Accelerated Revenue Growth to 5% with Increases in Wireless, Cable, and
Media
Executed Planned Investments to Retain Wireless Customers Before the
Final Expiry of Three-Year Contracts This Summer, Accelerating
Migration to Rogers Share Everything Plans
Delivered Key Customer Programs: Introduced Rogers IGNITE, Expanded Roam
Like Home to Over 35 Countries, Extended Network Coverage to Rural
Areas, and Launched New Fido Plans with Spotify and VICE
TORONTO, April 20, 2015 /CNW/ - Rogers Communications Inc., a leading
diversified Canadian communications and media company, today announced
its unaudited consolidated financial and operating results for the
first quarter ended March 31, 2015.
Financial Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(In millions of Canadian dollars, except per share amounts, unaudited)
|
|
|
|
|
|
2015
|
2014
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
3,175
|
3,020
|
As adjusted 1:
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
|
|
|
1,124
|
1,161
|
|
Net income
|
|
|
|
|
|
275
|
340
|
|
Basic and diluted earnings per share
|
|
|
|
|
|
$ 0.53
|
$ 0.66
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
255
|
307
|
Basic earnings per share
|
|
|
|
|
|
$ 0.50
|
$ 0.60
|
Diluted earnings per share
|
|
|
|
|
|
$ 0.48
|
$ 0.57
|
|
|
|
|
|
|
|
|
Free cash flow 1
|
|
|
|
|
|
266
|
356
|
Cash provided by operating activities
|
|
|
|
|
|
227
|
408
|
1
|
|
Adjusted amounts and free cash flow are non-GAAP measures and should not
be considered as a
substitute or alternative for GAAP measures. They are not defined terms
under IFRS and do not have
standard meanings, so may not be a reliable way to compare us to other
companies. See "Non-GAAP
Measures" for information about these measures, including how we
calculate them.
|
"We continued to see steady revenue growth this quarter along with
strong growth in Wireless ARPA," said Guy Laurence, President and Chief
Executive Officer of Rogers. "We made planned strategic investments to
retain high-value customers ahead of the conclusion of the
industry-wide shift to two-year contracts this summer - our underlying
adjusted operating profit growth was otherwise solid. At the same time,
we moved full steam ahead with our Rogers 3.0 program by delivering a
number of initiatives that are popular with our customers. Our plan is
gaining traction and we expect continued improvements in our key
financial and operating results as the year progresses."
Key Financial Highlights
Higher operating revenue
-
Consolidated revenue increased 5% this quarter, reflecting revenue
growth of 4% in Wireless, 1% in Cable, and 26% in Media, with stable
revenue in Business Solutions. Wireless revenue increased as a result
of both higher network revenue from the continued movement of our base
to LTE, the adoption of higher ARPU and ARPA-generating Share
Everything plans, as well as greater smartphone sales. Cable revenue
was relatively stable as continued Internet revenue growth was offset
by decreased revenue in Television and Phone. Media revenue increased
as a result of the NHL licensing agreement and growth at Sportsnet,
Radio, and Next Issue Canada partially offset by continued softness in
conventional broadcast TV and print advertising.
-
The implementation of a CRTC decision mandating that telecommunications
providers could no longer require customers to provide a minimum of 30
days' notice to cancel services resulted in a decrease of $3 million in
Cable revenue this quarter and an increase in Cable total service unit
losses of approximately 40,000 (which includes combined Internet,
Television, and Phone subscribers).
-
Activated 700,000 wireless smartphones this quarter, of which 32% were
new subscribers, with higher-value smartphone customers representing
83% of Wireless postpaid subscribers as at March 31, 2015.
Lower adjusted operating profit impacted by planned customer investments
-
The 3% decrease in consolidated adjusted operating profit this quarter
reflects decreases in Wireless of 3%, in Cable of 2%, and in Media of
33% ($8 million), while adjusted operating profit in Business Solutions
was stable. Wireless experienced higher costs associated with the
increased volume of subsidized smartphones sold primarily as a result
of proactively early-upgrading targeted subscribers in advance of the
conclusion of the industry-wide shift to two-year contracts this
summer, partially offset by higher network revenues. Cable results were
impacted by investments in programming, customer value enhancements,
and the CRTC cancellation notification policy change. Media's results,
during what is traditionally its softest quarter, were impacted by the
timing of programming and productions costs, a large portion of which
were seasonal in nature and related to hockey.
-
Consolidated adjusted operating profit margin decreased by 300 basis
points to 35.4% this quarter with margins of 45.8% in Wireless and
46.2% in Cable.
-
The reductions of 19% in adjusted net income and 17% in net income were
mainly as a result of an 8% increase in depreciation and amortization
in addition to the 3% decrease in consolidated adjusted operating
profit.
Cash flow and available liquidity
-
Generated $266 million of consolidated free cash flow this quarter,
representing a decrease of 25%, primarily as a result of a
timing-related increase in cash income taxes paid and the lower
adjusted operating profit. Cash provided by operating activities was
$227 million this quarter.
-
Maintained approximately $2.4 billion of liquidity available under our
bank credit facilities as at March 31, 2015.
-
Returned $235 million of cash to shareholders through the payment of our
quarterly cash dividend which the Rogers Board of Directors increased
by 5% to 48 cents per share earlier this quarter.
Strategic Highlights
Overhaul the customer experience
-
Reduced the number of customer complaints by more than 20% over the six
months ended January 31, 2015 based on data collected for the
Commissioner for Complaints for Telecommunications Services' (CCTS)
mid-year report released in April 2015. This reduction is on top of the
more than 30% reduction over the preceding 12-month period ended July
31, 2014 published in CCTS's November 2014 annual report. As part of
our Rogers 3.0 plan, we are committed to putting our customers first,
and while our work is far from over, this report shows our focus on
customers is paying off and we're heading in the right direction.
-
Expanded Roam Like Home to over 35 European countries, further
simplifying how Wireless consumers use the Internet, make calls, and
send texts and emails with their Rogers Share Everything plan.
Customers access their identical Canadian plan features while in
Europe, all at a relatively low cost.
-
Introduced a new Wireless Hardware Upgrade Program where customers now
have the option to upgrade their wireless device online.
-
Released Rogers' 2014 Transparency Report, our second annual report on
how we share customer information in response to requests from legal
authorities.
-
Unveiled a new look and feel, improved search and navigation
capabilities, and accelerated response times for our online Community
Forums. More customers want self-serve and our Community Forums are one
of many ways our customers will be able to get the information they
need quickly and easily.
-
Put customers first in an agreement with the Competition Bureau to issue
credits or refunds to customers who were charged for unwanted
third-party premium text messaging services.
Deliver compelling content everywhere
-
Introduced 'Fido Pulse' Wireless plans delivering more value with a
24-month subscription to Spotify Premium, one of the world's most
innovative music streaming services, and original exclusive DAILY VICE,
an edgy, ground-breaking news app.
-
Acquired exclusive Canadian English-language multimedia rights for
Sportsnet to the 2016 World Cup of Hockey including television, online,
and mobile rights for every game of the highly-anticipated tournament.
-
Reached an average audience of 2.64 million viewers for City's televised
presentation of the 57th Annual GRAMMY Awards, setting a record as the
most-watched program in the network's history.
