Rogers Communications Reports First Quarter 2016 Results

• Rogers 3.0 plan delivers solid financial and operating metrics for the first quarter 2016
  • Continued operating revenue growth of 2% driven by growth of 5% in Wireless
  • Wireless postpaid net additions of 14,000, an improvement of 40,000 year on year
  • Improved Wireless postpaid churn for the second quarter in a row; a 7 basis point improvement year on year
  • ARPA up 4% with strong growth in Share Everything plan adoption; now 38% of our postpaid base
  • Cable Internet net additions of 16,000, an improvement of 23,000 year on year; continued double digit Internet operating revenue growth, up 11%
• Delivering on the "need for speed"; on track to roll out 1 Gig speeds to our entire footprint by the end of 2016, well ahead of our competitors
• Customer complaints down 65% for the Rogers brand as most recently reported by the Commissioner for Complaints for Telecommunications Services (CCTS); the biggest improvement amongst our key competitors

TORONTO, April 18, 2016 /CNW/ - Rogers Communications Inc., a leading diversified Canadian communications and media company, today announced its unaudited financial and operating results for the first quarter ended March 31, 2016.

"We posted our best first-quarter Wireless postpaid churn in over five years thanks to the quality of our networks, the value of our offerings, and our improvements to the customer experience," said Guy Laurence, President and Chief Executive Officer. "Overall, we delivered another quarter of revenue growth, along with continued improvements in key subscriber metrics, despite an intensely competitive quarter. With momentum in Wireless, continued growth in Internet, and a clear path forward for our TV and media businesses, we're well positioned to achieve our 2016 financial guidance."

Key Financial Highlights

Higher operating revenueConsolidated revenue increased 2% this quarter, reflecting revenue growth of 5% in Wireless and 2% in Business Solutions, and decreases of 2% in Cable and 3% in Media. Wireless revenue increased as a result of higher network revenue from a higher subscriber base and the continued adoption of higher-postpaid-ARPA-generating Rogers Share Everything plans and increased device revenue. Cable revenue decreased due to the continued decline in Television and Phone revenue, partially offset by continued Internet revenue growth. Media revenue decreased primarily due to continued softness in conventional broadcast television, radio, and print advertising, partially offset by growth in sports-related revenue.

Lower adjusted operating profitLower consolidated adjusted operating profit this quarter largely reflects an increase in Media adjusted operating loss, as our traditional media businesses are facing pressures from the changing advertising landscape. We announced some job cuts this quarter affecting conventional TV, radio, publishing, and some back-office positions in order to help address these pressures.

Lower net income and adjusted net incomeAdjusted net income decreased this quarter primarily as a result of higher depreciation and amortization and lower adjusted operating profit, partially offset by lower income taxes. Net income this quarter was also impacted by higher restructuring costs.

Substantial free cash flow affords financial flexibilityIn the first quarter, we continued to generate substantial cash flow from operating activities and free cash flow of $598 million and $220 million, respectively. Lower free cash flow relates to the timing of network investments and cash tax payments. We are on track to deliver on our guidance targets for additions to property, plant and equipment and free cash flow for 2016.

Our solid financial results enabled us to continue to make investments in our network and still return substantial capital to shareholders. We paid $247 million in dividends this quarter.

Rogers 3.0

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

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

There are a number of opportunities we expect will help drive improved performance, including:

• further improving the customer experience;
• maintaining leadership and momentum in Wireless;
• strengthening our Cable offerings; and
• driving growth in the business market.

Improving the Customer ExperienceRogers again showed the biggest improvement amongst our key competitors in reducing the number of customer complaints, as reported by the CCTS in its 2015-16 mid-year report for the six-month period ended January 31, 2016. Complaints pertaining to the Rogers brand dropped dramatically by 65% and customer complaints overall decreased 54%.

Roaming-related complaints from Rogers customers to the CCTS are expected to decrease by 90% this year from the 2012-13 results. Rogers changed how customers roam by introducing Roam Like Home in late 2014, a service that lets them use their monthly plan to access the Internet, make calls, and send texts and emails when they travel, just as they would at home.

We believe our improvements to the customer experience are a key driver in lowering Wireless postpaid churn. This quarter, we reported postpaid churn of 1.17%, a year on year improvement of 7 basis points and our lowest churn in the past seven quarters, as well as our best first quarter result since 2010. Despite heightened competitive activity, and the impact of the "double cohort", we have posted two consecutive quarters of improved churn.

