|
n/m
|
81
|
31
|
161
|
Total additions to property, plant and equipment 2
|
621
|
576
|
8
|
1,096
|
1,064
|
3
|
|
|
|
|
|
|
|
Capital intensity 1
|
18.2%
|
17.9%
|
0.3 pts
|
16.7%
|
17.1%
|
(0.4 pts)
|
1 Capital intensity is a key performance indicator. See "Key Performance
Indicators".
|
2 Additions to property, plant and equipment do not include expenditures
on spectrum licences.
|
n/m - not meaningful
|
Wireless
The increase in additions to property, plant and equipment in Wireless
this quarter and year to date was a result of LTE network investments
and site build activity to further enhance network coverage and
quality, and the continued deployment of our 700 MHz spectrum.
Deployment of the LTE network has reached approximately 88% of Canada's
population as at June 30, 2015.
Cable
The increase in additions to property, plant and equipment in Cable this
quarter was a result of greater investment in network and information
technology infrastructure, partially offset by lower purchases of our
next generation NextBox digital set-top boxes compared to the same
quarter last year. The decrease in additions to property, plant and
equipment in Cable year to date is affected by lower purchases of our
digital set-top boxes over the first half of the year compared to the
same period last year.
We also made investments this quarter to improve the capacity of our
Internet platform, further improve the reliability and quality of the
network, and continue the development of our next generation IP-based
video service.
Business Solutions
The increase in additions to property, plant and equipment in Business
Solutions this quarter and year to date was a result of data centre
investments and network expansion to reach additional customers and
sites.
Media
The decrease in additions to property, plant and equipment in Media this
quarter and year to date was a result of greater prior year investments
made to our digital, IT infrastructure, and broadcast facilities.
Corporate
The increase in additions to property, plant and equipment in Corporate
this quarter and year to date was a result of higher spending on
premise improvements at our various offices.
Capital Intensity
Capital intensity increased this quarter and decreased year to date as a
result of changes in additions to property, plant and equipment as
described above, as well as the increases in revenue described
previously in this earnings release.
Financial Guidance
We are increasing the guidance for full year 2015 consolidated free cash
flow1 from the original range as provided on January 29, 2015 of $1,350
million to $1,500 million by an additional $175 million to $1,525
million to $1,675 million. This upward adjustment to our free cash flow
guidance is primarily reflective of the value of tax loss carry
forwards acquired as part of the Mobilicity transaction that we expect
to fully utilize during 2015. There are no changes at this time to the
consolidated guidance ranges for adjusted operating profit or additions
to property, plant and equipment, which were both also provided on
January 29, 2015. See "About Forward-Looking Information" in this
earnings release and in our 2014 Annual MD&A.
1 Free cash flow is a non-GAAP measure and should not be considered a
substitute or alternative for GAAP measures. It is not a defined term
under IFRS and does not have a standard meaning, so may not be a
reliable way to compare us to other companies. See "Non-GAAP Measures"
for information about this measure, including how we calculate it.
Key Performance Indicators
We measure the success of our strategy using a number of key performance
indicators that are defined and discussed in our 2014 Annual MD&A and
this earnings release. We believe these key performance indicators
allow us to appropriately measure our performance against our operating
strategy as well as against the results of our peers and competitors.
The following key performance indicators are not measurements in
accordance with IFRS and should not be considered as an alternative to
net income or any other measure of performance under IFRS. They
include:
-
Subscriber counts;
-
Subscriber churn;
-
Average revenue per user (ARPU);
-
Average revenue per account (ARPA); and
-
Capital intensity.
Average revenue per account - Wireless
Average revenue per account (ARPA) helps us identify trends and measure
our success in attracting and retaining multiple-device accounts. A
single Wireless postpaid account typically provides subscribers with
the advantage of allowing for the pooling of plan attributes across
multiple devices and on a single bill. Each Wireless postpaid account
is represented by an identifiable billing account number. A single
Wireless postpaid account may include more than one identifiable
telephone number and receive monthly Wireless services for a variety of
connected devices including smartphones, basic phones, tablets, and
other devices. Wireless postpaid accounts under our various brand names
are considered separate accounts. We calculate Wireless ARPA by
dividing total Wireless postpaid network revenue (monthly) by the
average number of Wireless postpaid accounts for the same time period.