-
Added more titles and exclusive content to shomi including agreements
with DHX Media and Corus Entertainment. shomi added popular kids' shows
such as iCarly, Yo Gabba Gabba, and SpongeBob SquarePants, as well as exclusive content through a deal with Sony Pictures
Television for the Golden Globe-winning show Transparent and acclaimed series Outlander.
Focus on innovation and network leadership
-
Launched new Rogers IGNITE broadband Internet-based bundled offerings
with new usage options and value-added content, including Rogers NHL
GameCentre LIVE and shomi.
-
Released independent testing research from SamKnows dated February 2015
confirming that Rogers' broadband Internet customers continue to enjoy
fast and reliable upload and download service, delivered at 100 percent
or more on average of advertised speeds, even during peak network
hours.
-
Rogers was the first in Canada to launch Voice over LTE (VoLTE)
technology giving customers across the country access to higher-quality
HD voice and video calls and faster call setup and connection times and
the ability to simultaneously place calls, browse the web or stream
video at considerably greater LTE speeds.
-
Extended wireless network coverage in even more rural markets across
Canada allowing customers to stay connected in additional places, at no
extra charge and with no sign-up or opt-in requirements.
-
Rogers' wireless network was the first in Canada to be Category 6
enabled, allowing customers in select communities across Ontario and
British Columbia to enjoy faster download speeds and a higher quality
video experience on Category 6-enabled smartphones and tablets.
-
Extended Rogers Smart Home Monitoring services to residents in Vancouver
and the Lower Mainland, British Columbia allowing them to connect,
protect, and manage what's happening at home using their mobile devices
or computers.
Drive growth in the business market
-
Deployed the GSMA Embedded SIM Specification of the M2M World Alliance,
a global partnership of telecommunications providers. This standard
allows for remote wireless provisioning of machine-to-machine (M2M)
devices, significantly reducing the cost and time for enabling globally
connected devices.
Invest in and develop our people
-
Selected as one of Canada's Best Diversity Employers for 2015 in a
report released by Mediacorp Inc. in March 2015 for recognition of our
efforts to promote diversity and inclusion in the workplace.
Be a strong Canadian growth company
-
Appointed Dirk Woessner as President, Consumer Business Unit effective
April 6, 2015. Mr. Woessner was previously at Deutsche Telekom where he
held a number of senior leadership positions in both wireless and
broadband within the United Kingdom and Germany.
-
Announced the internal appointment of Jamie Williams as our Chief
Information Officer effective May 4, 2015. Mr. Williams brings a
20-year track record of transforming IT systems in complex and
challenging North American telecommunications environments.
About non-GAAP measures
This earnings release contains non-GAAP measures such as adjusted
operating profit, adjusted operating profit margin, adjusted net
income, free cash flow, adjusted net debt, adjusted net debt to
adjusted operating profit, and adjusted basic and diluted earnings per
share. These are non-GAAP measures and should not be considered as a
substitute or alternative for GAAP measures. They are not defined terms
under International Financial Reporting Standards (IFRS), and do not
have standard meanings, so may not be a reliable way to compare us to
other companies. See "Non-GAAP Measures" for information about these
measures, including how we calculate them.
This earnings release contains important information about our business
and our performance in the first quarter of 2015 as well as
forward-looking information about future periods.
This earnings release should be read in conjunction with our First
Quarter 2015 MD&A, our First Quarter 2015 Interim Condensed
Consolidated Financial Statements and Notes, which have been prepared
in accordance with International Accounting Standard 34, Interim
Financial Reporting, as issued by the International Accounting
Standards Board (IASB), our 2014 Annual MD&A, our 2014 Audited
Consolidated Financial Statements and Notes thereto, which have been
prepared in accordance with IFRS as issued by the IASB, and our other
recent filings with Canadian and US securities regulatory authorities,
which are available on SEDAR at sedar.com or EDGAR at sec.gov, respectively.
For more information about Rogers, including product and service
offerings, competitive market and industry trends, and our overarching
strategy, see "Understanding Our Business", "Our Strategy", and
"Capability to Deliver Results" in our 2014 Annual MD&A. For our key
performance drivers and objectives, see "Key Performance Drivers and
Highlights" in our 2014 Annual MD&A and the section "Key Highlights" in
this earnings release for our first quarter 2015 key achievements.
All dollar amounts are in Canadian dollars unless otherwise stated. All
percentage changes are calculated using the rounded numbers as they
appear in the tables. This earnings release is current as at April 20,
2015 and was approved by the Audit Committee of our Board of Directors
on that date. This earnings release includes forward-looking statements
and assumptions. See "About Forward-Looking Information" for more
information.
We, us, our, Rogers, Rogers Communications, and the Company refer to Rogers Communications Inc. and its subsidiaries. RCI refers to the legal entity Rogers Communications Inc., not including
its subsidiaries. RCI also holds interests in various investments and
ventures.
We are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and
RCI.B) and on the New York Stock Exchange (NYSE: RCI).
In this earnings release, this quarter refers to the three months ended March 31, 2015. All results commentary
is compared to the equivalent periods in 2014 or as at December 31,
2014, as applicable, unless otherwise indicated.
Summary of Consolidated Financial Results
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(In millions of dollars, except margins and per share amounts)
|
|
|
|
|
|
2015
|
|
|
|
2014
|
|
|
% Chg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless
|
|
|
|
|
|
1,794
|
|
|
|
1,727
|
|
|
4
|
|
Cable
|
|
|
|
|
|
870
|
|
|
|
860
|
|
|
1
|
|
Business Solutions
|
|
|
|
|
|
94
|
|
|
|
94
|
|
|
-
|
|
Media
|
|
|
|
|
|
464
|
|
|
|
367
|
|
|
26
|
|
Corporate items and intercompany eliminations
|
|
|
|
|
|
(47)
|
|
|
|
(28)
|
|
|
68
|
Operating revenue
|
|
|
|
|
|
3,175
|
|
|
|
3,020
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless
|
|
|
|
|
|
765
|
|
|
|
790
|
|
|
(3)
|
|
Cable
|
|
|
|
|
|
402
|
|
|
|
409
|
|
|
(2)
|
|
Business Solutions
|
|
|
|
|
|
28
|
|
|
|
28
|
|
|
-
|
|
Media
|
|
|
|
|
|
(32)
|
|
|
|
(24)
|
|
|
(33)
|
|
Corporate items and intercompany eliminations
|
|
|
|
|
|
(39)
|
|
|
|
(42)
|
|
|
(7)
|
Adjusted operating profit 1
|
|
|
|
|
|
1,124
|
|
|
|
1,161
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit margin 1
|
|
|
|
|
|
35.4%
|
|
|
|
38.4%
|
|
|
(3.0 pts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
255
|
|
|
|
307
|
|
|
(17)
|
Diluted earnings per share
|
|
|
|
|
|
$ 0.48
|
|
|
|
$ 0.57
|
|
|
(16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income 1
|
|
|
|
|
|
275
|
|
|
|
340
|
|
|
(19)
|
Adjusted diluted earnings per share 1
|
|
|
|
|
|
$ 0.53
|
|
|
|
$ 0.66
|
|
|
(20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
|
|
|
475
|
|
|
|
488
|
|
|
(3)
|
Free cash flow 1
|
|
|
|
|
|
266
|
|
|
|
356
|
|
|
(25)
|
Cash provided by operating activities
|
|
|
|
|
|
227
|
|
|
|
408
|
|
|
(44)
|
1
|
|
Adjusted operating profit, adjusted operating profit margin, adjusted
net income, adjusted diluted
earnings per share, and free cash flow are non-GAAP measures and should
not be considered as
a substitute or alternative for GAAP measures. These are not defined
terms under IFRS and do
not have standard meanings, so may not be a reliable way to compare us
to other companies. See
"Non-GAAP Measures" for information about these measures, including how
we calculate them.
|
KEY CHANGES IN FINANCIAL RESULTS THIS QUARTER COMPARED TO 2014
Operating revenue
Wireless network revenue increased this quarter compared to the same
period last year primarily as a result of the continued adoption of
higher ARPU-generating simplified pricing plans, the continued growth
in usage of wireless data, and the ongoing transition from three-year
to two-year contracts, partially offset by the continued decline in
roaming revenue as a result of lower-priced roaming plans.
