ROGERS COMMUNICATIONS INC.
-- Rogers 3.0 plan delivers solid financial and operating metrics
for the fourth quarter
o Continued revenue growth of 3% driven by growth of 4% in Wireless,
our largest segment representing approximately 60% of total revenue
and adjusted operating profit
o Wireless adjusted operating profit growth of 4%; Wireless postpaid
net additions of 31,000, an improvement of 89,000 year on year, on
an 11 basis point improvement in churn
o Postpaid ARPA up 4% with strong growth in Share Everything
customers, up 63%
o Internet net additions of 16,000, an improvement of 20,000 year on
year; Internet revenue up 10%
o Strong operating fundamentals delivered operating cash flow and
free cash flow of $950 million and $274 million, respectively
-- Customer complaints as reported by the Commissioner for
Complaints for Telecommunications Services (CCTS) declined
faster than key competitors', down 26% in 2015 and down 50%
over the past two years
-- Met 2015 guidance and announced our 2016 outlook, with
continued growth in operating revenue and adjusted operating
profit as well as a declining capital expenditure profile
expected to drive higher free cash flow
TORONTO, Jan. 27, 2016 /PRNewswire/ - Rogers Communications Inc., a leading diversified Canadian communications and media company, today announced its unaudited financial and operating results for the fourth quarter ended December 31, 2015.
Consolidated Financial Highlights
Three months ended December 31
(In millions of Canadian dollars, except 2015 2014
per share amounts, unaudited)
Operating revenue 3,452 3,366
As adjusted 1:
Operating profit 1,226 1,233
Net income 331 355
Basic earnings per share $ 0.64 $ 0.69
Net income 299 297
Basic earnings per share $ 0.58 $ 0.58
Free cash flow 1 274 275
Cash provided by operating activities 950 1,031
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.
"Overall, we delivered steady results in a fiercely competitive quarter, including strong results in Wireless and Internet, where we maintained momentum in subscriber and financial metrics. We continued to make strong progress on postpaid churn thanks to the success of our customer propositions and customer experience improvements. Whilst we are making good progress, we aren't resting on our laurels, and we recognize there is more work to do," said Guy Laurence, President and Chief Executive Officer, Rogers Communications. "We delivered on our full-year guidance and our strategy continues to gain traction in the market. We enter 2016 with an outlook of continued growth and remain focused on delivering year two of Rogers 3.0."
Key Quarterly Financial Highlights
Higher operating revenue
Consolidated revenue increased 3% this quarter, reflecting revenue
growth of 4% in Wireless and 3% in Media and decreases of 2% in each of
Cable and Business Solutions. Wireless revenue increased as a result of
higher network revenue from 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 increased primarily as a result
of growth at Sportsnet and the Toronto Blue Jays.
Lower adjusted operating profit
The 1% decline in consolidated adjusted operating profit this quarter
largely reflects the flow-through of the revenue changes discussed
above as well as a decline in Media adjusted operating profit as our
traditional media businesses are facing pressures with the changing
advertising landscape. We recently announced some job cuts affecting
conventional TV, radio, publishing, and some back-office positions in
order to address these pressures.
Higher net income and lower adjusted net income
Net income increased this quarter primarily as a result of lower
restructuring, acquisition and other costs, lower finance costs, and
lower income taxes, partially offset by higher depreciation and
amortization, while adjusted net income decreased this quarter as this
measure excludes restructuring, acquisition and other costs.
Substantial free cash flow affords financial flexibility
In the fourth quarter, we continued to generate substantial cash flow
from operating activities and free cash flow of $950 million and $274
million, respectively. 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, which represents a 5% increase from the same quarter last
year.
Met 2015 Guidance
The following table outlines guidance ranges that we had previously provided and our actual results and achievements for the selected full year 2015 financial metrics:
2015 2015
(In millions Guidance
of dollars) Actual Achievement
Consolidated
Guidance1
Adjusted
operating
profit 2 5,020 to 5,175 5,032 SQRT
Additions
to
property,
plant and
equipment
3 2,350 to 2,450 2,440 SQRT
Free cash
flow 2 1,525 to 1,675 1,676
AchievedSQRT Exceeded
1 The preceding table outlines guidance ranges for selected full-year
2015 consolidated financial metrics
provided in our January 29, 2015 earnings release and subsequently
updated on July 23, 2015 to increase our
free cash flow guidance by $175 million, which reflected the value
of tax loss carry forwards acquired as part of
the Mobilicity transaction that closed on July 2, 2015.
2 Adjusted operating profit 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.
3 Includes additions to property, plant and equipment for the
Wireless, Cable, Business Solutions, Media,
and Corporate segments and does not include expenditures on spectrum
licences.
2016 Outlook
We expect steady growth in operating revenue and adjusted operating profit and lower additions to property, plant and equipment to drive higher free cash flow. We expect to have the financial flexibility to maintain our network advantages, to begin reducing debt, and to continue to return cash to shareholders.
2015 2016 Guidance
(In millions
of dollars,
except
percentages) Actual Ranges1
Consolidated
Guidance
Operating Increase
revenue 13,414 of 1% to 3%
Adjusted
operating Increase
profit 2 5,032 of 1% to 3%
Additions
to
property,
plant and
equipment
3 2,440 2,300 to 2,400
Free cash Increase
flow 2 1,676 of 1% to 3%
1 Guidance ranges presented as percentages reflect percentage
increases over 2015 actual results.
2 Adjusted operating profit 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.
3 Includes additions to property, plant and equipment for the
Wireless, Cable, Business Solutions,
Media, and Corporate segments but does not include expenditures for
spectrum licences.