Non-GAAP Measures
We use the following non-GAAP measures. These are reviewed regularly by
management and our Board of Directors in assessing our performance and
making decisions regarding the ongoing operations of our business and
its ability to generate cash flows. Some or all of these measures may
also be used by investors, lending institutions, and credit rating
agencies as an indicator of our operating performance, our ability to
incur and service debt, and as a measurement to value companies in the
telecommunications sector. These are not recognized measures under GAAP
and do not have standard meanings under IFRS, so they may not be a
reliable way to compare us to other companies.
Non-GAAP
measure
|
Why we use it
|
How we calculate it
|
Most comparable
IFRS financial
measure
|
Adjusted operating profit and related
margin
|
-
To evaluate the performance of our businesses and when making decisions
about the ongoing operations of the business and our ability to
generate cash flows.
-
We believe that certain investors and analysts use adjusted operating
profit to measure our ability to service debt and to meet other payment
obligations.
-
We also use it as one component in determining short-term incentive
compensation for all management employees.
|
Adjusted operating profit:
Net income
add back (deduct)
income taxes, other expense (income), finance costs, depreciation and
amortization, impairment of assets, stock-based compensation, and
restructuring, acquisition and other.
Adjusted operating profit margin:
Adjusted operating profit
divided by
Operating revenue (network revenue for Wireless).
|
Net income
|
Adjusted net income
Adjusted basic and diluted earnings per share
|
-
To assess the performance of our businesses before the effects of these
items, because they affect the comparability of our financial results
and could potentially distort the analysis of trends in business
performance. Excluding these items does not imply they are
non-recurring.
|
Net income
add back (deduct)
stock-based compensation, restructuring, acquisition and other,
impairment of assets, gains on sale of investments, losses on repayment
of long-term debt, and income tax adjustments on these items, including
adjustments as a result of legislative changes.
|
Net income
Basic and diluted earnings per share
|
Free cash flow
|
-
To show how much cash we have available to repay debt and reinvest in
our company, which is an important indicator of our financial strength
and performance.
-
We believe that some investors and analysts use free cash flow to value
a business and its underlying assets.
|
Adjusted operating profit
minus
additions to property, plant and equipment, interest on borrowings net
of capitalized interest, and cash income taxes.
|
Cash provided by
operating activities
|
Adjusted net debt
|
-
To conduct valuation-related analysis and make decisions about capital
structure.
-
We believe this helps investors and analysts analyze our enterprise and
equity value and assess our leverage.
|
Total long-term debt
plus
current portion of long-term debt, deferred transaction costs and
discounts, net debt derivative assets or liabilities, bank advances,
and short-term borrowings
minus
cash and cash equivalents.
|
Long-term debt
|
Adjusted net debt
to adjusted
operating profit
|
-
To conduct valuation-related analysis and make decisions about capital
structure.
-
We believe this helps investors and analysts analyze our enterprise and
equity value and assess our leverage.
|
Adjusted net debt (defined above)
divided by
12 months trailing adjusted operating profit (defined above).
