Ladies and gentlemen, thank you for standing by. Welcome to the Rogers Communications Third Quarter 2013 Results Analyst Conference Call. [Operator Instructions] I would like to remind everyone that this conference is being recorded today, Thursday, October 24, 2013, at 8:00 a.m. Eastern. And I will turn the conference over to Bruce Mann with the Rogers Communication management team. Please go ahead.

Good morning, everyone. Thanks for investing a bit of your time with us this morning for Rogers' Third Quarter Investment Community Teleconference. Joining me on the line here in Toronto this morning are our Chief Executive Officer, Nadir Mohamed; our CFO, Tony Staffieri; Rob Bruce, who's President of our Communications Division; and Keith Pelley, who's President of our Media Division. And we have also Bob Berner, our Chief Technology Officer; and Ken Engelhart from our Regulatory team. So we released our third quarter results earlier this morning, hopefully you've all seen them. The purpose the call is to, just as critical as possible, provide you with the business additional background upfront and then answer as many of your questions as time permits. Administratively, today's remarks and discussion will undoubtedly touch on estimates and other forward-looking types of information, which our actual results could be different from. So as such, would you please review the cautionary language in today's earnings report, and also in our 2012 annual report. It includes the various factors, assumptions, risks, et cetera, that could cause our results to be differ, as well as an explanation of the non-GAAP measures that we discuss. And all of these cautions apply equally to our dialogue on the call. If you don't already have copies of today's third quarter earnings release or the end report of 2012 to accompany the call, they're both available on the Investor Relations section of rogers.com, our website, as well as on the EDGAR and SEDAR websites.

Thanks, Bruce, and so much for scripting this. Appreciate it. Didn't know that was coming. Anyway, welcome, everyone, and thank you for joining us. As you can see from this morning's earnings release, we delivered another balanced set of financial and subscriber results with continued growth and consolidated revenue and adjusted operating profit. We leveraged our superior networks to double-digit data growth across both our Wireless and Broadband Cable platforms. And we accelerated the growth in both revenue and adjusted operating profit at both Rogers Business Solutions and at Rogers Media. At the same time, we further expanded our strong operating margins, year-over-year, at Wireless, Cable and Business Solutions, as well as on a consolidated basis. The balanced growth in Q3 across revenue, margins and everything, clearly reflects our innovative product offering and the strength of our asset mix, which positions us uniquely as Canada's largest wireless provider complemented by healthy Broadband and Media businesses. So beginning with Wireless, on the subscriber front, we delivered healthy net postpaid growth additions at 64,000. Now what is truly in the reporting cycle to know how much was market size versus share, my intent is that all of the changes in the industry associated with the transition, as you know, from 3- to 2-year contracts, along with the timing and impact of device launches during the quarter, combined to moderate the market somewhat in the period. It's important to highlight that we brought [indiscernible] down by 11 basis points versus last year to 1.23%. And we did so at the same time that we brought down retention spending as a percentage of network revenue both year-over-year and sequentially to 11.1%. The combination of those 2 important value drivers, both moving in the right direction at the same time, was one of the primary…

Thank you, Nadir, and good morning, everyone. I'll provide a little bit of additional context around the financial results and metric for the quarter, then we can get into the specific questions that you may have. On the top line, our consolidated revenue was up 2% for the quarter, driven by revenue growth of 12% at Media, 8% at Business Solutions and 4% at Cable, offset by a decline of 1% in Wireless network revenue. Result of the acquisitions of Mountain Cable, theScore and Blackiron completed earlier in the year are included in the growth rate I just quoted. Excluding the impact of these acquisitions, consolidated revenue growth would have been closer to 1%. Relative to Q2, much of the sequential slowing of revenue growth overall is driven by a combination of lower amount of equipment sales, which stated on subsidization cost and by the lower price roaming fee we put in place earlier in year, which Nadir spoke to a moment ago. At Wireless, equipment revenue declined 17%, while we experienced a 1% decline in Network revenue, due primarily to the launch of lower-priced, higher-value roaming plans. Excluding the decline in roaming revenue this quarter, Wireless network revenue would have been up year-on-year by 1%. And the lower year-over-year equipment sales number reflects the level and timing of growth solutions and hardware upgrades that Nadir touched on as well. Wireless adjusted operating profit was up 4% year-on-year, with strong margin expansion of 240 basis points to 50.7%. We brought down retention spending, again this quarter to 11% of network revenue from 13% during the second quarter, while concurrently driving an 11-basis-point improvement in postpaid churn of 1.23%. At the same time, we continue to make the right investment on our customers. This speaks a lot to our continued execution…

All right. Thank you, Tony. [Operator Instructions] With that, operator, could you please explain how you'd like the participants [indiscernible] Q&A polling process, and we're to answer.