The above table outlines guidance ranges for selected full year 2016 consolidated financial metrics. These ranges take into consideration our current outlook and our actual results for 2015. The purpose of the financial outlook is to assist investors, shareholders, and others in understanding certain financial metrics relating to expected 2016 financial results for evaluating the performance of our business. This information may not be appropriate for other purposes. Information about our guidance, including the various assumptions underlying it, is forward-looking and should be read in conjunction with "About Forward-Looking Information" and the related disclosure and information about various economic, competitive, and regulatory assumptions, factors, and risks that may cause our actual future financial and operating results to differ from what we currently expect.
We provide annual guidance ranges on a consolidated full-year basis, which are consistent with annual full-year Board-approved plans. Any updates to our full-year financial guidance over the course of the year would only be made to the consolidated guidance ranges that appear above.
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 the company's track record of translating revenue into
strong margins, robust free cash flow, and a solid return on
assets, ultimately increasing returns to shareholders.
There are a number of opportunities we expect will help drive improved performance going forward, including:
-- further improving the customer experience;
-- maintaining leadership and momentum in Wireless;
-- strengthening our Cable proposition; and
-- driving growth in the business market.
Improving the Customer Experience
In 2015, we made key strides in our continuous pursuit to improve the
customer experience. Rogers showed the biggest improvement amongst our
primary competitors in reducing customer complaints, which were down
26% for the period August 1, 2014 to July 31, 2015 and down 50% over
the past two years. We believe our improvements to the customer
experience were key drivers in lowering Wireless postpaid churn this
quarter, despite the heightened competitive activity and the impact of
the "double cohort". We also reduced the number of times our customers
contacted us by 12.7% in 2015. We are committed to enhancing our
self-serve options, which we expect will further decrease the need for
customers to reach out and drive cost savings. During the quarter, we
were also the first communications provider in the world to introduce
customer care on Facebook Messenger.
Additionally in 2015, Ookla, a global leader in broadband speed testing, named Rogers as both Canada's Fastest ISP and Canada's Fastest Mobile Network. We believe this confirms how our network investments are also driving high quality customer experiences.
Maintaining Leadership and Momentum in Wireless
As part of Rogers 3.0, we first focused on our largest business,
Wireless. Our compelling value propositions, leading content, and
best-in-class network have attracted and helped us retain higher-value
customers. We achieved 106,000 Wireless net postpaid additions in 2015,
up from marginal net losses in the prior year.
We expect lower overall additions to property, plant and equipment in 2016 following our acquisitions and deployment of premium spectrum in 2015 and improved capital efficiency, including leveraging better pricing, in part due to our unique strategic partnership with Vodafone in Canada.
Strengthening Our Cable Proposition
We enter 2016 with an improved outlook for Cable with:
-- the strong popularity of IGNITE Internet and the planned
offering of IGNITE Gigabit to our entire footprint by the end
of 2016, ahead of our competitors; and
-- enhanced video offerings including an improved legacy user
interface, 4K TV, and the launch of Internet Protocol
Television (IPTV).
IGNITE Internet
We announced plans 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.
Launch of 4K TV
In 2015, we made the largest commitment to live sports broadcasting in
4K in North America, rolling out our new NextBox 4K set-top box and
announcing more than 100 live sporting events to be televised in 4K.
This month, we delivered the world's first NBA and NHL games in 4K.
Driving Growth in the Business Market
We believe Rogers is currently under-indexed in this growing market. In
2015, we established a solid foundation for a plan to capture market
share through next-generation technology offerings. We also introduced
the first in a series of leapfrog technologies with the launch of a
managed Wi-Fi service, as well as a set of new, cloud-managed
cybersecurity services so businesses of all sizes can run their
networks in a safe and secure environment. 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 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 / 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
The fourth quarter 2015 results teleconference with the investment community will be held on:
-- January 27, 2016
-- 8:00 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) and on SEDAR (sedar.com), on EDGAR (sec.gov), or by e-mailing your request to investor.relations@rci.rogers.com. 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.
About this Earnings Release
This earnings release contains important information about our business and our performance for the three months ended December 31, 2015, as well as forward-looking information about future periods. This earnings release should be used as preparation for reading our forthcoming MD&A and Audited Consolidated Financial Statements for the year ended December 31, 2015 in respect of such annual financial statements, which we intend to file with securities regulators in Canada and the US in the next few weeks. These statements will be made available on the rogers.com/investors, sedar.com, and sec.gov websites or mailed upon request.
The financial information contained in this earnings release is prepared using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. This earnings release should be read in conjunction with our 2014 Annual Management's Discussion and Analysis (MD&A) and our 2014 Audited Consolidated Financial Statements, our 2015 First, Second, and Third Quarter MD&A and Interim Condensed Consolidated Financial Statements, 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.
All dollar amounts are in Canadian dollars unless otherwise stated and are unaudited. All percentage changes are calculated using the rounded numbers as they appear in the tables. Information is current as of January 26, 2016 and was approved by the Audit and Risk Committee of the Rogers Communications Inc. 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 our subsidiaries. RCI refers to the legal entity Rogers Communications Inc., not including our subsidiaries.
In this earnings release, this quarter refers to the three months ended December 31, 2015, and year to date refers to the twelve months ended December 31, 2015. All results commentary is compared to the equivalent periods in 2014 or as at December 31, 2014, unless otherwise indicated.
Four Business Segments
We report our results of operations in four segments. Each segment and
the nature of its business are as follows:
Segment Principal activities
Wireless Wireless telecommunications operations for Canadian
consumers and businesses.