Maintaining Leadership and Momentum in WirelessOur compelling value propositions and content, improving customer experience, and best-in-class network have continued to attract and retain higher-value customers. We reported 14,000 Wireless net postpaid additions this quarter, an improvement of 40,000 year on year. Against a backdrop of continued competitive intensity, we spent more this quarter to get the high-value customers we want to help drive further improvements in churn and lifetime value.

We continue to expect lower overall additions to property, plant and equipment in 2016 following our acquisitions and deployment of premium spectrum in 2015. We also expect improvements from leveraging better supplier pricing, in part due to our unique strategic partnership with Vodafone Group Plc in Canada.

Strengthening Our Cable OfferingsIGNITE InternetOur Cable product mix continues to shift to higher margin Internet services. We expect to deliver gigabit Internet speeds to our entire cable footprint of over four million homes by the end of 2016 at an incremental in-year capital cost of less than $50 per home. We will increase capacity as the demand for speed grows with further annual success-based capital investments, positioning us well to earn attractive returns on investment for our shareholders.

Television offeringsWe believe consumer interest in 4K TV will continue to grow. By the end of 2016, we expect to deliver over 500 hours of 4K content, including over 100 live sporting events. We also continued to deliver upgrades on our legacy TV user interface this quarter, launched two new Sportsnet 4K companion channels, delivered the inaugural 4K broadcast of a Major League Baseball game with the Toronto Blue Jays home opener, and expect to launch an Internet Protocol Television (IPTV) product by the end of the year.

Driving Growth in the Business MarketWe believe Rogers is currently under-indexed in this growing market. This quarter, we introduced Internet of Things as a Service. Our managed service will help customers take advantage of this transformative technology while keeping their focus on running their business. We will continue to roll out a series of "leapfrog" technologies, such as this one, to customers in the months ahead. It will take time to educate and penetrate the market on these new offerings, but we look forward to the contribution from this longer-term growth opportunity.

About non-GAAP measuresThis 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 / 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" in this earnings release for information about these measures, including how we calculate them.

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

Our first quarter 2016 results teleconference with the investment community will be held on:

• April 18, 2016
• 4:30 p.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 more information relating to us on our website (rogers.com/investors), on SEDAR (sedar.com), and on EDGAR (sec.gov), or you can e-mail us at [email protected]. Information on or connected to these and any 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.

This earnings release contains important information about our business and our performance for the three months ended March 31, 2016, as well as forward-looking information about future periods.

This earnings release should be read in conjunction with our First Quarter 2016 MD&A; our First Quarter 2016 Interim Condensed Consolidated Financial Statements and notes thereto, which have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB); our 2015 Annual MD&A; our 2015 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 2015 Annual MD&A. For our key performance drivers and objectives, see "Key Performance Drivers and Strategic Highlights" in our 2015 Annual MD&A and "Key Financial Highlights" and "Rogers 3.0" on pages 2 to 4 of our First Quarter 2016 earnings release.

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 April 18, 2016 and was approved by the Audit and Risk Committee of our Board of Directors (the Board) 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 March 31, 2016. All results commentary is compared to the equivalent periods in 2015 or as at December 31, 2015, as applicable, unless otherwise indicated.

Key Changes in Financial Results Compared to 2015

Operating revenueWireless network revenue increased this quarter as a result of a higher subscriber base and the continued adoption of higher-postpaid-ARPA-generating Rogers Share Everything plans.

Cable operating revenue decreased this quarter due to TV and Phone subscriber losses over the past year, partially offset by Internet subscriber growth, movement of Internet subscribers to higher speed and usage tiers, and the impact of pricing changes across most product types.

Business Solutions operating revenue increased this quarter as the growth in on-net next generation services, including our data centre businesses more than offset the continued planned reduction in lower-margin, off-net legacy revenue.

Media operating revenue decreased this quarter primarily as a result of lower advertising revenue in conventional broadcast television, publishing, and radio, partially offset by growth of sports-related revenue.

Adjusted operating profitWireless adjusted operating profit was stable this quarter as the network revenue growth described above was offset by higher costs associated with increased volumes of subsidized smartphones.

Cable adjusted operating profit decreased this quarter as a result of lower operating revenue as described above, partially offset by various cost efficiency and productivity initiatives.

Business Solutions adjusted operating profit increased this quarter as a result of higher operating revenue and lower service costs.

Media adjusted operating loss increased this quarter primarily as a result of lower revenue as described above.