|
Long-term debt
divided by net
income
|
Reconciliation of adjusted operating profit
|
|
|
|
Three months ended June 30
|
Six months ended June 30
|
(In millions of dollars)
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Net income
|
363
|
405
|
618
|
712
|
Add (deduct):
|
|
|
|
|
|
Income taxes
|
148
|
138
|
230
|
244
|
|
Other expense (income)
|
26
|
9
|
23
|
(1)
|
|
Finance costs
|
182
|
188
|
392
|
413
|
|
Restructuring, acquisition and other
|
42
|
30
|
51
|
39
|
|
Depreciation and amortization
|
562
|
532
|
1,121
|
1,051
|
|
Stock-based compensation
|
14
|
11
|
26
|
16
|
|
|
|
|
|
Adjusted operating profit
|
1,337
|
1,313
|
2,461
|
2,474
|
|
|
|
|
|
Reconciliation of adjusted net income
|
|
|
|
Three months ended June 30
|
Six months ended June 30
|
(In millions of dollars)
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Net income
|
363
|
405
|
618
|
712
|
Add (deduct):
|
|
|
|
|
|
Stock-based compensation
|
14
|
11
|
26
|
16
|
|
Restructuring, acquisition and other
|
42
|
30
|
51
|
39
|
|
Loss on repayment of long-term debt
|
-
|
-
|
7
|
29
|
Income tax impact of above items
|
(13)
|
(14)
|
(21)
|
(24)
|
Income tax adjustment, legislative tax change
|
6
|
-
|
6
|
-
|
|
|
|
|
|
Adjusted net income
|
412
|
432
|
687
|
772
|
|
|
|
|
|
Reconciliation of adjusted earnings per share
|
|
|
(In millions of dollars, except per share amounts;
|
Three months ended June 30
|
Six months ended June 30
|
number of shares outstanding in millions)
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Adjusted basic earnings per share:
|
|
|
|
|
|
Adjusted net income
|
412
|
432
|
687
|
772
|
|
Divided by: Weighted average number of shares outstanding
|
515
|
515
|
515
|
515
|
Adjusted basic earnings per share
|
0.80
|
0.84
|
1.33
|
1.50
|
|
|
|
|
|
Adjusted diluted earnings per share:
|
|
|
|
|
|
Adjusted net income
|
412
|
432
|
687
|
772
|
|
Divided by: Diluted weighted average number of shares outstanding
|
516
|
517
|
517
|
517
|
Adjusted diluted earnings per share
|
0.80
|
0.84
|
1.33
|
1.49
|
|
|
|
|
|
Reconciliation of free cash flow
|
|
|
|
Three months ended June 30
|
Six months ended June 30
|
(In millions of dollars)
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Cash provided by operating activities
|
1,114
|
1,202
|
1,341
|
1,610
|
Add (deduct):
|
|
|
|
|
|
Additions to property, plant and equipment
|
(621)
|
(576)
|
(1,096)
|
(1,064)
|
|
Interest on borrowings, net of capitalized interest
|
(179)
|
(189)
|
(367)
|
(372)
|
|
Restructuring, acquisition and other
|
42
|
30
|
51
|
39
|
|
Interest paid
|
141
|
151
|
404
|
387
|
|
Change in non-cash working capital
|
44
|
(144)
|
394
|
165
|
|
Other adjustments
|
(65)
|
(38)
|
15
|
27
|
|
|
|
|
|
Free cash flow
|
476
|
436
|
742
|
792
|
|
|
|
|
|
Reconciliation of adjusted net debt and adjusted net debt / adjusted
operating profit
|
|
|
|
As at
June 30
|
As at
December 31
|
(In millions of dollars)
|
2015
|
2014
|
|
|
|
Current portion of long-term debt
|
1,000
|
963
|
Long-term debt
|
14,889
|
13,824
|
Deferred transaction costs and discounts
|
106
|
108
|
|
15,995
|
14,895
|
Add (deduct):
|
|
|
|
Net debt derivative assets
|
(1,115)
|
(846)
|
|
Short-term borrowings
|
1,017
|
842
|
|
Cash and cash equivalents
|
(7)
|
(176)
|
|
|
|
Adjusted net debt
|
15,890
|
14,715
|
|
|
|
|
As at
June 30
|
As at
December 31
|
(In millions of dollars, except ratios)
|
2015
|
2014
|
|
|
|
Adjusted net debt / adjusted operating profit
|
|
|
|
Adjusted net debt
|
15,890
|
14,715
|
|
Divided by: trailing 12 month adjusted operating profit
|
5,006
|
5,019
|
Adjusted net debt / adjusted operating profit
|
3.2
|
2.9
|
Rogers Communications Inc.