Cable Cable telecommunications operations, including
Internet, television, and telephony (phone) services
for Canadian consumers and businesses.
Business Network connectivity through our fibre network and data
Solutions centre assets to support a range of voice, data,
networking, hosting, and cloud-based services for
small, medium, and large Canadian businesses,
governments, and on a wholesale basis to other
telecommunications providers.
Media A diversified portfolio of media properties, including
television and radio broadcasting, specialty channels,
multi-platform shopping, publishing, sports media and
entertainment, and digital media.
During the year, Wireless, Cable, and Business Solutions were operated by our wholly-owned subsidiary, Rogers Communications Partnership (RCP), and certain of our other wholly-owned subsidiaries. Media is operated by our wholly-owned subsidiary, Rogers Media Inc., and its subsidiaries.
On January 1, 2016, Fido Solutions Inc., a subsidiary of RCI, transferred its partnership interest in RCP to Rogers Cable and Data Centres Inc. (RCDCI), a subsidiary of RCI, leaving RCDCI as the sole partner of RCP, thereby causing RCP to cease to exist. RCDCI became the owner of all the assets and assumed all the liabilities previously held by RCP. Subsequent to the reorganization, RCDCI changed its name to Rogers Communications Canada Inc. (RCCI).
Summary of Consolidated Financial Results
Three months ended December Twelve months ended
31 December 31
(In millions of
dollars, except
margins and per
share amounts) 2015 2014 % Chg 2015 2014 % Chg
Operating
revenue
Wireless 1,981 1,898 4 7,651 7,305 5
Cable 855 871 (2) 3,465 3,467 -
Business (1)
Solutions 95 97 (2) 377 382
Media 560 544 3 2,079 1,826 14
Corporate 22
items and
intercompany
eliminations (39) (44) (11) (158) (130)
Operating
revenue 3,452 3,366 3 13,414 12,850 4
Adjusted
operating
profit
Wireless 754 725 4 3,239 3,246 -
Cable 426 424 - 1,658 1,665 -
Business (5)
Solutions 30 34 (12) 116 122
Media 56 78 (28) 172 131 31
Corporate 6
items and
intercompany
eliminations (40) (28) 43 (153) (145)
Adjusted
operating
profit 1 1,226 1,233 (1) 5,032 5,019 -
Adjusted
operating
profit margin 1 35.5% 36.6% (1.1 pts) 37.5% 39.1% (1.6 pts)
Net income 299 297 1 1,381 1,341 3
Basic earnings
per share $ 0.58 $ 0.58 - $ 2.68 $ 2.60 3
Adjusted net
income 1 331 355 (7) 1,490 1,532 (3)
Adjusted basic
earnings per
share 1 $ 0.64 $ 0.69 (7) $ 2.89 $ 2.97 (3)
Additions to
property, plant
and equipment 773 664 16 2,440 2,366 3
Free cash flow
1 274 275 - 1,676 1,437 17
Cash provided
by operating
activities 950 1,031 (8) 3,747 3,698 1
1 Adjusted operating profit, adjusted operating profit margin, adjusted
net income, adjusted basic 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.
Results of our Business Segments
WIRELESS
Wireless Financial Results
Three months ended December Twelve months ended
31 December 31
(In millions of 2015 1
dollars, except
margins) 2014 % Chg 2015 1 2014 % Chg
Operating
revenue
Network
revenue 1,747 1,701 3 6,902 6,743 2
Equipment
sales 234 197 19 749 562 33
Operating 1,981
revenue 1,898 4 7,651 7,305 5
Operating
expenses
Cost of
equipment 2 569 497 14 1,845 1,488 24
Other
operating
expenses 658 676 (3) 2,567 2,571 -
Operating 1,227
expenses 1,173 5 4,412 4,059 9
Adjusted 754
operating profit 725 4 3,239 3,246 -
Adjusted 43.2%
operating profit
margin as a % of
network revenue 42.6% 0.6 pts 46.9% 48.1% (1.2 pts)
Additions to 235
property, plant
and equipment 258 (9) 866 978 (11)
1 The operating results of Mobilicity are included in the Wireless
results of operations from the date of acquisition on July 2, 2015.
2 Includes the cost of equipment sales and direct channel subsidies.
Wireless Subscriber Results (1)
Three months ended December Twelve months ended
31 December 31
(In 2015
thousands,
except churn,
ARPA, and
ARPU) 2014 Chg 2015 2014 Chg
Postpaid
Gross
additions 365 297 68 1,354 1,238 116
Net
additions
(losses) 31 (58) 89 106 (1) 107
Total
postpaid
subscribers
2,3 8,271 8,073 198 8,271 8,073 198
Churn (0.11
(monthly) 1.35% 1.46% pts) 1.27% 1.27% -
ARPA
(monthly) $ 112.07 $ 107.95 $ 4.12 $ 110.74 $ 106.41 $ 4.33
Prepaid
Gross
additions 179 138 41 677 507 170
Net
additions
(losses) 27 11 16 75 (52) 127
Total
prepaid
subscribers
3,4 1,606 1,377 229 1,606 1,377 229
Churn
(monthly) 3.17% 3.09% 0.08 pts 3.45% 3.42% 0.03 pts
Blended ARPU $ 59.16
(monthly) $ 59.86 ($ 0.70) $ 59.71 $ 59.41 $ 0.30
1 Subscriber counts, subscriber churn, postpaid ARPA, and blended ARPU
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, which are
not included in net additions, but do appear in the ending total
balance for December 31, 2015.