[Operator Instructions] Your first question today will come from the line of Jeff Fan of Scotia Capital.

Congratulations, again, one last time to Nadir on your retirement. My question is on the ARPU and the roaming impact. Understand the causes, wanted to just get your take on the demand elasticity for roaming. Wondering, based on the price changes that you put through, are you starting to see any such increase by those that's currently roamed or even an increase in penetration of roamers? If you haven't seen it, maybe you can just give us some insights on where you think that relationship is between usage and volume versus price, that would be very helpful.

Jeff, it's Bruce. In answer to your question, Jeff, I think I'd like to start by echoing Nadir's comments that we as an industry, and at Rogers we think cracking the code on roaming in the long run is a critical part of our job. And we've been innovating fairly significantly trying to do that. As we look specifically at the $7.99 U.S. plan that we launched some time ago, we're actually starting to see a creep up, albeit slow and you'd be [indiscernible], so it's early to declare victory. The other positive thing that we're seeing is people are actually using the $7.99 plan. The amount of roaming it's doing is actually increasing as well. So the early sign, I think, there definitely going to need to be a number of different alternatives out there, like travel packs and packs that include both voice, text and data to ensure that we really meet the needs of the customers and to give them the confidence and the comfort that they can roam. And I think at that point, we'll start to see more of an upturn and even better results on roaming.

And maybe just as a quick follow-up, how long do you expect the, I guess, the repricing impact adjustment to last on the results?

Well, Jeff, we'll settle through the $7.99 specifics, and I think you know the timing of when we launched that, so 1 year after. But I think, what I would say, this will be for all of the carriers I believe an area of pressure as we seek to work even harder to find the formula that actually works for customers and unleash some of the elasticity that you referred to in your opening remarks. So I think we got -- we've all got work to do and we will have the $7.99 plan, as I said, on a predictable timeframe. But note that we're all going to be doing other things to try to find the right formula for our customers here.

Your next question will come from the line of Glen Campbell of Bank of America Merrill Lynch.

Terrific margin performance at Wireless. And, Nadir, you've talked us through some of the drivers there. But I wonder if we can get a little bit of color. We've got lower growth sides, lower retention spend. Could you maybe give us a sense of whether you're seeing lower per unit cost on subsidies, whether you are seeing a strong pick-up on the BYOD option? Or what sort of drivers might be on that strong performance take?

Glen, let me start by just emphasizing that the 2 that I, at least, refer to in that remark, I think, warrants some more discussion. Clearly, we look at churn as probably the primary Wireless value driver along with ARPU. And you saw that this quarter we came down to -- by 11 basis points, just to give you a context for that. That's probably the largest decline in churn -- the largest positive we've had in a few years. So we're definitely making progress in that front. And what was, I think, really important is we did that at the same time as retention spending. Sometimes it's the quality of the churn number. And in this case, retention spending is down to 11% net of revenue. That's come down third quarter now in a row. So it's a very positive value where the combination is really important, and to go forward. We've also had -- and hopefully you've seen this consistently over the last couple of years, a very strong focus on the cost side of the equation, if you look at operating costs, we're down actually year-over-year about 3%. So that obviously contributed to the margin as well, but I do believe, generally speaking -- and as I said it's hard to call these when the others haven't reported, but we have a pretty good sense on what's going on in the market. You will see that the impact is going from 3 to 2 years. Some of the devices, like the Apple, iPhone Plus is coming late in the quarter, somewhat constrained on the apps. It probably led to less activity in the market, which would be less activations, which, as you know, from an accounting perspective actually has the effect of increasing our margins and earnings. I think those probably are the key factors that have driven the kind of the high over 50% margin this quarter.

Your next question will come from the line of Drew McReynolds of RBC Capital Markets.

Nadir, can you flesh out a little bit more on postpaid churn decline and the prepaid churn decline, just obviously subtracting just the magnitude of it. And if I just have a quick follow-up, maybe Rob, you can just comment, we've seen Rogers pretty aggressive in Atlanta and Canada with respect to the triple-play offering. Just could you update us on the what -- obviously, what your forward strategy will be. But is this something that you're gaining traction in the marketplace with and that you're happy since the current promotion of that.