Cable operating revenue increased this quarter compared to the same
period last year as a result of Internet revenue growth and the impact
and timing of pricing changes across all product types, partially
offset by TV subscriber losses over the past year. The implementation
of a CRTC decision mandating that telecommunications providers could no
longer require customers to provide a minimum of 30 days' notice to
cancel services resulted in a decrease of $3 million in Cable revenue
this quarter and an increase in Cable total service unit losses of
approximately 40,000.
Business Solutions operating revenue was stable this quarter compared to
the same period last year as the continued growth in on-net and next
generation services, including our data centre businesses, was offset
by the continued planned reduction in lower-margin, off-net legacy
revenue.
Media operating revenue increased this quarter compared to the same
period last year as a result of revenue generated by our National
Hockey League (NHL) licensing agreement and growth at Sportsnet, Radio,
and Next Issue Canada, partially offset by continued softness in
conventional broadcast TV and print advertising.
Adjusted operating profit
Wireless adjusted operating profit decreased this quarter compared to
the same period last year as a result of the higher volumes of
subsidized smartphones sold as a result of our initiative to
proactively early upgrade existing customers in the first half of 2015,
prior to the final expiration of three-year contracts, partially offset
by the network revenue growth described above and cost reductions.
Cable adjusted operating profit decreased this quarter compared to the
same period last year as a result of investments in programming and
customer value enhancements, partially offset by the revenue changes
discussed above.
Business Solutions adjusted operating profit was stable this quarter as
a result of the continued growth in on-net and near-net next generation
businesses and productivity improvements, offset by the continued
decline in the off-net legacy business.
Media adjusted operating loss increased this quarter compared to the
same period last year as a result of higher programming and production
costs, a large portion of which were seasonal in nature and related to
hockey. See "Media Financial Results" for more information on
seasonality and the impact of programming and production costs.
Results of our Business Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WIRELESS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless Financial Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(In millions of dollars, except margins)
|
|
|
|
|
|
2015
|
|
|
|
2014
|
|
|
% Chg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network revenue
|
|
|
|
|
|
1,672
|
|
|
|
1,636
|
|
|
2
|
|
Equipment sales
|
|
|
|
|
|
122
|
|
|
|
91
|
|
|
34
|
Operating revenue
|
|
|
|
|
|
1,794
|
|
|
|
1,727
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of equipment 1
|
|
|
|
|
|
(393)
|
|
|
|
(297)
|
|
|
32
|
|
Other operating expenses
|
|
|
|
|
|
(636)
|
|
|
|
(640)
|
|
|
(1)
|
|
|
|
|
|
|
(1,029)
|
|
|
|
(937)
|
|
|
10
|
Adjusted operating profit
|
|
|
|
|
|
765
|
|
|
|
790
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit margin as a % of network revenue
|
|
|
|
|
|
45.8%
|
|
|
|
48.3%
|
|
|
(2.5 pts)
|
Additions to property, plant and equipment
|
|
|
|
|
|
180
|
|
|
|
181
|
|
|
(1)
|
1 Includes the cost of equipment sales and direct channel subsidies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless Subscriber Results 1
|
|
|
|
|
|
Three months ended March 31
|
(In thousands, except churn, ARPA, and ARPU)
|
2015
|
2014
|
Chg
|
|
|
|
|
Postpaid 2
|
|
|
|
|
Gross additions
|
277
|
293
|
(16)
|
|
Net (losses) additions
|
(26)
|
2
|
(28)
|
|
Total postpaid subscribers 3
|
8,139
|
8,076
|
63
|
|
Churn (monthly)
|
1.24%
|
1.20%
|
0.04 pts
|
|
ARPU (monthly)
|
$66.21
|
$65.20
|
$1.01
|
|
ARPA (monthly)
|
$107.47
|
$103.10
|
$4.37
|
Prepaid
|
|
|
|
|
Gross additions
|
126
|
76
|
50
|
|
Net (losses)
|
(37)
|
(73)
|
36
|
|
Total prepaid subscribers 3
|
1,340
|
1,356
|
(16)
|
|
Churn (monthly)
|
3.99%
|
3.55%
|
0.44 pts
|
Blended ARPU 2
|
$58.75
|
$57.63
|
$1.12
|
|
|
|
|
1 Subscriber counts, subscriber churn, ARPA, and 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. Excluding the impact of the Wireless Home Phone
subscriber base
adjustment, postpaid ARPU would have increased by 2% or $1.61 and
blended ARPU would have
would have increased by 3% or $1.58 compared to the same period in the
prior year.
|
3 As at end of period.
|
|
Network revenue
The 2% increase in network revenue this quarter was a result of:
-
continued adoption of the customer-friendly Rogers Share Everything
plans, which generate higher ARPU and ARPA and bundle in certain
calling features and long distance, grant the ability to pool data
usage with other devices on the same account, and entice customers with
access to our other products, such as Roam Like Home and Rogers NHL
GameCentre LIVE; partially offset by
-
approximately 18% lower roaming revenue as a result of lower-priced US
and international roaming plans introduced for customers in 2014, which
simplify the customer experience and should increase roaming usage.
A 4% increase in network revenue and postpaid ARPU and a 6% increase in
ARPA would have been realized this quarter if roaming revenue was
excluded from our calculation.
The 2% increase in postpaid ARPU was a result of increased network
revenue and wireless data usage. Commencing in 2015, we are disclosing
ARPA as one of our key performance indicators. See "Key Performance
Indicators" for more information. The 4% increase in postpaid ARPA was
a result of the continued adoption of Share Everything plans relative
to the number of subscriber accounts as customers are increasingly
utilizing the advantages of accessing their shareable plans with
multiple devices on the same account.
The increases in postpaid subscriber churn and net losses and lower
gross additions to our postpaid subscriber base compared to the prior
year were expected in the short-term as a result of:
-
our strategic focus on optimizing subscriber value;
-
a focus on migrating existing customers to current pricing plans; and
-
adjustments to the required rate plans for subsidized premium device
eligibility.
We had fewer net subscriber losses this quarter compared to the fourth
quarter of 2014. The 4 basis point increase in postpaid subscriber
churn compared to the first quarter last year improved from the 12
basis point increase in the fourth quarter of 2014 compared to the
fourth quarter of 2013.