3 As at end of period.
4 On July 2, 2015, we acquired approximately 154,000 Wireless prepaid
subscribers as a result of our acquisition of
Mobilicity, which are not included in net additions, but do appear
in the ending total balance for December 31, 2015.
Network revenue
The 3% increase in network revenue this quarter was a result of:
-- 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;
-- an adjustment pertaining to the anticipated usage of our
loyalty programs; and
-- our acquisition of Mobilicity; partially offset by
-- a 9% decrease in roaming revenue this quarter as a result of
changes to roaming plans, including the introduction of Roam
Like Home in the US, Caribbean, Mexico, Latin America, and
Europe, which simplify the customer experience and provide
greater value to the customer. We believe roaming revenue was
also impacted by lower outbound customer travel volumes, which
we believe to be connected to the depreciation of the Canadian
dollar.
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 increasingly utilize the advantages of premium offerings and access their shareable plans with multiple devices on the same account.
The 1% decrease in blended ARPU this quarter was a result of:
-- the inclusion of lower-blended-ARPU-generating Wireless Home
Phone subscribers in our postpaid base; and
-- 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; partially offset by
-- increased network revenue as discussed above.
Excluding the impact of roaming revenue and the addition of Mobilicity and Wireless Home Phone subscribers, blended ARPU would have increased by 2% this quarter.
We believe the increases in gross and net additions to our postpaid subscriber base and lower postpaid churn this quarter 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. Significantly, this was achieved during the industry's "double cohort" period and with heightened competitive activity.
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. This industry-wide impact commenced late in the second quarter of 2015 and will generally result in subscribers being on shorter-term contracts than in the past.
Equipment sales
The 19% increase in revenue from equipment sales this quarter was a
result of:
-- a greater number of gross additions with device activations by
new subscribers;
-- a 1% increase in device upgrades by existing subscribers; and
-- increases in equipment sales prices.
Operating expenses
The 14% increase in the cost of equipment sales 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 from our higher gross
additions and higher upgrades this quarter.
Total customer retention spending (primarily consisting of subsidies on handset upgrades) was 3% lower this quarter as a result of:
-- improvements in our sales channels resulting in lower
commissions; partially offset by
-- increased device upgrades by existing subscribers as discussed
above; and
-- increased subsidy rates provided on higher-cost smartphones.
Other operating expenses (excluding retention spending) increased this quarter as a result of higher service costs and incremental expenses resulting from our acquisition of Mobilicity, partially offset by efficiency gains and improvements in cost management.
Adjusted operating profit
The 4% increase in adjusted operating profit this quarter was a result
of network revenue growth, partially offset by the increased net
subsidies associated with higher gross additions and higher-cost
smartphones.
CABLE
Cable Financial Results
Three months ended December Twelve months ended
31 December 31
(In millions of 2015 1 2015 1
dollars, except
margins) 2014 % Chg 2014 % Chg
Operating
revenue
Internet 348 317 10 1,343 1,245 8
Television 403 433 (7) 1,669 1,734 (4)
Phone 102 118 (14) 445 478 (7)
Service 853 868 (2) 3,457 3,457 -
revenue
Equipment 2 3 (33) 8 10 (20)
sales
Operating 855 871 (2) 3,465 3,467 -
revenue
Operating
expenses
Cost of 2 2 - 4 6 (33)
equipment
Other 427 445 (4) 1,803 1,796 -
operating
expenses
Operating 429 447 (4) 1,807 1,802 -
expenses
Adjusted 426 424 - 1,658 1,665 -
operating profit
Adjusted 49.8% 48.7% 1.1 pts 47.8% 48.0% (0.2 pts)
operating profit
margin
Additions to 308 291 6 1,030 1,055 (2)
property, plant
and equipment
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 December Twelve months ended
31 December 31
(In thousands) 2015 2014 Chg 2015 2014 Chg
Internet
Net additions
(losses) 16 (4) 20 37 34 3
Total Internet
subscribers 2,3 2,048 2,011 37 2,048 2,011 37
Television
Net losses (24) (36) 12 (128) (119) (9)
Total
television
subscribers 2,3 1,896 2,024 (128) 1,896 2,024 (128)
Phone
Net losses (15) (18) 3 (60) (14) (46)
Total phone
subscribers 2,3 1,090 1,150 (60) 1,090 1,150 (60)
Cable homes 4,153
passed 2,3 4,068 85 4,153 4,068 85
Total service
units4
Net losses (23) (58) 35 (151) (99) (52)
Total service
units 2,3 5,034 5,185 (151) 5,034 5,185 (151)
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,
which are not included in net additions,
but do appear in the ending total balance for December 31, 2014. The
acquisition also increased homes
passed by 26,000.
3 As at end of period.
4 Includes Internet, Television, and Phone subscribers.
Operating revenue
The 2% decrease in operating revenue this quarter was primarily a result
of:
-- Television and Phone subscriber losses over the past year; and
-- more promotional pricing provided to subscribers; partially
offset by
-- the movement of Internet customers to higher speed and usage
tiers, combined with a higher subscriber base for our Internet
products; and
-- the impact of pricing changes implemented over the past year.
Internet revenue
The 10% 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 that provide
subscribers with broader choices of speed and data usage and
incorporate bundled, value-added content;
-- 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 revenue
The 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 pricing changes implemented over the past year.
Phone revenue
The 14% decrease in Phone revenue this quarter was a result of:
-- a smaller subscriber base; and
-- more promotional pricing provided to subscribers, mainly
related to IGNITE multi-product bundles.
Operating expenses
The 4% 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.
Adjusted operating profit
The marginal increase in adjusted operating profit this quarter was a
result of the revenue and expense changes discussed above.