|
|
|
Interim Condensed Consolidated Statements of Income
|
|
|
(In millions of Canadian dollars, except per share amounts, unaudited)
|
|
|
|
Three months ended June 30
|
Six months ended June 30
|
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Operating revenue
|
3,403
|
3,212
|
6,578
|
6,232
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
Operating costs
|
2,080
|
1,910
|
4,143
|
3,774
|
|
Depreciation and amortization
|
562
|
532
|
1,121
|
1,051
|
|
Restructuring, acquisition and other
|
42
|
30
|
51
|
39
|
Finance costs
|
182
|
188
|
392
|
413
|
Other expense (income)
|
26
|
9
|
23
|
(1)
|
|
|
|
|
|
Income before income taxes
|
511
|
543
|
848
|
956
|
Income taxes
|
148
|
138
|
230
|
244
|
|
|
|
|
|
Net income for the period
|
363
|
405
|
618
|
712
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
Basic
|
$ 0.70
|
$ 0.79
|
$ 1.20
|
$ 1.38
|
|
Diluted
|
$ 0.70
|
$ 0.76
|
$ 1.19
|
$ 1.33
|
|
|
|
|
|
|
Rogers Communications Inc.
|
Interim Condensed Consolidated Statements of Financial Position
|
(In millions of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
As at
June 30
|
As at
December 31
|
|
|
|
2015
|
2014
|
|
|
|
|
|
Assets
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
7
|
176
|
|
Accounts receivable
|
|
|
1,562
|
1,591
|
|
Inventories
|
|
|
283
|
251
|
|
Other current assets
|
|
|
265
|
191
|
|
Current portion of derivative instruments
|
|
|
118
|
136
|
Total current assets
|
|
|
2,235
|
2,345
|
|
|
|
|
|
Property, plant and equipment
|
|
|
10,709
|
10,655
|
Intangible assets
|
|
|
6,843
|
6,588
|
Investments
|
|
|
2,395
|
1,898
|
Derivative instruments
|
|
|
1,106
|
788
|
Other long-term assets
|
|
|
207
|
356
|
Deferred tax assets
|
|
|
9
|
9
|
Goodwill
|
|
|
3,882
|
3,883
|
|
|
|
|
|
Total assets
|
|
|
27,386
|
26,522
|
|
|
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Short-term borrowings
|
|
|
1,017
|
842
|
|
Accounts payable and accrued liabilities
|
|
|
2,153
|
2,578
|
|
Income tax payable
|
|
|
54
|
47
|
|
Current portion of provisions
|
|
|
4
|
7
|
|
Unearned revenue
|
|
|
426
|
443
|
|
Current portion of long-term debt
|
|
|
1,000
|
963
|
|
Current portion of derivative instruments
|
|
|
47
|
40
|
Total current liabilities
|
|
|
4,701
|
4,920
|
|
|
|
|
|
Provisions
|
|
|
52
|
55
|
Long-term debt
|
|
|
14,889
|
13,824
|
Derivative instruments
|
|
|
35
|
11
|
Other long-term liabilities
|
|
|
497
|
462
|
Deferred tax liabilities
|
|
|
1,744
|
1,769
|
Total liabilities
|
|
|
21,918
|
21,041
|
|
|
|
|
|
Shareholders' equity
|
|
|
5,468
|
5,481
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
|
27,386
|
26,522
|
Rogers Communications Inc.
