[Note: This is a summary of the highlights of the Rogers release. To access the complete document click here.]
- Revenue and Adjusted Operating Profit Increase 3% with 39% Margins, 16% Growth in Free Cash Flow and 24% Growth in Free Cash Flow per Share Compared to Third Quarter 2009;
- Wireless Activates and Upgrades a Record 529,000 Smartphones in Quarter;
- Wireless Data Revenue Growth Continues Strong at 28%, while the Addition of Cable Total Service Units Accelerates from Third Quarter 2009;
- $522 Million of Cash Returned to Rogers Shareholders in Dividends and Share Buybacks During Third Quarter
Rogers Communications Inc. today announced the filing of its consolidated financial and operating results for the three and nine months ended September 30, 2010.
“The third quarter 2010 results demonstrate continued steady growth in new subscribers, revenues and free cash flow, and the return of significant amounts of cash to our shareholders through dividends and share buybacks,” said Nadir Mohamed, President and CEO of Rogers Communications Inc. “Importantly, we continued to make significant investments in both customer retention initiatives and opportunistic acquisitions consistent with our strategic priorities to support the future growth of the business.”
Highlights of the third quarter of 2010 include the following:
– Generated consolidated quarterly revenue growth of 3%, with Wireless network revenue growth of 4%, and revenue growth of 3% in Cable Operations and 3% in Media, versus the same quarter last year. Cable Operations and Media adjusted operating profit increased by 13% and 6%, respectively, partially offset by the modest decline in Wireless reflecting the related costs attributable to the significant year-over-year increase in smartphone activations and upgrades this quarter. Revenue growth and cost reduction initiatives combined to keep adjusted operating profit margin steady at 39.0% year-over-year on a consolidated basis, with Cable Operations margins increasing to 46.2% from 42.0%, and Media margins increasing to 10.1% from 9.9%, partially offset by Wireless network margins decreasing to 48.3% from 51.4% as a result of increased smartphone costs through stronger activations and upgrades.
– Wireless network revenue growth was fuelled by data revenue growth of 28% and net subscriber additions of 211,000. Wireless data revenue now comprises 28% of Wireless network revenue and was helped by the activation and upgrade of a record 529,000 additional smartphones during the quarter, predominantly BlackBerry, iPhone and Android devices, of which approximately 33% were for subscribers new to Wireless, compared to 370,000 in the prior year quarter. The number of new Smartphone subscribers was the second highest ever in a quarter. This resulted in subscribers with smartphones, who typically generate ARPU nearly twice that of voice only subscribers, representing 37% of the overall postpaid subscriber base as at September 30, 2010, up from 28% as at September 30, 2009.
– Wireless launched the next generation Apple iPhone 4 that includes new features such as video calling, higher-resolution display, multi-tasking and HD video recording. Wireless upgraded 61% more iPhones than in the third quarter of 2009.
– Sony Canada and Rogers announced the integration of Rogers’ wireless, Internet, and cable products and services into its Sony Style retail stores, where customers can now select from a wide variety of Rogers services, devices and product bundles.
– Wireless announced the launch of technical trials of Long Term Evolution (“LTE”) wireless network technology, a fourth generation (“4G”) wireless technology that enables network at speeds of up to 150 Mbps. Through this trial we will determine how LTE technology performs across a variety of spectrum frequencies in urban, suburban, and rural environments. In addition, we will verify LTE throughput speeds, performance quality, and interoperability of LTE with our existing HSPA+ network.
– Cable grew total service units (television, Internet and telephony subscribers) by 54,000 during the quarter or 8% faster than the third quarter of 2009, with Internet subscriber penetration now at 72% of television subscribers and residential voice-over-cable telephony penetration at 43% of television subscribers.
– Rogers announced the acquisition of Atria Networks on October 5, 2010, one of Ontario’s largest fibre-optic networks, which will augment the Rogers Business Solutions (“RBS”) small and medium sized business offerings by enhancing its ability to deliver on-net data centric services within and adjacent to Cable’s footprint. This transaction is subject to regulatory approval and is expected to close in the first quarter of 2011.
– Cable divested certain assets related to its remaining circuit-switched operations, including co-location sites and related equipment. In addition, the remaining residential circuit-switched lines in Cable Operations will be transferred to a third party reseller over the next six months approximately. The portion of RBS’s business customer lines provisioned over these circuit-switched co-location facilities will continue to be serviced by RBS under a separate wholesale arrangement.
– Cable announced that its Rogers On Demand Online broadband video distribution platform, Canada’s leading on-demand portal, now carries over 10,000 hours of primetime TV, movies, series and sports entertainment from hundreds of top studios and networks, including the recent addition of on-demand programming from Sony, Disney, HBO, Showtime, and more.
– Rogers announced the appointment of Keith Pelley as the President of Rogers Media succeeding retiring President Tony Viner. Pelley joins Rogers from CTV and most recently was President of Canada’s highly successful Olympic Broadcast Media Consortium. He previously served as President of the Toronto Argonauts and of the TSN sports specialty channel.
– Media announced a 10-year programming partnership with Alberta’s two NHL teams, the Edmonton Oilers and Calgary Flames, and the launch of a new national sports network called Sportsnet ONE that will feature extensive live-event programming, including professional hockey, basketball, baseball and soccer.