BUSINESS SOLUTIONS
Business Solutions Financial Results
Three months ended December Twelve months ended
31 December 31
(In millions of 20151 20151
dollars, except
margins) 2014 % Chg 2014 % Chg
Operating revenue
Next generation 74 71 4 288 271 6
Legacy 20 24 (17) 85 106 (20)
Service revenue 94 95 (1) 373 377 (1)
Equipment sales 1 2 (50) 4 5 (20)
Operating revenue 95 97 (2) 377 382 (1)
Operating 65 63 3 261 260 -
expenses
Adjusted 30 34 (12) 116 122 (5)
operating profit
Adjusted 31.6% 35.1% (3.5 pts) 30.8% 31.9% (1.1 pts)
operating profit
margin
Additions to 65 53 23 187 146 28
property, plant
and equipment
1 The operating results of Internetworking Atlantic Inc. are included
in the Business Solutions results of operations from
the date of acquisition on November 30, 2015.
Operating revenue
The 1% decrease in service revenue this quarter was a result of:
-- 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; partially offset by
-- the continued execution of our plan to grow higher-margin, next
generation on-net and near-net IP-based services revenue.
Next generation services, which include our data centre operations, represented 79% (2014 - 75%) of total service revenue in the quarter.
Operating expenses
The 3% increase in operating expenses this quarter was a result of
higher service costs.
Adjusted operating profit
The 12% decrease in adjusted operating profit this quarter was a result
of the revenue and expense changes discussed above.
Other Business Solutions developments
On November 30, 2015, we acquired 100% of the common shares of
Internetworking Atlantic Inc. (IAI) for $6 million. IAI provides
enhanced technology solutions and services for business and public
sector clients in Atlantic Canada. The acquisition of IAI will enable
us to offer greater local expertise in the areas of cloud computing,
data centre services, fibre networking, and professional services.
MEDIA
Media Financial Results
Three months ended December Twelve months ended
31 December 31
(In millions of 2015 2014 % Chg 2015 2014 % Chg
dollars, except
margins)
Operating 560 544 3 2,079 1,826 14
revenue
Operating 504 466 8 1,907 1,695 13
expenses
Adjusted 56 78 (28) 172 131 31
operating
profit
Adjusted 10.0% 14.3% (4.3 pts) 8.3% 7.2% 1.1 pts
operating
profit margin
Additions to 28 28 - 60 94 (36)
property, plant
and equipment
Operating revenue
The 3% increase in operating revenue this quarter was a result of:
-- higher subscription and advertising revenue generated by our
Sportsnet properties; and
-- higher Toronto Blue Jays game day and merchandise revenue as a
result of the postseason; partially offset by
-- continued softness in conventional broadcast TV and print
advertising; and
-- lower merchandise sales at The Shopping Channel (TSC).
Operating expenses
The 8% increase in operating expenses this quarter was a result of:
-- higher sports-related programming and production costs;
-- higher costs related to the Toronto Blue Jays as a result of
the postseason; partially offset by
-- lower conventional broadcast TV programming costs;
-- lower publishing costs; and
-- operating efficiencies realized across various Media divisions.
Adjusted operating profit
The 28% decrease in adjusted operating profit this quarter was a result
of the revenue and expense changes described above, mainly from
conventional areas of TV and publishing.
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Three months ended December Twelve months ended
31 December 31
(In millions of
dollars, except
capital
intensity) 2015 2014 % Chg 2015 2014 % Chg
Additions to
property, plant
and equipment
Wireless 235 258 (9) 866 978 (11)
Cable 308 291 6 1,030 1,055 (2)
Business 28
Solutions 65 53 23 187 146
Media 28 28 - 60 94 (36)
Corporate 137 34 n/m 297 93 n/m
Total additions
to property,
plant and
equipment 1 773 664 16 2,440 2,366 3
Capital intensity
2 22.4% 19.7% 2.7 pts 18.2% 18.4% (0.2 pts)
1 Additions to property, plant and equipment do not include
expenditures on spectrum licences.
2 Capital intensity is a key performance indicator. See "Key
Performance Indicators".
n/m - not meaningful
Wireless
The decrease in additions to property, plant and equipment in Wireless
this quarter was a result of lower expenditures on our wireless
network, partially offset by higher software and information technology
costs required to activate the spectrum we acquired in previous
quarters. Deployment of our LTE network has reached approximately 93%
of Canada's population as at December 31, 2015 (December 31, 2014 -
84%).
Cable
The increase in additions to property, plant and equipment in Cable this
quarter was a result of greater investment in information technology
infrastructure to further improve the reliability and quality of the
network and to improve the capacity of our Internet platform to deliver
gigabit Internet speeds as well as higher purchases of our next
generation NextBox digital set-top boxes. We also continued to expand
our bandwidth towards the development of our next-generation IP-based
video service and digital television guides.
Business Solutions
The increase in additions to property, plant and equipment in Business
Solutions this quarter was a result of data centre investments and
network expansion to reach additional customers and sites.
Media
The additions to property, plant and equipment in Media were stable this
quarter and reflect investments in conventional television, radio,
digital assets, and at TSC. In the fourth quarter last year,
investments were made to our broadcast facilities, IT infrastructure,
and digital assets.
Corporate
The 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 Intensity
Capital intensity increased this quarter as a result of higher additions
to property, plant and equipment as described above relative to the
increase in revenue described previously in this earnings release.
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;
-- Postpaid average revenue per account (ARPA)
-- Average revenue per user (ARPU); and
-- Capital intensity.