We activated and upgraded approximately 700,000 smartphones for new and
existing subscribers this quarter, a 21% increase compared to
approximately 579,000 in the same period last year. This increase in
smartphone activations was a result of:
-
a greater number of hardware upgrades by existing subscribers; partially
offset by
-
the reduction in postpaid gross additions.
The percentage of subscribers with smartphones was 83% of our total
postpaid subscriber base as at March 31, 2015. In our experience,
smartphone subscribers typically:
-
generate significantly higher ARPU; and
-
are less likely to churn than customers on less advanced devices.
Equipment sales
The 34% increase in revenue from equipment sales this quarter primarily
reflects:
-
the impact of more device upgrades by existing subscribers;
-
a shift in the sales mix to smartphones which included a higher
proportion of iPhone devices; and
-
increased equipment sales prices; partially offset by
-
fewer gross activations.
Operating expenses
The 32% increase in the cost of equipment sales this quarter was
primarily as a result of:
-
a shift in the product mix towards higher-cost smartphones; and
-
increased equipment sales volumes as we proactively early upgraded
targeted subscribers in advance of the industry's "double cohort"
resulting in an increase of 18% more upgrades this quarter, the
majority of which were higher-cost smartphones including 44% more
iPhones.
The "double cohort" refers to the greater than usual number of
subscriber contracts coming to an end as both three-year and two-year
contracts expire near the same time. The final expiration of remaining
three-year contracts for consumers will occur this summer.
Total customer retention spending (primarily consisting of subsidies on
handset upgrades) was 32% higher this quarter with 18% more existing
subscribers upgrading their hardware combined with the shift in product
mix described above.
Other operating expenses (excluding retention spending) decreased this
quarter as a result of improvements in cost management and efficiency
gains.
Adjusted operating profit
The 3% decrease in adjusted operating profit this quarter was a result
of the revenue and expense changes discussed above.
CABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable Financial Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(In millions of dollars, except margins)
|
|
|
|
|
|
2015 1
|
|
|
|
2014
|
|
|
% Chg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internet
|
|
|
|
|
|
324
|
|
|
|
305
|
|
|
6
|
Television
|
|
|
|
|
|
426
|
|
|
|
431
|
|
|
(1)
|
Phone
|
|
|
|
|
|
118
|
|
|
|
121
|
|
|
(2)
|
Service revenue
|
|
|
|
|
|
868
|
|
|
|
857
|
|
|
1
|
Equipment sales
|
|
|
|
|
|
2
|
|
|
|
3
|
|
|
(33)
|
Operating revenue
|
|
|
|
|
|
870
|
|
|
|
860
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of equipment
|
|
|
|
|
|
(1)
|
|
|
|
(2)
|
|
|
(50)
|
Other operating expenses
|
|
|
|
|
|
(467)
|
|
|
|
(449)
|
|
|
4
|
|
|
|
|
|
|
(468)
|
|
|
|
(451)
|
|
|
4
|
Adjusted operating profit
|
|
|
|
|
|
402
|
|
|
|
409
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit margin
|
|
|
|
|
|
46.2%
|
|
|
|
47.6%
|
|
|
(1.4 pts)
|
Additions to property, plant and equipment
|
|
|
|
|
|
224
|
|
|
|
251
|
|
|
(11)
|
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 March 31
|
(In thousands)
|
|
|
|
|
|
2015 2
|
|
|
|
2014
|
|
|
Chg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (losses) additions
|
|
|
|
|
|
(7)
|
|
|
|
20
|
|
|
(27)
|
Total Internet subscribers 2,3
|
|
|
|
|
|
2,004
|
|
|
|
1,981
|
|
|
23
|
Television
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses
|
|
|
|
|
|
(41)
|
|
|
|
(20)
|
|
|
(21)
|
Total television subscribers 2,3
|
|
|
|
|
|
1,983
|
|
|
|
2,107
|
|
|
(124)
|
Phone
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (losses) additions
|
|
|
|
|
|
(20)
|
|
|
|
10
|
|
|
(30)
|
Total phone subscribers 2,3
|
|
|
|
|
|
1,130
|
|
|
|
1,163
|
|
|
(33)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable homes passed 2,3
|
|
|
|
|
|
4,085
|
|
|
|
3,990
|
|
|
95
|
Total service units 2,3,4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (losses) additions
|
|
|
|
|
|
(68)
|
|
|
|
10
|
|
|
(78)
|
Total service units 2,3
|
|
|
|
|
|
5,117
|
|
|
|
5,251
|
|
|
(134)
|
1
|
|
Subscriber counts are key performance indicators. See "Key Performance
Indicators".
|
2
|
|
On November 4, 2014, we acquired approximately 16,000 high-speed
Internet
subscribers, 16,000 Television subscribers and 11,000 Phone subscribers
from our acquisition of Source Cable. The acquisition also increased
homes
passed by 26,000.
|
3
|
|
As at end of period.
|
4
|
|
Includes Internet, Television, and Phone subscribers.
|
Operating revenue
The 1% increase in overall Cable revenue this quarter was primarily a
result of:
-
a higher subscriber base for our Internet products combined with the
movement of customers to higher speed and usage tiers;
-
the impact and timing of pricing changes implemented over the past year;
partially offset by
-
Television and Phone subscriber losses over the past year; and
-
Phone promotional discounting.
The implementation of a CRTC decision mandating that, effective January
23, 2015, telecommunications providers could no longer require
customers to provide a minimum of 30 days' notice to cancel services
had the effect of increasing the amount of Cable product subscriber
deactivations reported this quarter. The policy change effectively
resulted in an extra month of customer deactivations being counted this
quarter and a corresponding increase in the number of subscriber losses
of approximately 17,000 Television subscribers, 15,000 high-speed
Internet subscribers, and 8,000 Phone subscribers. This decreased Cable
revenue by $3 million for the quarter.
Internet revenue
The 6% increase in Internet revenue this quarter was a result of:
-
general movement by customers to higher speed and usage tiers;
-
the impact and timing of changes in Internet service pricing;
-
a larger Internet subscriber base; partially offset by
-
the effect of the CRTC cancellation notification policy change.
The realization of Internet net losses in the short-term was a result of
our strategic focus towards optimizing subscriber value versus
subscriber volume as we migrate existing customers to current price
plans. There was also heightened competition where cross-bundling of
various wireline products impacted our Internet subscribers. We believe
that our new IGNITE broadband Internet-based bundled offerings we
introduced late in the quarter will help our revenue metrics as these
offerings give the consumer better choice on usage and incorporate
value-added content.
Television revenue
The slight decrease in Television revenue this quarter was a result of:
-
the decline in Television subscribers over the past year mainly
associated with heightened pay TV competition;
-
the effect of the CRTC cancellation notification policy change;
partially offset by
-
the impact and timing of pricing changes implemented over the past year.
The digital cable subscriber base represented 89% of our total
Television subscriber base as at the end of the quarter, compared to
85% in the same period last year. We expect to complete our ongoing
analog-to-digital network transition to digital by the end of 2015.
Phone revenue
The 2% decrease in Phone revenue this quarter was a result of:
-
decreased subscriber volume; and
-
increased promotional discounting activity;
-
the effect the CRTC cancellation notification policy change; partially
offset by
-
the impact and timing of pricing changes implemented over the past year.
Operating expenses
The 4% increase in operating expenses this quarter was a result of:
-
higher investments in programming and customer value enhancements;
partially offset by
-
various cost efficiency and productivity initiatives.