Yes, Drew, let me talk about churn piece first. As Nadir said, we're delighted to have the 11-basis-point decline in churn, and it's a real important lever in the business. That decrease in churn continues to reflect more disciplined approach on retention hardware discounts and credits in how we're applying and dealing with our customers across the board. There is also no question that the COC industry pricing probably had somewhat reduced consumer's propensity to switch. I think our reinforcement of the value proposition, our network leadership on speed and the improvements that we've made, all aspects of the customer experience, are all kind of key contributing factors. Making it easy at the time of launch of iconic devices and national reservations service that actually make it easy for customers and know they are going to get the device of their choice. This is typically within a period of relatively to high churn. And I think with the NRS, we've mitigated a significant amount of that churn. In terms of prepaid, the story is truly a story we're proud of, 44 basis point improvement in churn on prepaid. We continue to refine the product and we continue to go after kind of value prepaid customers. And as you know, we don't chase the bottom end of that market. We're very pleased with the results that we saw this quarter. We saw an increase in gross as well. I would also credit the change to COC 3 to 2-year and the associated packaging and pricing, driving a slight shift in the mix between pre and postpaid, as I think people get a little bit more interested in prepaid as we went through that cycle. Looking at the last part of our question, the Atlantic, we're quite happy with what's going on in the Atlantic. The new approach to the market, the aggressive packaging that we're doing, although quite different than our approach in Ontario, has brought us numerical success there. And that we plan to refine things, as always, but that kind of continue down that path.

And just for the interest of those who may not now, we referred to COC through the code of conduct changes there that came out of that call.

Your next question will come from the line of Simon Flannery of Morgan Stanley.

Continuing on the wireless theme, the upgrade performance was quite good as well. Can you just talk whether you think this is something that is likely to be more permanent? Obviously, there is seasonality around it. Some of the drivers there were handsets upgraders, attractive maybe not as compelling differences so that people may be slower and hold on to their handsets longer.

Yes, great questions, Simon. It's Rob. Listen, for sure, we were pleased with the upgrade rate of about 4.5%. I think the norm is more in the 6% range. I would say that my expectation is that, over time, we will probably creep back more towards the norm and a little bit higher. It's important for customers to have the facility to be able to upgrade when they want to, and you know that FLEXtab have programs that allow that kind of upgrade are an important part of that fabric. I think one of the things that actually changed the dynamic slightly is we went to some of the changes from 3 to 2 years, along with that some of the handset prices were higher. I think some of that may have caused a bit of slowing. Just like, we believe, we've seen some slowing as well on activation. And to the extent that the device price stay a little bit higher, I think we'll probably see a little bit slower cycle handset upgrade. But none of the other key dynamics are actually at play here.

The iPhones supply were similar this year, last year?

No, Simon. Actually, the iPhone supply and the supply in general of more iconic devices have been much shorter this year than in past years. That has, too, probably created a bit of a pull.

Your next question comes from the line of Adam Shine of National Bank Financial.

Nadir, obviously, all the best to you. Switching over to the Cable a little bit. You touched on some cord-cutting dynamic. Maybe Rob, you can speak a little bit to sort of your incremental traction to sort of Internet-only subscribers. And obviously, we continue to see some very strong growth, sort of double-digit in the context of Internet ARPU. Maybe you can speak a little bit to that, both from a consumer as well as maybe in the business context. And maybe if I can have one follow up after.

Yes, sure. Listen, we're happy and we continue to drive hard with our success on the Internet. We've said before, and I think Nadir and Tony both echoed it today. Internet is the key product. And we're in a great position. Customers recognize that, customers tell us that, and we simply have a vastly superior product to our competitor. We have faster speeds to 150 megabytes per second. And we are excited and delighted when recently PC Magazine recognized us as the best in America. We have better speed consistency, and you will know that we made investments with SamKnows to validate the individual customers we're getting, all important consistency of those terrific speeds. And we've got a better customer experience built around things like TechXpert, which deliver premium technical support. You'll know that we have no traffic management practices that impede our customers ability to use the service. And we've actively up-speeding our base to give them even faster speeds and great value. So our success really is a reflection of winning more Internet-only subs, winning more multiproduct subs. We continue to win more wholesale subs and we continue to win with SMB customers. And our Internet revenue growth on small business is up almost 22% this quarter. So really it is -- it's really an important facet of our Cable portfolio. And in the face of all things that are going on in Television, we continue to put a sharp focus on Internet, and that's what the future is. And you said you were going to ask a follow-up question?

Yes, just one last. Your competitor to the market, obviously, having telegraph price increases across the board in coming months. Earlier this year, in January, you did your last increases. Are we sort of sticking to that sort of -- or maybe there's a tying issue with prices increases to come?

Yes. And price increases and the timing of price increases or the magnitude is really something that we don't discuss on calls. So maybe I'll just leave that one for today.