Results of our Reporting Segments

WIRELESS

Network revenueThe 4% increase in network revenue this quarter was a result of:

• a larger postpaid and prepaid subscriber base, partly as a result of the acquisition of Mobilicity prepaid subscribers in the third quarter of 2015; and
• the continued adoption of customer-friendly Rogers Share Everything plans, which generate higher postpaid ARPA, bundle in various calling features and long distance, provide the ability to pool data usage across multiple devices, and grant access to our other offerings, such as Roam Like Home, Rogers NHL GameCentre LIVE, Spotify, shomi, and Texture by Next Issue.

The 4% increase in postpaid ARPA this quarter was a result of the continued adoption of Rogers Share Everything plans relative to the number of subscriber accounts as customers have increasingly utilized the advantages of premium offerings and access their shareable plans with multiple devices on the same account.

The marginal decrease in blended ARPU this quarter was a result of:

• the impact of expanding our lower-blended-ARPU-generating prepaid subscriber base relative to our total subscriber base as a result of our acquisition of Mobilicity and the general increase in prepaid net additions over the past year; partially offset by
• increased network revenue as discussed above.

Excluding the impact of the addition of Mobilicity, blended ARPU would have increased by 1% this quarter.

We believe the increases in gross and net additions to our subscriber base this quarter, as well as the lower churn, were results of our strategic focus on enhancing the customer experience by providing higher-value offerings, such as our new Share Everything plans, and improving our customer service.

Equipment salesThe 28% increase in revenue from equipment sales this quarter was a result of:

• a greater number of device purchases, primarily as a result of our higher gross additions; and
• increases in equipment sales prices; partially offset by
• a 2% decrease in device upgrades by existing subscribers.

Operating expensesThe 17% increase in the cost of equipment this quarter was a result of:

• a shift in the product mix of device sales and upgrades towards higher-cost smartphones; and
• increased equipment sales volumes primarily from our higher gross additions; partially offset by
• the decrease in device upgrades by existing subscribers, discussed above.

The 5% increase in other operating expenses this quarter was a result of:

• higher service costs;
• higher incremental costs as a result of our acquisition of Mobilicity; and
• higher advertising costs; partially offset by
• lower commissions resulting from improvements in our sales channels.

Adjusted operating profitThe stable adjusted operating profit this quarter was a result of the revenue and expenses changes discussed above.

CABLE

Operating revenueThe 2% decrease in operating revenue this quarter was primarily a result of:

• Television and Phone subscriber losses over the past year; partially offset by
• the movement of Internet subscribers to higher speed and usage tiers;
• a higher subscriber base for our Internet products; and
• the impact of pricing changes implemented over the past year. 

Internet revenueThe 11% increase in Internet revenue this quarter was a result of:

• general movement of customers to higher speed and usage tiers of our IGNITE broadband Internet offerings;
• a larger Internet subscriber base; and
• the impact of changes in Internet service pricing; partially offset by
• a decline in additional usage-based revenue as portions of the subscriber base move to the higher-value, unlimited usage plans.

Television revenueThe 7% decrease in Television revenue this quarter was a result of:

• the decline in Television subscribers over the past year primarily associated with the changing television consumption environment; and
• more promotional pricing provided to subscribers; partially offset by
• the impact of Television service pricing changes implemented over the past year.

Phone revenueThe 16% decrease in Phone revenue this quarter was a result of:

• the impact of pricing packages, primarily related to IGNITE multi-product bundles; and
• a smaller subscriber base.

Operating expensesThe 1% decrease in operating expenses this quarter was a result of:

• relative shifts in product mix to higher-margin Internet from conventional Television broadcasting; and
• various cost efficiency and productivity initiatives; partially offset by
• increased advertising, which was partly related to our launch of 4K TV.

Adjusted operating profitThe 2% decrease in adjusted operating profit this quarter was a result of the revenue and expense changes discussed above.

BUSINESS SOLUTIONS

Operating revenueThe 2% increase in service revenue this quarter was a result of:

• the continued execution of our plan to grow higher-margin, next generation on-net and near-net IP-based services revenue; partially offset by.
• the continued decline in our legacy and off-net voice business, a trend we expect to continue as we focus the business on next generation on-net and near-net opportunities and customers move to more advanced and cost-effective IP-based services and solutions.

Next generation services, which include our data centre operations, represented 79% (2015 - 75%) of total service revenue in the quarter.

Operating expensesThe 2% decrease in operating expenses this quarter was a result of lower service costs.

Adjusted operating profitThe 11% increase in adjusted operating profit this quarter was a result of the revenue and expense changes discussed above.