Adjusted operating profit
The 2% decrease in adjusted operating profit this quarter was a result
of the revenue and expense changes discussed above.
BUSINESS SOLUTIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Solutions Financial Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(In millions of dollars, except margins)
|
|
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
% Chg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Next generation
|
|
|
|
|
|
70
|
|
|
|
64
|
|
|
|
9
|
|
Legacy
|
|
|
|
|
|
23
|
|
|
|
29
|
|
|
|
(21)
|
|
Service revenue
|
|
|
|
|
|
93
|
|
|
|
93
|
|
|
|
-
|
|
Equipment sales
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
-
|
Operating revenue
|
|
|
|
|
|
94
|
|
|
|
94
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
(66)
|
|
|
|
(66)
|
|
|
|
-
|
Adjusted operating profit
|
|
|
|
|
|
28
|
|
|
|
28
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit margin
|
|
|
|
|
|
29.8%
|
|
|
|
29.8%
|
|
|
|
-
|
Additions to property, plant and equipment
|
|
|
|
|
|
33
|
|
|
|
26
|
|
|
|
27
|
Business Solutions continues to focus primarily on next generation
IP-based services, leveraging higher-margin on-net and near-net service
revenue opportunities, and using existing network facilities to expand
offerings to the small, medium, and large-sized enterprise, public
sector, and carrier wholesale markets. Business Solutions is also
focused on data centre colocation, hosting, cloud, and disaster
recovery services.
Next generation services, which include our data centre operations,
represented 75% (2014 - 69%) of total service revenue in the quarter.
Revenue from the lower-margin off-net legacy business, which continues
to decline as planned, generally includes circuit-switched local and
long-distance voice services and legacy data services, which often use
facilities that are leased from other carriers rather than owned.
Operating revenue
Service revenue was stable this quarter as a result of:
-
continuing execution of our plan to grow higher-margin on-net and
near-net next generation IP-based services revenue; and
-
higher revenue from data centre operations; offset by
-
the continuing planned decline in the legacy off-net voice and data
business, a trend we expect to continue as we focus the business on
on-net and near-net opportunities and customers move to more advanced
and cost-effective IP-based services and solutions.
Operating expenses
Operating expenses were stable this quarter as a result of:
-
lower legacy service costs related to planned lower volumes and customer
levels; and
-
ongoing initiatives to reduce costs and increase productivity; offset by
-
higher on-net and next generation service costs associated with higher
volumes.
Adjusted operating profit
Adjusted operating profit was stable this quarter as a result of the
continued growth in on-net and near-net next generation business and
productivity improvements offset by the continued decline in off-net
legacy business.
MEDIA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Media Financial Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(In millions of dollars, except margins)
|
|
|
|
|
|
2015
|
|
|
|
2014
|
|
|
% Chg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
464
|
|
|
|
367
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
(496)
|
|
|
|
(391)
|
|
|
27
|
Adjusted operating loss
|
|
|
|
|
|
(32)
|
|
|
|
(24)
|
|
|
(33)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating loss margin
|
|
|
|
|
|
(6.9%)
|
|
|
|
(6.5%)
|
|
|
(0.4 pts)
|
Additions to property, plant and equipment
|
|
|
|
|
|
9
|
|
|
|
14
|
|
|
(36)
|
National NHL licensing agreement
The national NHL licensing agreement commenced in the fourth quarter of
2014. The first quarter of the calendar year is when the greatest
volume of regular season games are played, followed by the second
quarter which includes fewer games but includes the league playoffs.
Playoff games are expected to command a premium in advertising
revenues. NHL-related programming and production costs are expensed
based on the proportion of games played without differentiation between
regular season and playoff games.
Operating revenue
The 26% increase in operating revenue this quarter was a result of:
-
approximately $106 million of revenue generated by the national NHL
licensing agreement;
-
higher subscription revenue generated by our Sportsnet properties; and
-
higher Radio and Next Issue Canada revenue; partially offset by
-
continued softness in conventional broadcast TV and print advertising.
Operating expenses
The 27% increase in operating expenses this quarter was a result of:
-
higher programming and production costs of approximately $120 million as
a result of the increase in the number of NHL hockey games associated
with the national and regional NHL licensing agreements. There were
more regional NHL games relative to last year partially as a result of
schedule changes due to the 2014 Winter Olympic Games in the prior
year; partially offset by
-
lower conventional broadcast TV programming costs;
-
lower publishing costs related to lower printing, postage, shipping, and
circulation costs; and
-
decreased operating costs in Radio.
Adjusted operating loss
The $8 million increase in adjusted operating loss this quarter reflects
the revenue and expense changes described above. The NHL games
contributed an expected adjusted operating loss of approximately $14
million this quarter as a result of the seasonal peak period of games,
as discussed above. We anticipate this seasonal loss will be offset in
the second quarter of 2015 with the higher-value playoff season
expected to generate greater advertising revenue, while at the same
time there are fewer games produced and over which rights are
amortized.
Compared to the fourth quarter of 2014, the lower revenue and adjusted
operating profit trends primarily reflect the seasonality of Media's
business. In addition to the NHL impacts described above, this is a
result of higher conventional advertising revenue occurring in the
fourth quarter of 2014 due to fall season premieres in broadcasting and
higher retail sales at The Shopping Channel due to holiday shopping.
Additions to Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(In millions of dollars, except capital intensity)
|
|
|
|
|
|
2015
|
|
|
|
2014
|
|
|
% Chg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless
|
|
|
|
|
|
180
|
|
|
|
181
|
|
|
(1)
|
|
Cable
|
|
|
|
|
|
224
|
|
|
|
251
|
|
|
(11)
|
|
Business Solutions
|
|
|
|
|
|
33
|
|
|
|
26
|
|
|
27
|
|
Media
|
|
|
|
|
|
9
|
|
|
|
14
|
|
|
(36)
|
|
Corporate
|
|
|
|
|
|
29
|
|
|
|
16
|
|
|
81
|
Total additions to property, plant and equipment
|
|
|
|
|
|
475
|
|
|
|
488
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital intensity 1
|
|
|
|
|
|
15.0%
|
|
|
|
16.2%
|
|
|
(1.2 pts)
|
1
|
Capital intensity is a key performance indicator. See "Key Performance
Indicators".
|
Wireless
The relatively stable additions to property, plant and equipment at
Wireless this quarter are primarily related to LTE capacity investments
and site build activity to further enhance network coverage and quality
and the continued deployment of our 700 MHz spectrum. Deployment of the
LTE network has reached approximately 87% of Canada's population as at
March 31, 2015.
Cable
The decrease in additions to property, plant and equipment at Cable this
quarter was a result of lower customer equipment investment in our next
generation NextBox digital set-top boxes compared to the same quarter
last year. We also made investments this quarter to improve the
capacity of our Internet platform, further improve the reliability and
quality of the network, and continue the development of our next
generation IP-based video service.
Business Solutions
The increase in Business Solutions property, plant and equipment
additions this quarter was a result of data centre investments and
network expansion to reach additional customers and sites.
Media
The decrease in Media property, plant and equipment additions this
quarter was a result of greater prior year investments made to our
digital, IT infrastructure, and broadcast facilities.