– Rogers issued an aggregate $1.7 billion of public debt in the third quarter with the August 2010 issuance of $800 million of 6.11% Senior Notes due 2040 and the September 2010 issue of $900 million of 4.70% Senior Notes due 2020.
– In August 2010, Rogers redeemed all three of our public debt issues maturing in 2011, including US$490 million of 9.625% Senior Notes, $460 million of 7.625% Senior Notes and $175 million of 7.25% Senior Notes. The total cash outlay, including redemption premiums and costs to terminate the associated Derivatives, was $1,499 million.
– For the quarter, free cash flow, defined as adjusted operating profit less property, plant and equipment expenditures and interest, was $607 million representing an increase of 16% from the same quarter last year. On a per share basis, free cash flow increased by 24% over the same period reflecting share buybacks over the past year which decreased the base of outstanding shares.
– Rogers repurchased 9.0 million RCI Class B Non-Voting shares for $335 million during the quarter under our $1.5 billion share buyback authorization and paid dividends on our common shares totaling $187 million. Also, we plan to introduce shortly a new dividend reinvestment plan (“DRIP”), whereby Rogers investors are able to automatically reinvest their quarterly dividends to purchase additional Rogers Class B common shares.
This earnings release should be read in conjunction with our 2009 Annual Report, our third quarter 2010 MD&A and our third quarter 2010 Unaudited Interim Consolidated Financial Statements and Notes thereto that can be found at http://www.rogers.com/ and on SEDAR at http://www.sedar.com/ or on EDGAR at http://www.sec.gov/.
Caution Regarding Forward-Looking Statements, Risks and Assumptions
This earnings release includes forward-looking statements and assumptions concerning our business, its operations and its financial performance and condition approved by management on the date of this earnings release. These forward-looking statements and assumptions include, but are not limited to, statements with respect to our objectives and strategies to achieve those objectives, statements with respect to our beliefs, plans, expectations, anticipations, estimates or intentions, including guidance and forecasts relating to revenue, adjusted operating profit, PP&E expenditures, free cash flow, dividend payments, expected growth in subscribers and the services to which they subscribe, the cost of acquiring subscribers and the deployment of new services, the currently estimated financial impacts of converting to IFRS accounting standards, and all other statements that are not historical facts. Such forward-looking statements are based on current objectives, strategies, expectations and assumptions, most of which are confidential and proprietary, that we believe to be reasonable at the time including, but not limited to, general economic and industry growth rates, currency exchange rates, product pricing levels and competitive intensity, subscriber growth and usage rates, changes in government regulation, technology deployment, device availability, the timing of new product launches, content and equipment costs, the integration of acquisitions, industry structure and stability, and current guidance from accounting standard bodies with respect to the conversion to IFRS accounting standards.
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 or announced or may occur after the date of the financial information contained herein.
We caution that all forward-looking information, including any statement regarding our current intentions, is inherently subject to change and uncertainty and that actual results may differ materially from the assumptions, estimates or expectations reflected in the forward-looking information. A number of factors could cause actual results to differ materially from those in the forward-looking statements or could cause our current objectives and strategies to change, including but not limited to new interpretations from accounting standards bodies, economic conditions, technological change, the integration of acquisitions, unanticipated changes in content or equipment costs, changing conditions in the entertainment, information and communications industries, regulatory changes, litigation and tax matters, the level of competitive intensity and the emergence of new opportunities, many of which are beyond our control and current expectation or knowledge. Therefore, should one or more of these risks materialize, should our objectives or strategies change, or should any other factors underlying the forward-looking statements prove incorrect, actual results and our plans may vary significantly from what we currently foresee. Accordingly, we warn investors to exercise caution when considering any such forward-looking information herein and that it would be unreasonable to rely on such statements as creating any 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 forward-looking statements or assumptions whether as a result of new information, future events or otherwise, except as required by law.
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 third quarter 2010 MD&A entitled “Updates to Risks and Uncertainties” and “Government Regulation and Regulatory Developments”, and also the sections entitled “Risks and Uncertainties Affecting our Businesses” and “Government Regulation and Regulatory Developments” in our 2009 Annual MD&A.
About Rogers Communications Inc.
Rogers Communications is a diversified Canadian communications and media company. We are Canada’s largest provider of wireless voice and data communications services and one of Canada’s leading providers of cable television, high-speed Internet and telephony services. Through Rogers Media we are engaged in radio and television broadcasting, televised shopping, magazines and trade publications, and sports entertainment. We are 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 http://www.rogers.com/.
Quarterly Investment Community Conference Call
As previously announced by press release, a live webcast of our quarterly results conference call with the investment community will be broadcast via the Internet at rogers.com/webcast beginning at 8:00 a.m. ET today, October 26, 2010. A rebroadcast of this teleconference will be available on the Webcast Archive page of the Investor Relations section of rogers.com for a period of at least two weeks following the conference call.
For further information: Investment Community Contacts: Bruce M. Mann, 416.935.3532, [email protected]; Dan Coombes, 416.935.3550, [email protected]; Media Contacts: Wireless, Cable and Corporate: Terrie Tweddle, 416.935.4727, [email protected]; Media and Regulatory: Jan Innes, 416.935.3525, [email protected]