Your next question will come from the line of Greg MacDonald of Macquarie.

Not to turn this into a love fest for Nadir, but congrats again. [indiscernible] Listen, it's always -- so good luck in your future. The question I wanted to ask is on use of free cash flow. One might expect, now with capital allocation with respect to spectrum auction that the cost of buying 700 megahertz spectrum may not be as much as one would have previously thought. It certainly is a large foreign telco within the mix. Where is your head at, as a management team, I guess, weighs into this as well, buybacks on the potential to actually get more active on the buyback. Is that something that you'd consider now given kind of a sigh of relief on what the spectrum auction may cost? Or is there still a question mark on that spectrum auction that would hold you off on being more active on the buyback until after the auction?

Greg, let me lead off with kind of the framework and then get to specifically address buyback in the program for this year. I think if you go back a few years, we pretty much laid out our perspective on how we deal with balance sheet and how we deal with cash flow and in particular the outflows that come from the strong cash position that we've had for some time now, in terms of both operating and balance sheet. And as you know, I think, going back almost 4, 5 years ago, in my view, it's been that we wanted to establish a track record of consistent, albeit conservative, dividend growth. And you've seen that over the last 2 years of double-digit dividend growth. We still would say that we're fairly conservative in terms of dividend payout ratios vis-a-vis with our peers. So I see the ability to grow dividends as something really important for us. Obviously, a specific decision that always the board call, but I think it's an important factor. We've always said that we will never compromise on something we hold dearly, which is having the best network as wired and wireless in this platform. So for us it's paramount, you'd see that continue. You will not see that change from our company. And that we've always said and we recognize that we've got a leverage ratio, 2 to 2.5, but [indiscernible]. And it's -- with an acquisition that makes sense for the company, we would always see that as taking precedence on any of these initiatives vis a vis share buybacks or the leverage ratio, in particular. And we've used share buybacks and we had an aggressive program up until a while back for couple of years. We see it as opportunistic thing. And maybe on specific share buybacks for this year, Tony, can you comment?

Sure. So against that backdrop of consistently returning cash to shareholders when we have it. And fairly consistent about it is that we would pause on share buybacks until we have greater certainty around 2 things. One was cash taxes; the other was the upcoming spectrum auction. On cash taxes, you've seen, this quarter, us getting comfort around our ability to reduce the amount of cash taxes. So we're pleased with the progress from that. And then the second piece of it is this auction, so notwithstanding all the variables that go into it, we're just tied in a position where we don't want to speculate about the cost and the outcome of that. So we continue to be prudent and conservative with our cash until we get certainty on that second piece.

Your next question will come from the line of Tim Casey of BMO Capital Markets.

Just curious a bit on to the regulatory side. And I'm curious what Nadir and Ken's thoughts are on the government's Throne Speech comment with respect to reducing roaming rates and obviously video unbundling. It seemed to be fairly complex issues involving commercially negotiated contracts. Just curious what your thoughts on what levers the government has and Rogers' position on that.

So turning to video unbundling, I don't know to what levers the government will exercise. But I do note that the CRTC is -- will be, today, commencing consultation on the future of television, and that would be followed up likely next year with a proceeding. And I would imagine that unbundling or pick-and-pay will be a part of the CRTC's consultation and proceeding. Whether the government will issue a direction to them, I don't know. But in any event, more packaging flexibility is something that we support at Rogers. You are correct that the contracts that distributors have with content providers and broadcasters makes that very difficult, in some cases impossible, so that is a complicated area that the CRTC will have to wade into as part of their investigation. As far as the domestic roaming goes, it's not certain in the Throne Speech -- whether that refers to retail or wholesale. Is it -- the context in the Throne Speech is all about consumer protection. So it might be referring to retail domestic roaming, which is not a big issue for Rogers, because there's almost no domestic roaming for us. There's a few -- a small carrier in the Yukon where we charge retail roaming rates, but other than that we don't charge our customers domestic roaming at all.

And next question comes from the line of Imari Love of Morningstar.

Great job on the Wireless margins. On the same -- despite the fact that this is the first quarter in 5 where you had a decline in blended ARPU, the 6 straight quarters now where you've had an increase, year-over-year, in terms of EBITDA per Wireless user. It seems that we've had an inflection point. I just wanted to try and get a take as how sustainable you think these trends are amidst the backdrop of the timeline changing and the roaming costs also coming down. Is it fair to say that while there could be some ARPU pressure going forward that the AMPU trajectory should continue to increase?