Corporate
The increase in Corporate property, plant and equipment additions this
quarter was a result of higher spending on premise improvements at our
various offices.
Capital Intensity
Capital intensity decreased this quarter as a result of a decline in
additions to property, plant and equipment combined with the increase
in operating revenue.
Financial Guidance
We have no changes to the 2015 annual consolidated guidance ranges for
adjusted operating profit, additions to property, plant and equipment,
or free cash flow that we provided on January 29, 2015. See "About
Forward-Looking Information" in this earnings release and in our 2014
Annual MD&A.
Key Performance Indicators
We measure the success of our strategy using a number of key performance
indicators that are defined and discussed in our 2014 Annual MD&A and
this earnings release. We believe these key performance indicators
allow us to appropriately measure our performance against our operating
strategy as well as against the results of our peers and competitors.
The following key performance indicators are not measurements in
accordance with IFRS and should not be considered as an alternative to
net income or any other measure of performance under IFRS. They
include:
-
Subscriber counts;
-
Subscriber churn;
-
Average revenue per user (ARPU);
-
Average revenue per account (ARPA); and
-
Capital intensity.
Commencing this quarter, we are disclosing ARPA as one of our key
performance indicators, which is described below:
Average revenue per account - Wireless
Average revenue per account (ARPA) helps us identify trends and measure
our success in attracting and retaining multiple-device accounts. A
single Wireless postpaid account typically provides subscribers with
the advantage of allowing for the pooling of plan attributes across
multiple devices and on a single bill. Each Wireless postpaid account
is represented by an identifiable billing account number. A single
Wireless postpaid account may include more than one identifiable
telephone number and receive monthly Wireless services for a variety of
connected devices including smartphones, basic phones, tablets, and
other devices. Wireless postpaid accounts under our various brand names
are considered separate accounts. We calculate Wireless ARPA by
dividing total Wireless postpaid network revenue (monthly) by the
average number of Wireless postpaid accounts for the same time period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(In millions of dollars, except ARPA and months; subscribers in
thousands)
|
|
|
|
|
|
2015
|
2014
|
|
|
|
|
|
|
|
|
Postpaid ARPA (monthly)
|
|
|
|
|
|
|
|
|
Total network revenue
|
|
|
|
|
|
1,672
|
1,636
|
|
Less: prepaid revenue
|
|
|
|
|
|
58
|
58
|
|
Postpaid (voice and data) revenue
|
|
|
|
|
|
1,614
|
1,578
|
|
|
|
|
|
|
|
|
|
Divided by: average Wireless postpaid accounts
|
|
|
|
|
|
5,006
|
5,102
|
|
Divided by: three months for the quarter
|
|
|
|
|
|
3
|
3
|
Postpaid ARPA (monthly)
|
|
|
|
|
|
$ 107.47
|
$ 103.10
|
Non-GAAP Measures
We use the following non-GAAP measures. These are reviewed regularly by
management and our Board of Directors in assessing our performance and
making decisions regarding the ongoing operations of our business and
its ability to generate cash flows. Some or all of these measures may
also be used by investors, lending institutions, and credit rating
agencies as an indicator of our operating performance, our ability to
incur and service debt, and as a measurement to value companies in the
telecommunications sector. These are not recognized measures under GAAP
and do not have standard meanings under IFRS, so they may not be a
reliable way to compare us to other companies.
Non-GAAP
measure
|
Why we use it
|
How we calculate it
|
Most comparable
IFRS financial
measure
|
Adjusted
operating profit
and related
margin
|
-
To evaluate the performance of our
businesses and when making
decisions about the ongoing
operations of the business and our
ability to generate cash flows.
-
We believe that certain investors and
analysts use adjusted operating profit
to measure our ability to service debt
and to meet other payment obligations.
-
We also use it as one component in
determining short-term incentive
compensation for all management
employees.
|
Adjusted operating profit:
Net income
add back
income taxes, other (income) expense, finance
costs, depreciation and amortization,
impairment of assets, stock-based
compensation, and restructuring, acquisition
and other expenses.
Adjusted operating profit margin:
Adjusted operating profit
divided by
Operating revenue (network revenue for
Wireless).
|
Net income
|
Adjusted net
income
Adjusted basic
and diluted
earnings per
share
|
-
To assess the performance of our
businesses before the effects of these
items, because they affect the
comparability of our financial results
and could potentially distort the
analysis of trends in business
performance. Excluding these items
does not imply they are non-recurring.
|
Net income
add back
stock-based compensation, restructuring,
acquisition and other expenses, impairment of
assets, gains on sale of investments, losses on
repayment of long-term debt, and income tax
adjustments on these items, including
adjustments as a result of legislative changes.
|
Net income
Basic and diluted
earnings per share
|
Free cash flow
|
-
To show how much cash we have
available to repay debt and reinvest in
our company, which is an important
indicator of our financial strength and
performance.
-
We believe that some investors and
analysts use free cash flow to value a
business and its underlying assets.
|
Adjusted operating profit
minus
additions to property, plant and equipment,
interest on borrowings net of interest
capitalized, and cash income taxes.
|
Cash provided by
operating activities
|
Adjusted net
debt
|
-
To conduct valuation-related analysis
and make decisions about capital
structure.
-
We believe this helps investors and
analysts analyze our enterprise and
equity value and assess our leverage.
|
Total long-term debt
plus
current portion of long-term debt, deferred
transaction costs and discounts, net debt
derivative assets or liabilities, bank advances,
and short-term borrowings
minus
cash and cash equivalents.
|
Long-term debt
|
Adjusted net
debt to adjusted
operating profit
|
-
To conduct valuation-related analysis
and make decisions about capital
structure.
-
We believe this helps investors and
analysts analyze our enterprise and
equity value and assess our leverage.
|
Adjusted net debt (defined above)
divided by
12 months trailing adjusted operating profit
(defined above).