Commencing in the first quarter of 2015, we began disclosing postpaid ARPA as one of our key performance indicators.
Postpaid average revenue per account - Wireless
Postpaid 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 postpaid 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 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.
_____________________________________________________________________
| | | |Most |
| |Why we use it |How we |comparable |
|Non-GAAP | |calculate it |IFRS financial|
|measure | | |measure |
|____________|_________________________|_______________|______________|
| | -- To evaluate the | | |
|Adjusted | performance of |Adjusted |Net income |
|operating | our |operating | |
|profit | businesses and |profit: | |
|and related | when making |Net income | |
|margin | decisions |add (deduct) | |
| | about the ongoing|income taxes, | |
| | operations of the|other expense | |
| | business and our |(income), | |
| | ability to |finance costs, | |
| | generate |restructuring, | |
| | cash flows. |acquisition and| |
| | -- We believe that |other, | |
| | certain investors|depreciation | |
| | and |and | |
| | analysts use |amortization, | |
| | adjusted |stock- | |
| | operating profit |based | |
| | to measure our |compensation, | |
| | ability to |and impairment | |
| | service debt |of | |
| | and to meet other|assets. | |
| | payment | | |
| | obligations. |Adjusted | |
| | -- We also use it as|operating | |
| | one component in |profit margin: | |
| | determining |Adjusted | |
| | short-term |operating | |
| | incentive |profit | |
| | compensation for |divided by | |
| | all management |Operating | |
| | employees. |revenue | |
| | |(network | |
| | |revenue for | |
| | |Wireless). | |
|____________|_________________________|_______________|______________|
| | -- To assess the | | |
|Adjusted net| performance of |Adjusted net |Net income |
|income | our |income: | |
| | businesses before|Net income |Basic and |
|Adjusted | the effects of |add (deduct) |diluted |
|basic and | the |stock-based |earnings per |
|diluted | noted items, |compensation, |share |
|earnings | because they |restructuring, | |
|per share | affect the |acquisition and| |
| | comparability of |other, | |
| | our financial |impairment of | |
| | results |assets, | |
| | and could |(gain) on sale | |
| | potentially |of investments,| |
| | distort the |(gain) on | |
| | analysis |acquisitions, | |
| | of trends in |loss on | |
| | business |non-controlling| |
| | performance. |interest | |
| | Excluding these |purchase | |
| | items does not |obligations, | |
| | imply |loss on | |
| | they are |repayment of | |
| | non-recurring. |long-term debt,| |
| | |and income | |
| | |tax adjustments| |
| | |on these items,| |
| | |including | |
| | |adjustments as | |
| | |a result of | |
| | |legislative | |
| | |changes. | |
| | | | |
| | |Adjusted basic | |
| | |and diluted | |
| | |earnings per | |
| | |share: | |
| | |Adjusted net | |
| | |income | |
| | |divided by | |
| | |basic and | |
| | |diluted | |
| | |weighted | |
| | |average shares | |
| | |outstanding. | |
|____________|_________________________|_______________|______________|
| | -- To show how much | | |
|Free cash | cash we have |Adjusted |Cash provided |
|flow | available to |operating |by |
| | repay debt and |profit |operating |
| | reinvest in |deduct |activities |
| | our company, |additions to | |
| | which is an |property, plant| |
| | important |and equipment, | |
| | indicator of our |interest on | |
| | financial |borrowings net | |
| | strength and |of capitalized | |
| | performance. |interest, and | |
| | -- We believe that |cash income | |
| | some investors |taxes. | |
| | and | | |
| | analysts use free| | |
| | cash flow to | | |
| | value a | | |
| | business and its | | |
| | underlying | | |
|____________|________assets.__________|_______________|______________|
| | -- To conduct | | |
|Adjusted net| valuation-related|Total long-term|Long-term debt|
|debt | analysis |debt | |
| | and make |add (deduct) | |
| | decisions about |current portion| |
| | capital |of long-term | |
| | structure. |debt, deferred | |
| | -- We believe this |transaction | |
| | helps investors |costs and | |
| | and |discounts, net | |
| | analysts analyze |debt | |
| | our enterprise |derivative | |
| | and |(assets) | |
| | equity value and |liabilities, | |
| | assess our |credit risk | |
| | leverage. |adjustment | |
| | |related to net | |
| | |debt | |
| | |derivatives, | |
| | |bank advances | |
| | |(cash and cash | |
| | |equivalents), | |
| | |and short-term | |
| | |borrowings. | |
|____________|_________________________|_______________|______________|
| | -- To conduct | | |
|Adjusted net| valuation-related|Adjusted net |Long-term debt|
|debt / | analysis |debt (defined |divided by net|
|adjusted | and make |above) |income |
|operating | decisions about |divided by | |
|profit | capital |12 months | |
| | structure. |trailing | |
| | -- We believe this |adjusted | |
| | helps investors |operating | |
| | and |profit | |
| | analysts analyze |(defined | |
| | our enterprise |above). | |
| | and | | |
| | equity value and | | |
| | assess our | | |
|____________|________leverage.________|_______________|______________|
Reconciliation of
adjusted operating
profit
Three months ended Twelve months ended December
December 31 31
(In millions of 2015 2014 2015 2014
dollars)
Net income 299 297 1,381 1,341
Add (deduct):
Income taxes 112 129 466 506