MEDIA

Operating revenueThe 3% decrease in operating revenue this quarter was a result of:

• lower advertising revenues across publishing, radio, and broadcast TV; partially offset by
• higher sports-related revenue.

Operating expensesThe stable operating expenses this quarter were a result of:

• higher sports-related costs; offset by
• lower conventional broadcast TV programming costs;
• lower publishing costs; and
• the commencement of cost savings resulting from previously announced job cuts.

Adjusted operating lossThe 53% increase in adjusted operating loss this quarter was a result of the revenue and expense changes described above.

ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT

WirelessThe marginal increase in additions to property, plant and equipment in Wireless this quarter was a result of higher network-related costs to increase the quality and capacity of our network. The deployment of our 700 MHz LTE network has reached 83% of Canada's population as at March 31, 2016 (December 31, 2015 - 78%). The 700 MHz LTE network offers improved signal quality in basements, elevators, and buildings with thick concrete walls. Our deployment of our overall LTE network has reached approximately 93% of Canada's population as at March 31, 2016.

CableThe increase in additions to property, plant and equipment in Cable this quarter was a result of greater network investment in infrastructure to further improve the reliability and quality of our network and to improve the capacity of our Internet platform to deliver gigabit Internet speeds across our Cable footprint by the end of the year. We also continued our investment in the development of our next-generation IP-based video service and digital television guides. This was partially offset by lower customer premise equipment expenditures.

Business SolutionsThe increase in additions to property, plant and equipment in Business Solutions this quarter was a result of continued investments in data centres, network expansion to reach additional customers and sites, and the development of new IP-based products.

MediaThe increase in additions to property, plant and equipment in Media this quarter reflects greater current year investments made to our digital platforms and broadcast facilities.

CorporateThe increase in additions to property, plant and equipment in Corporate this quarter was a result of higher spending on premise improvements at our various offices as well as higher information technology costs.

Capital IntensityCapital intensity increased this quarter as a result of higher additions to property, plant and equipment due to the timing of investments in our network as described above relative to the increase in operating revenue described previously.

Financial Guidance

There are no changes at this time to the consolidated guidance ranges for operating revenue, adjusted operating profit, free cash flow, or additions to property, plant and equipment, which were provided on January 27, 2016. See "About Forward-Looking Information" in this earnings release and in our 2015 Annual MD&A. Adjusted operating profit and free cash flow are non-GAAP measures and should not be considered 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.

Key Performance Indicators

We measure the success of our strategy using a number of key performance indicators that are defined and discussed in our 2015 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;
• Postpaid average revenue per account (ARPA);
• Blended average revenue per user (ARPU); and
• Capital intensity.

Non-GAAP Measures

We use the following non-GAAP measures. These are reviewed regularly by management and our Board 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 indicators of our operating performance, of our ability to incur and service debt, and as measurements to value companies in the telecommunications sector. These are not recognized measures under GAAP and do not have standard meanings under IFRS, so may not be a reliable way to compare us to other companies.

Rogers Communications Inc.Interim Condensed Consolidated Statements of Income(In millions of Canadian dollars, except per share amounts, unaudited)

Rogers Communications Inc.Interim Condensed Consolidated Statements of Financial Position(In millions of Canadian dollars, unaudited)

Rogers Communications Inc.Interim Condensed Consolidated Statements of Cash Flows(In millions of Canadian dollars, unaudited)

About Forward-Looking Information

This earnings release includes "forward-looking information" and "forward-looking statements" within the meaning of applicable securities laws (collectively, "forward-looking information"), 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

• typically includes words like could, expect, may, anticipate, assume, believe, intend, estimate, plan, project, guidance, outlook, and similar expressions, although not all forward-looking information includes them;
• includes 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 have been reasonable at the time they were applied but may prove to be incorrect; and
• was approved by our management on the date of this earnings release.

Our forward-looking information includes forecasts and projections related to the following items, among others:

• operating revenue;
• adjusted operating profit;
• additions to property, plant and equipment;
• cash income tax payments;
• free cash flow;
• dividend payments;
• the growth of new products and services;
• 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; and
• 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; and
• industry structure and stability.

Except as otherwise indicated, this earnings release and our forward-looking information 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 uncertaintiesActual 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:

• 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; and
• new interpretations and new accounting standards from accounting standards bodies.

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 decisionBefore 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 First Quarter 2016 MD&A entitled "Updates to Risks and Uncertainties" and "Regulatory Developments" and fully review the sections in our 2015 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.

SOURCE Rogers Communications Canada Inc. - English