|
Long-term debt
divided by net
income
|
Reconciliation of adjusted operating profit
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(In millions of dollars)
|
|
|
|
2015
|
2014
|
|
|
|
|
|
|
Net income
|
|
|
|
255
|
307
|
Add (deduct):
|
|
|
|
|
|
|
Income taxes
|
|
|
|
82
|
106
|
|
Other (income)
|
|
|
|
(3)
|
(10)
|
|
Finance costs
|
|
|
|
210
|
225
|
|
Depreciation and amortization
|
|
|
|
559
|
519
|
|
Stock-based compensation
|
|
|
|
12
|
5
|
|
Restructuring, acquisition and other
|
|
|
|
9
|
9
|
|
|
|
|
|
|
Adjusted operating profit
|
|
|
|
1,124
|
1,161
|
|
|
|
|
|
|
Reconciliation of adjusted net income
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(In millions of dollars)
|
|
|
|
2015
|
2014
|
|
|
|
|
|
|
Net income
|
|
|
|
255
|
307
|
Add (deduct):
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
12
|
5
|
|
Restructuring, acquisition and other
|
|
|
|
9
|
9
|
|
Loss on repayment of long-term debt
|
|
|
|
7
|
29
|
Income tax impact of above items
|
|
|
|
(8)
|
(10)
|
|
|
|
|
|
|
Adjusted net income
|
|
|
|
275
|
340
|
|
|
|
|
|
|
Reconciliation of free cash flow
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(In millions of dollars)
|
|
|
|
2015
|
2014
|
|
|
|
|
|
|
Cash provided by operating activities
|
|
|
|
227
|
408
|
Add (deduct):
|
|
|
|
|
|
|
Property, plant and equipment expenditures
|
|
|
|
(475)
|
(488)
|
|
Interest on borrowings, net of capitalization
|
|
|
|
(188)
|
(183)
|
|
Restructuring, acquisition and other
|
|
|
|
9
|
9
|
|
Interest paid
|
|
|
|
263
|
236
|
|
Change in non-cash working capital
|
|
|
|
350
|
309
|
|
Other adjustments
|
|
|
|
80
|
65
|
|
|
|
|
|
|
Free cash flow
|
|
|
|
266
|
356
|
|
|
|
|
|
|
Reconciliation of adjusted net debt and adjusted net debt / adjusted
operating profit
|
|
|
|
|
As at
March 31
|
As at
December 31
|
(In millions of dollars)
|
|
|
|
2015
|
2014
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
|
-
|
963
|
Long-term debt
|
|
|
|
15,490
|
13,824
|
Deferred transaction costs and discounts
|
|
|
|
106
|
108
|
|
|
|
|
15,596
|
14,895
|
Add (deduct):
|
|
|
|
|
|
|
Net debt derivatives assets
|
|
|
|
(1,441)
|
(846)
|
|
Short-term borrowings
|
|
|
|
1,035
|
842
|
|
Bank advances (cash and cash equivalents)
|
|
|
|
27
|
(176)
|
|
|
|
|
|
|
Adjusted net debt
|
|
|
|
15,217
|
14,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
March 31
|
As at
December 31
|
(In millions of dollars, except ratios)
|
|
|
|
2015
|
2014
|
|
|
|
|
|
|
Adjusted net debt / adjusted operating profit
|
|
|
|
|
|
|
Adjusted net debt
|
|
|
|
15,217
|
14,715
|
|
Divided by: trailing 12 months adjusted operating profit
|
|
|
|
4,982
|
5,019
|
Adjusted net debt / adjusted operating profit
|
|
|
|
3.1
|
2.9
|
|
|
|
|
|
|
Reconciliation of adjusted earnings per share
|
|
|
|
|
|
(In millions of dollars, except per share amounts;
|
|
|
|
Three months ended March 31
|
number of shares outstanding in millions)
|
|
|
|
2015
|
2014
|
|
|
|
|
|
|
Adjusted basic earnings per share:
|
|
|
|
|
|
|
Adjusted net income
|
|
|
|
275
|
340
|
|
Divided by: weighted average number of shares outstanding
|
|
|
|
515
|
515
|
Adjusted basic earnings per share
|
|
|
|
0.53
|
0.66
|
|
|
|
|
|
|
Adjusted diluted earnings per share:
|
|
|
|
|
|
|
Adjusted net income
|
|
|
|
275
|
340
|
|
Divided by: diluted weighted average number of shares outstanding
|
|
|
|
517
|
517
|
Adjusted diluted earnings per share
|
|
|
|
0.53
|
0.66
|
|
|
|
|
|
|
Rogers Communications Inc.
|
|
|
|
|
|
Interim Condensed Consolidated Statements of Income
|
|
|
|
|
|
(In millions of Canadian dollars, except per share amounts, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(In millions of Canadian dollars, except per share amounts)
|
|
|
|
2015
|
2014
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
3,175
|
3,020
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
Operating costs
|
|
|
|
2,063
|
1,864
|
|
Depreciation and amortization
|
|
|
|
559
|
519
|
|
Restructuring, acquisition and other
|
|
|
|
9
|
9
|
Finance costs
|
|
|
|
210
|
225
|
Other income
|
|
|
|
(3)
|
(10)
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
337
|
413
|
Income taxes
|
|
|
|
82
|
106
|
|
|
|
|
|
|
Net income for the period
|
|
|
|
255
|
307
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
Basic
|
|
|
|
$ 0.50
|
$ 0.60
|
|
Diluted
|
|
|
|
$ 0.48
|
$ 0.57
|
|
|
|
|
|
|
|
|
|
|
|
|
Rogers Communications Inc.
|
|
|
|
|
|
Interim Condensed Consolidated Statements of Financial Position
|
|
|
|
|
|
(In millions of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at
March 31
|
As at
December 31
|
(In millions of Canadian dollars)
|
|
|
|
2015
|
2014
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
-
|
176
|
|
Accounts receivable
|
|
|
|
1,440
|
1,591
|
|
Inventories
|
|
|
|
380
|
251
|
|
Other current assets
|
|
|
|
328
|
191
|
|
Current portion of derivative instruments
|
|
|
|
149
|
136
|
Total current assets
|
|
|
|
2,297
|
2,345
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
|
10,610
|
10,655
|
Intangible assets
|
|
|
|
6,537
|
6,588
|
Investments
|
|
|
|
1,866
|
1,898
|
Derivative instruments
|
|
|
|
1,430
|
788
|
Other long-term assets
|
|
|
|
357
|
356
|
Deferred tax assets
|
|
|
|
9
|
9
|
Goodwill
|
|
|
|
3,883
|
3,883
|
|
|
|
|
|
|
Total assets
|
|
|
|
26,989
|
26,522
|
|
|
|
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Bank advances
|
|
|
|
27
|
-
|
|
Short-term borrowings
|
|
|
|
1,035
|
842
|
|
Accounts payable and accrued liabilities
|
|
|
|
2,141
|
2,578
|
|
Income tax payable
|
|
|
|
-
|
47
|
|
Current portion of provisions
|
|
|
|
7
|
7
|
|
Unearned revenue
|
|
|
|
495
|
443
|
|
Current portion of long-term debt
|
|
|
|
-
|
963
|
|
Current portion of derivative instruments
|
|
|
|
75
|
40
|
Total current liabilities
|
|
|
|
3,780
|
4,920
|
|
|
|
|
|
|
Provisions
|
|
|
|
52
|
55
|
Long-term debt
|
|
|
|
15,490
|
13,824
|
Derivative instruments
|
|
|
|
100
|
11
|
Other long-term liabilities
|
|
|
|
360
|
462
|
Deferred tax liabilities
|
|
|
|
1,766
|
1,769
|
Total liabilities
|
|
|
|
21,548
|
21,041
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
5,441
|
5,481
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
|
|
26,989
|
26,522
|
|
|
|
|
|
|
Rogers Communications Inc.