Other expense 4 (10) (32) 1
(income)
Finance costs 192 202 774 817
Restructuring, 23 43 111 173
acquisition and
other
Depreciation and 580 560 2,277 2,144
amortization
Stock-based 16 12 55 37
compensation
Adjusted operating 1,226 1,233 5,032 5,019
profit
Reconciliation of
adjusted net income
Three months ended Twelve months ended December
December 31 31
(In millions of 2015 2014 2015 2014
dollars)
Net income 299 297 1,381 1,341
Add (deduct):
Stock-based 16 12 55 37
compensation
Restructuring, 23 43 111 173
acquisition and
other
Gain on acquisition - - (102) -
of Mobilicity
Loss on - - 72 -
non-controlling
interest purchase
obligation
Loss on repayment - - 7 29
of long-term debt
Income tax impact (7) (11) (40) (62)
of above items
Income tax - 14 6 14
adjustment,
legislative tax
change
Adjusted net income 331 355 1,490 1,532
Reconciliation of
adjusted earnings per
share
(In millions of Three months ended Twelve months ended December
dollars, except per December 31 31
share amounts;
number of shares 2015 2014 2015 2014
outstanding in
millions)
Adjusted basic
earnings per share:
Adjusted net income 331 355 1,490 1,532
Divided by: 515 515 515 515
weighted average
number of shares
outstanding
Adjusted basic $ 0.64 $ 0.69 $ 2.89 $ 2.97
earnings per share
Adjusted diluted
earnings per share:
Adjusted net income 331 355 1,490 1,532
Divided by: diluted 517 517 517 517
weighted average
number of shares
outstanding
Adjusted diluted $ 0.64 $ 0.69 $ 2.88 $ 2.96
earnings per share
Reconciliation of
free cash flow
Three months ended Twelve months ended December
December 31 31
(In millions of 2015 2014 2015 2014
dollars)
Cash provided by 950 1,031 3,747 3,698
operating activities
Add (deduct):
Additions to (773) (664) (2,440) (2,366)
property, plant and
equipment
Interest on (185) (192) (732) (756)
borrowings, net of
capitalized
interest
Restructuring, 23 43 111 173
acquisition and
other
Interest paid 133 130 771 778
Change in non-cash 187 (4) 302 (11)
working capital
Other adjustments (61) (69) (83) (79)
Free cash flow 274 275 1,676 1,437
Reconciliation of adjusted net debt and adjusted net debt / adjusted
operating profit 1
As at As at
December 31 December 31
(In millions of 2015 2014
dollars)
Current portion of 1,000 963
long-term debt
Long-term debt 15,870 13,824
Deferred transaction 111 108
costs and discounts
16,981 14,895
Add (deduct):
Net debt derivative (2,028) (846)
assets
Credit risk (152) (39)
adjustment related
to net debt
derivatives
Short-term 800 842
borrowings
Cash and cash (11) (176)
equivalents
Adjusted net debt 15,590 14,676
As at As at
December 31 December 31
(In millions of 2015 2014
dollars, except
ratios)
Adjusted net debt /
adjusted operating
profit
Adjusted net debt 15,590 14,676
Divided by: trailing 5,032 5,019
12 month adjusted
operating profit
Adjusted net debt / 3.1 2.9
adjusted operating
profit
1 Effective September 30, 2015, we have retrospectively amended our
calculation of adjusted net debt to value the net debt derivatives
without
adjustment for credit risk. For accounting purposes in accordance
with IFRS, we recognize the fair values of our debt derivatives
using an
estimated credit-adjusted mark-to-market valuation by discounting
cash flows to the measurement date. For purposes of calculating
adjusted
net debt and adjusted net debt / adjusted operating profit, we
believe including debt derivatives valued without adjustment for
credit risk is
commonly used to evaluate debt leverage and for market valuation and
transactional purposes.
Supplementary Information
Rogers Communications Inc.
Condensed Consolidated Statements of Income
(In millions of dollars, except per share amounts, unaudited)
Three months ended Twelve months ended
December 31 December 31
2015 2014 2015 2014
Operating revenue 3,452 3,366 13,414 12,850
Operating expenses:
Operating costs 2,242 2,145 8,437 7,868
Depreciation and 580 560 2,277 2,144
amortization
Restructuring, 23 43 111 173
acquisition and
other
Finance costs 192 202 774 817
Other expense 4 (10) (32) 1
(income)
Income before income 411 426 1,847 1,847
taxes
Income taxes 112 129 466 506
Net income 299 297 1,381 1,341
Earnings per share:
Basic $ 0.58 $ 0.58 $ 2.68 $ 2.60
Diluted $ 0.58 $ 0.57 $ 2.67 $ 2.56
Rogers Communications Inc.
Condensed Consolidated Statements of Financial Position
(In millions of dollars, except per share amounts, unaudited)
As at As at
December 31 December 31
2015 2014
Assets
Current assets:
Cash and cash equivalents 11 176
Accounts receivable 1,792 1,591
Inventories 318 251
Other current assets 303 191
Current portion of derivative 198 136
instruments
Total current assets 2,622 2,345
Property, plant and equipment 10,997 10,655
Intangible assets 7,243 6,588
Investments 2,271 1,898
Derivative instruments 1,992 788
Other long-term assets 150 356
Deferred tax assets 9 9
Goodwill 3,891 3,883
Total assets 29,175 26,522
Liabilities and shareholders'
equity
Current liabilities:
Short-term borrowings 800 842
Accounts payable and accrued 2,708 2,578
liabilities
Income tax payable 96 47
Current portion of provisions 10 7
Unearned revenue 388 443
Current portion of long-term 1,000 963
debt
Current portion of derivative 15 40
instruments
Total current liabilities 5,017 4,920
Provisions 50 55
Long-term debt 15,870 13,824
Derivative instruments 95 11
Other long-term liabilities 455 462
Deferred tax liabilities 1,943 1,769
Total liabilities 23,430 21,041
Shareholders' equity 5,745 5,481
Total liabilities and 29,175 26,522
shareholders' equity
Rogers Communications Inc.