|
|
|
Interim Condensed Consolidated Statements of Cash Flows
|
|
|
(In millions of Canadian dollars, unaudited)
|
|
|
|
Three months ended June 30
|
Six months ended June 30
|
|
2015
|
2014
|
2015
|
2014
|
Operating activities:
|
|
|
|
|
|
Net income for the period
|
363
|
405
|
618
|
712
|
|
Adjustments to reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
562
|
532
|
1,121
|
1,051
|
|
|
Program rights amortization
|
21
|
16
|
43
|
32
|
|
|
Finance costs
|
182
|
188
|
392
|
413
|
|
|
Income taxes
|
148
|
138
|
230
|
244
|
|
|
Stock-based compensation
|
14
|
11
|
26
|
16
|
|
|
Post-employment benefits contributions, net of expense
|
24
|
18
|
(71)
|
(67)
|
|
|
Other
|
46
|
13
|
36
|
7
|
|
1,360
|
1,321
|
2,395
|
2,408
|
|
Change in non-cash operating working capital items
|
(44)
|
144
|
(394)
|
(165)
|
|
1,316
|
1,465
|
2,001
|
2,243
|
|
Income taxes paid
|
(61)
|
(112)
|
(256)
|
(246)
|
|
Interest paid
|
(141)
|
(151)
|
(404)
|
(387)
|
|
|
|
|
|
Cash provided by operating activities
|
1,114
|
1,202
|
1,341
|
1,610
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
Additions to property, plant and equipment
|
(621)
|
(576)
|
(1,096)
|
(1,064)
|
|
Changes in non-cash working capital related to property, plant and
equipment
|
(46)
|
(72)
|
(138)
|
(89)
|
|
Additions to program rights
|
(6)
|
(15)
|
(18)
|
(22)
|
|
Acquisitions and other strategic transactions, net of cash acquired
|
(601)
|
(2,643)
|
(601)
|
(3,301)
|
|
Other
|
(22)
|
12
|
(34)
|
9
|
|
|
|
|
|
Cash used in investing activities
|
(1,296)
|
(3,294)
|
(1,887)
|
(4,467)
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
Proceeds received on short-term borrowings
|
38
|
196
|
246
|
196
|
|
Repayment of short-term borrowings
|
(56)
|
(38)
|
(71)
|
(38)
|
|
Issuance of long-term debt
|
1,792
|
500
|
3,450
|
2,582
|
|
Repayment of long-term debt
|
(1,310)
|
(500)
|
(2,919)
|
(1,721)
|
|
Proceeds on settlement of cross-currency interest rate exchange
agreements and forward contracts
|
-
|
-
|
1,059
|
2,150
|
|
Payments on settlement of cross-currency interest rate exchange
agreements and forward contracts
|
-
|
-
|
(905)
|
(2,115)
|
|
Transaction costs incurred
|
-
|
(3)
|
-
|
(30)
|
|
Dividends paid
|
(248)
|
(235)
|
(483)
|
(459)
|
|
|
|
|
|
Cash provided by (used in) financing activities
|
216
|
(80)
|
377
|
565
|
|
|
|
|
|
Change in cash and cash equivalents
|
34
|
(2,172)
|
(169)
|
(2,292)
|
(Bank advances) cash and cash equivalents, beginning of period
|
(27)
|
2,181
|
176
|
2,301
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
7
|
9
|
7
|
9
|
About Forward-Looking Information
This earnings release includes "forward-looking information" within the
meaning of applicable securities laws, and assumptions about, among
other things, our business, operations, and financial performance and
condition approved by our management on the date of this earnings
release. This forward-looking information and these assumptions
include, but are not limited to, statements about our objectives and
strategies to achieve those objectives, and about our beliefs, plans,
expectations, anticipations, estimates, or intentions.
Forward-looking information and statements
-
typically include words like could, expect, may, anticipate, assume,
believe, intend, estimate, plan, project, guidance, outlook, and
similar expressions, although not all forward-looking information and
statements include them;
-
include conclusions, forecasts, and projections that are based on our
current objectives and strategies and on estimates, expectations,
assumptions, and other factors, most of which are confidential and
proprietary and that we believe to be reasonable at the time they were
applied but may prove to be incorrect; and
-
were approved by our management on the date of this earnings release.
Our forward-looking information and statements include forecasts and
projections related to the following items, among others:
-
revenue
-
adjusted operating profit
-
additions to property, plant and equipment
-
cash income tax payments
-
free cash flow
-
dividend payments
-
expected growth in subscribers and the services to which they subscribe
-
the cost of acquiring subscribers and deployment of new services
-
continued cost reductions and efficiency improvements
-
the growth of new products and services
-
all other statements that are not historical facts.
We base our conclusions, forecasts, and projections on the following
factors, among others:
-
general economic and industry growth rates
-
currency exchange rates and interest rates
-
product pricing levels and competitive intensity
-
subscriber growth
-
pricing, usage and churn rates
-
changes in government regulation
-
technology deployment
-
availability of devices
-
timing of new product launches
-
content and equipment costs
-
the integration of acquisitions
-
industry structure and stability.