|
|
|
|
|
|
Interim Condensed Consolidated Statements of Cash Flows
|
|
|
|
|
|
(In millions of Canadian dollars, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(In millions of Canadian dollars)
|
|
|
|
2015
|
2014
|
Operating activities:
|
|
|
|
|
|
|
Net income for the period
|
|
|
|
255
|
307
|
|
Adjustments to reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
559
|
519
|
|
|
Program rights amortization
|
|
|
|
22
|
16
|
|
|
Finance costs
|
|
|
|
210
|
225
|
|
|
Income taxes
|
|
|
|
82
|
106
|
|
|
Stock-based compensation
|
|
|
|
12
|
5
|
|
|
Post-employment benefits contributions, net of expense
|
|
|
|
(95)
|
(85)
|
|
|
Other
|
|
|
|
(10)
|
(6)
|
|
|
|
|
1,035
|
1,087
|
|
Change in non-cash operating working capital items
|
|
|
|
(350)
|
(309)
|
|
|
|
|
685
|
778
|
|
Income taxes paid
|
|
|
|
(195)
|
(134)
|
|
Interest paid
|
|
|
|
(263)
|
(236)
|
|
|
|
|
|
|
Cash provided by operating activities
|
|
|
|
227
|
408
|
Investing activities:
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
|
(475)
|
(488)
|
|
Changes in non-cash working capital related to property, plant and
equipment
|
|
|
|
(92)
|
(17)
|
|
Additions to program rights
|
|
|
|
(12)
|
(7)
|
|
Acquisitions and other strategic transactions, net of cash acquired
|
|
|
|
-
|
(658)
|
|
Other
|
|
|
|
(12)
|
(3)
|
|
|
|
|
|
|
Cash used in investing activities
|
|
|
|
(591)
|
(1,173)
|
Financing activities:
|
|
|
|
|
|
|
Proceeds received on short-term borrowings
|
|
|
|
208
|
-
|
|
Repayment of short-term borrowings
|
|
|
|
(15)
|
-
|
|
Issuance of long-term debt
|
|
|
|
1,658
|
2,082
|
|
Repayment of long-term debt
|
|
|
|
(1,609)
|
(1,221)
|
|
Proceeds on settlement of cross-currency interest rate exchange
agreements and forward contracts
|
|
|
|
1,059
|
2,150
|
|
Payments on settlement of cross-currency interest rate exchange
agreements and forward contracts
|
|
|
|
(905)
|
(2,115)
|
|
Transaction costs incurred
|
|
|
|
-
|
(27)
|
|
Dividends paid
|
|
|
|
(235)
|
(224)
|
|
|
|
|
|
|
Cash provided by financing activities
|
|
|
|
161
|
645
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
|
(203)
|
(120)
|
Cash and cash equivalents, beginning of period
|
|
|
|
176
|
2,301
|
|
|
|
|
|
|
(Bank advances) cash and cash equivalents, end of period
|
|
|
|
(27)
|
2,181
|
About Forward-Looking Information
This earnings release includes "forward-looking information" within the
meaning of applicable securities laws, and assumptions about, among
other things, our business, operations, and financial performance and
condition approved by our management on the date of this earnings
release. This forward-looking information and these assumptions
include, but are not limited to, statements about our objectives and
strategies to achieve those objectives, and about our beliefs, plans,
expectations, anticipations, estimates, or intentions.
Forward-looking information and statements
-
typically include words like could, expect, may, anticipate, assume,
believe, intend, estimate, plan, project, guidance, outlook, and
similar expressions, although not all forward-looking information and
statements include them;
-
include conclusions, forecasts, and projections that are based on our
current objectives and strategies and on estimates, expectations,
assumptions, and other factors, most of which are confidential and
proprietary and that we believe to be reasonable at the time they were
applied but may prove to be incorrect; and
-
were approved by our management on the date of this earnings release.
Our forward-looking information and statements include forecasts and
projections related to the following items, among others:
-
revenue
-
adjusted operating profit
-
property, plant and equipment expenditures
-
cash income tax payments
-
free cash flow
-
dividend payments
-
expected growth in subscribers and the services to which they subscribe
-
the cost of acquiring subscribers and deployment of new services
-
continued cost reductions and efficiency improvements
-
the growth of new products and services
-
all other statements that are not historical facts.
We base our conclusions, forecasts, and projections on the following
factors, among others:
-
general economic and industry growth rates
-
currency exchange rates and interest rates
-
product pricing levels and competitive intensity
-
subscriber growth
-
pricing, usage and churn rates
-
changes in government regulation
-
technology deployment
-
availability of devices
-
timing of new product launches
-
content and equipment costs
-
the integration of acquisitions
-
industry structure and stability.
Except as otherwise indicated, this earnings release and our
forward-looking statements do not reflect the potential impact of any
non-recurring or other special items or of any dispositions,
monetizations, mergers, acquisitions, other business combinations, or
other transactions that may be considered, announced or may occur after
the date the statement containing the forward-looking information is
made.
Risks and uncertainties
Actual events and results can be substantially different from what is
expressed or implied by forward-looking information as a result of
risks, uncertainties, and other factors, many of which are beyond our
control, including but not limited to:
-
new interpretations and new accounting standards from accounting
standards bodies
-
regulatory changes
-
technological change
-
economic conditions
-
unanticipated changes in content or equipment costs
-
changing conditions in the entertainment, information, and
communications industries
-
the integration of acquisitions
-
litigation and tax matters
-
the level of competitive intensity
-
the emergence of new opportunities.
These factors can also affect our objectives, strategies, and
intentions. Many of these factors are beyond our control or our current
expectations or knowledge. Should one or more of these risks,
uncertainties, or other factors materialize, our objectives,
strategies, or intentions change, or any other factors or assumptions
underlying the forward-looking information prove incorrect, our actual
results and our plans could vary significantly from what we currently
foresee.
Accordingly, we warn investors to exercise caution when considering
statements containing forward-looking information and caution them that
it would be unreasonable to rely on such statements as creating legal
rights regarding our future results or plans. We are under no
obligation (and we expressly disclaim any such obligation) to update or
alter any statements containing forward-looking information or the
factors or assumptions underlying them, whether as a result of new
information, future events, or otherwise, except as required by law.
All of the forward-looking information in this earnings release is
qualified by the cautionary statements herein.
Before making an investment decision
Before making any investment decisions and for a detailed discussion of
the risks, uncertainties, and environment associated with our business,
fully review the sections of our First Quarter 2015 MD&A entitled
"Updates to Risks and Uncertainties" and "Regulatory Developments" and
fully review the sections in our 2014 Annual MD&A entitled "Regulation
in Our Industry" and "Governance and Risk Management", as well as our
various other filings with Canadian and US securities regulators, which
can be found at sedar.com and sec.gov, respectively.
About Rogers
Rogers Communications is a leading diversified public Canadian
communications and media company. We are Canada's largest provider of
wireless communications services and one of Canada's leading providers
of cable television, high-speed Internet and telephony services to
consumers and businesses. Through Rogers Media, we are engaged in radio
and television broadcasting, televised shopping, magazines and trade
publications, sports entertainment, and digital media. Our stock is
publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B)
and on the New York Stock Exchange (NYSE: RCI). For further information
about the Rogers group of companies, please visit rogers.com.
Information on or connected to our website is not part of or
incorporated into this earnings release.
Quarterly Investment Community Teleconference
The first quarter 2015 results teleconference with the investment
community will be held on:
-
April 20, 2015
-
4:30 p.m. Eastern Time
-
webcast available at rogers.com/webcast
A rebroadcast will be available at rogers.com/investors on the Events
and Presentations page for at least two weeks following the
teleconference. Additionally, investors should note that from time to
time, Rogers management presents at brokerage-sponsored investor
conferences. Most often, but not always, these conferences are webcast
by the hosting brokerage firm, and when they are webcast, links are
made available on Rogers' website at rogers.com/events and are placed
there generally at least two days before the conference.
For More Information
You can find additional information relating to us on our website (rogers.com/investors), on SEDAR (sedar.com), on EDGAR (sec.gov), or by e-mailing your request to 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.
SOURCE Rogers Communications Inc.