Condensed Consolidated Statements of Cash Flows
(In millions of dollars, except per share amounts, unaudited)
Three months ended Twelve months ended
December 31 December 31
2015 2014 2015 2014
Operating activities:
Net income for the 299 297 1,381 1,341
period
Adjustments to
reconcile net income
to cash provided by
operating
activities:
Depreciation and 580 560 2,277 2,144
amortization
Program rights 21 19 87 66
amortization
Finance costs 192 202 774 817
Income taxes 112 129 466 506
Stock-based 16 12 55 37
compensation
Post-employment 31 15 (16) (34)
benefits
contributions, net
of expense
Gain on - - (102) -
acquisition of
Mobilicity
Other 13 25 82 48
Cash provided by
operating activities
before changes in
non-cash working 1,264 1,259 5,004 4,925
capital, income
taxes paid, and
interest paid
Change in non-cash (187) 4 (302) 11
operating working
capital items
Cash provided by
operating activities
before income taxes
received (paid) 1,077 1,263 4,702 4,936
and interest paid
Income taxes 6 (102) (184) (460)
received (paid)
Interest paid (133) (130) (771) (778)
Cash provided by 950 1,031 3,747 3,698
operating activities
Investing activities:
Additions to (773) (664) (2,440) (2,366)
property, plant and
equipment
Additions to program (27) (96) (64) (231)
rights
Changes in non-cash
working capital
related to property,
plant and 167 204 (116) 153
equipment and
intangible assets
Acquisitions and
other strategic
transactions, net of
cash
acquired (5) (155) (1,077) (3,456)
Other (32) (67) (70) (51)
Cash used in investing (670) (778) (3,767) (5,951)
activities
Financing activities:
Proceeds received on 22 55 294 276
short-term
borrowings
Repayment of (81) - (336) (84)
short-term
borrowings
Issuance of 2,522 530 7,338 3,412
long-term debt
Repayment of (2,440) (530) (6,584) (2,551)
long-term debt
Proceeds on
settlement of debt
derivatives and
forward
contracts - - 1,059 2,150
Payments on
settlement of debt
derivatives, forward
contracts, and (25) - (930) (2,115)
bond forwards
Transaction costs (9) - (9) (30)
incurred
Dividends paid (247) (236) (977) (930)
Cash (used in) (258) (181) (145) 128
provided by financing
activities
Change in cash and 22 72 (165) (2,125)
cash equivalents
(Bank advances) cash
and cash equivalents,
beginning
of period (11) 104 176 2,301
Cash and cash 11 176 11 176
equivalents, end of
period
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 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:
-- 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.
Specific forward-looking information included or incorporated in this document include, but is not limited to, our information and statements under "2016 Outlook" relating to our 2016 consolidated guidance on operating revenue, adjusted operating profit, additions to property, plant and equipment, and free cash flow. All other statements that are not historical facts are forward-looking statements.
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 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:
-- regulatory changes;
-- technological change;
-- economic conditions;
-- unanticipated changes in content or equipment costs;
-- changing conditions in the communications, entertainment, and
information 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.
Key assumptions underlying our 2016 guidance
Our 2016 guidance ranges under "2016 Outlook" are based on many
assumptions including, but not limited to, the following material
assumptions:
-- Continued intense competition in all segments in which we
operate.
-- A substantial portion of our US dollar-denominated expenditures
has been hedged at an average exchange rate of $1.22/US$.
-- Key interest rates will remain relatively stable throughout
2016.
-- No significant additional regulatory developments, shifts in
economic conditions, or macro changes in the competitive
environment affecting our business activities will occur. We
note that regulatory decisions expected during 2016 could
materially alter underlying assumptions around our Wireless,
Cable, Business Solutions, and/or Media results in the current
and future years, the impacts of which are currently unknown
and not factored into our guidance.
-- The CRTC decision to require distributors to offer a basic
entry-level television package capped at $25 per month, as well
as channels above the basic tier on an "à la carte" basis or in
smaller, reasonably priced packages by March 1, 2016, and both
"à la carte" and in smaller, reasonably priced packages by
December 1, 2016, is not expected to materially impact our
Cable operating revenue.
-- Wireless customers will continue to adopt, and upgrade to,
higher-value smartphones and a similar proportion of customers
will remain on term contracts.
-- Overall wireless market penetration in Canada is expected to
grow in 2016 at a similar rate as in 2015.
-- Continued subscriber growth in Wireless and Cable Internet;
moderating net losses in Cable Television and Home Phone
subscribers.
-- In Business Solutions, continued declines in our legacy and
off-net business, and the continued execution of our plan to
grow higher margin-next generation IP- and cloud-based
services.
-- In Media, continued growth in Sportsnet and declines in our
traditional media businesses.
-- With respect to additions to property, plant and equipment:
o We expect to complete our analog-to-digital conversion during the
first quarter of 2016.
o We can offer IGNITE Gigabit Internet services in 2016 using
available spectrum capacity on our fibre-coaxial network at an
incremental 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.
o We have rolled out LTE across the majority of our coverage area as
well as deployed newly-acquired 700 MHz and AWS-1 spectrum.
o We made significant investments in our IPTV technology and legacy
set-top boxes to bridge the customer experience pre-IPTV, thus
gaining measurable unit cost efficiencies.
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 "Regulation in Our Industry" and "Governance
and Risk Management" in our 2014 Annual MD&A, 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