Except as otherwise indicated, this earnings release and our
forward-looking statements do not reflect the potential impact of any
non-recurring or other special items or of any dispositions,
monetizations, mergers, acquisitions, other business combinations, or
other transactions that may be considered, announced or may occur after
the date the statement containing the forward-looking information is
made.
Risks and uncertainties
Actual events and results can be substantially different from what is
expressed or implied by forward-looking information as a result of
risks, uncertainties, and other factors, many of which are beyond our
control, including but not limited to:
-
new interpretations and new accounting standards from accounting
standards bodies
-
regulatory changes
-
technological change
-
economic conditions
-
unanticipated changes in content or equipment costs
-
changing conditions in the entertainment, information, and
communications industries
-
the integration of acquisitions
-
litigation and tax matters
-
the level of competitive intensity
-
the emergence of new opportunities.
These factors can also affect our objectives, strategies, and
intentions. Many of these factors are beyond our control or our current
expectations or knowledge. Should one or more of these risks,
uncertainties, or other factors materialize, our objectives,
strategies, or intentions change, or any other factors or assumptions
underlying the forward-looking information prove incorrect, our actual
results and our plans could vary significantly from what we currently
foresee.
Accordingly, we warn investors to exercise caution when considering
statements containing forward-looking information and caution them that
it would be unreasonable to rely on such statements as creating legal
rights regarding our future results or plans. We are under no
obligation (and we expressly disclaim any such obligation) to update or
alter any statements containing forward-looking information or the
factors or assumptions underlying them, whether as a result of new
information, future events, or otherwise, except as required by law.
All of the forward-looking information in this earnings release is
qualified by the cautionary statements herein.
Before making an investment decision
Before making any investment decisions and for a detailed discussion of
the risks, uncertainties, and environment associated with our business,
fully review the sections of our Second Quarter 2015 MD&A entitled
"Updates to Risks and Uncertainties" and "Regulatory Developments" and
fully review the sections in our 2014 Annual MD&A entitled "Regulation
in Our Industry" and "Governance and Risk Management", as well as our
various other filings with Canadian and US securities regulators, which
can be found at sedar.com and sec.gov, respectively.
About Rogers
Rogers Communications is a leading diversified public Canadian
communications and media company. We are Canada's largest provider of
wireless communications services and one of Canada's leading providers
of cable television, high-speed Internet and telephony services to
consumers and businesses. Through Rogers Media, we are engaged in radio
and television broadcasting, televised shopping, magazines and trade
publications, sports entertainment, and digital media. Our stock is
publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B)
and on the New York Stock Exchange (NYSE: RCI). For further information
about the Rogers group of companies, please visit rogers.com.
Information on or connected to our website is not part of or
incorporated into this earnings release.
Quarterly Investment Community Teleconference
The second quarter 2015 results teleconference with the investment
community will be held on:
-
July 23, 2015
-
7:30 a.m. Eastern Time
-
webcast available at rogers.com/webcast
-
Media are welcome to participate on a listen-only basis
A rebroadcast will be available at rogers.com/investors on the Events and Presentations page for at least two weeks following
the teleconference. Additionally, investors should note that from time
to time, Rogers' management presents at brokerage-sponsored investor
conferences. Most often, but not always, these conferences are webcast
by the hosting brokerage firm, and when they are webcast, links are
made available on Rogers' website at rogers.com/events and are placed there generally at least two days before the conference.
For More Information
You can find additional information relating to us on our website (rogers.com/investors), on SEDAR (sedar.com), on EDGAR (sec.gov), or by e-mailing your request to [email protected]. Information on or connected to these and other websites referenced in
this earnings release is not part of, or incorporated into, this
earnings release.
You can also go to rogers.com/investors for information about our governance practices, corporate social
responsibility reporting, a glossary of communications and media
industry terms, and additional information about our business.
SOURCE Rogers Communications Inc.
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