Imari, it's Rob. The introduction of our new flat-rate roaming plans are the key factor in driving down ARPU. And we believe the new roaming price structure is exactly the right strategy for our customers and the business in the long run. The price, certainly, we think these plans and other plans likely will bring in the long run, we think will increase customers using their device while traveling, but it will certainly take a couple of more quarters before we start to see some of the effects that works, I think, in terms of unique user growth and comfort from our customers. But if we excluded roaming, the ARPU would have been much more like 4% from last year.

Your next question will come from Dvai Ghose from Genuity Capital Markets.

In the acceleration in basic cable subscriber declines and the deceleration in broadband and telephony subscriber growth, it obviously seems as if the decline that we saw in cable PSUs over the quarters is going to continue. And suggests that only driver of revenue growth for the core Cable segment is ARPU and pricing, and -- yourselves and all your peers, they increased price quite a bit this year. Given the regulatory comments made Tony and Ken, and the scrutiny not just on ala carte services, but Minister Flaherty's comments this week that TV should be regulated like a utility because of the lack of competition. Do you think that you can keep that price? And if you can't, what does that mean for the overall revenue and cash flow trajectory for that segment?

Dvai, it's Nadir. I think our view of what's going on in the markets is probably somewhat different from yours. I would start with if you look at what's happening in the home, if they're into cable, specifically, what you're really seeing something very straightforward and obvious, which is customers more and more are leaning to the Internet as their primary means of information and entertainment. And so we're seeing, first and foremast, the great improvement of consumption of Internet, which is usage -- our usage on an average basis going up on average like 45% give or take. And I think that's really the driver of the revenues. It's the shift towards more and more consumption of the Internet bandwidth. And as you know, that's something that we've been pretty much focused on. I think with your comment with respect to IPTV and the impact on the cable net, it's really important that we think through what's happened over the last couple of years. Especially something we've been calling out every quarter, as you would know, and that is that if you look back from standing start of 0% penetration on IPTV footprint, what you saw today is, probably at the end of Q3, our view would be 70% of our footprint is what our IPTV competitor now covers. It's the same for the other markets. It's not for me to talk about what the strategy is, but I only reflect to what they said publicly, is the saturation point of somewhere in the 80% range, or thereabouts. So I think a large percentage of the footprint gains to match what were actually behind us. And I think that you need to factor through in terms of what it means from a revenue perspective and a net subscriber performance as the quarters come by. So I do think in a competitive market, there are deep discounts that you assume are referring to the competitor who's looking to gain entry into the new market. Generally, these things -- I have lived long enough to know that they actually stabilize over time. We have a terrific product. There's nothing in what we see within the customers that suggests anything that -- other than they like the product that we have. The issue is the footprint and pricing, both of which we would expect in the fullness of time, and to actually stabilize. But most importantly, at Canada [indiscernible], we see the anchor as Internet. That's where our investments have the fastest Internet product, the most reliable, is absolutely essential to our view going forward.

Your next question will come from the line of Maher Yaghi of Desjardins.

Nadir, it was a pleasure interacting with you, and wish you great success in the future.

Thank you.

I wanted to ask you a question regarding the TV consumption habits, as were talking about here. As more and more customers move to IP and more customers move to OTT, I was wondering about your view about the capacity and the dependability of the infrastructure to support those changes in habit. What does that mean, in your view, longer term? Because I think Capex requirement to keep upgrading the Cable side to support and be able to deliver the product to customers because of -- do you have the changes from the broadcast side to more IPTV?

Maher, thank you. And it's a great question because if you look beyond the focus [ph], it's very much in sync with our view. Look, we weren't shaving and ultimately from the amount cord cutting, we see it's inevitable, but we should start with the right metric [indiscernible]. It's fairly small. And at the current state, we see cable TV being a very strong business for quite some time. Having said that, we know, long term, the platform will be the Internet platform, and we've been in the past to go overall IP for the last couple of years, and [indiscernible] timeline. Bob Berner, I think -- you know Bob. And, Bob, if you can just lay out our view of IP and what it means.

Certainly. Maher, I'm sure you're aware that, as Nadir said, we're on the path of building and launching a standards base -- global standards base for each of our IP service. And as such, everything gets delivered over an IP connection. So if you think sort of 2 things: over-the-top services, which are currently being delivered on our existing IP capacity; and then, expanding that IP capacity within a plant to handle fully [indiscernible] services delivered over IP, on a special forward it's built to handle all those complexities. And your question was how -- do we think there's going to be any significant change in capital required to do that? And the answer is, we think is going to be pretty steady amount of capital in aggregate that we're spending, There'll be a shift in how that capital gets spent. But effectively, what we're doing is we're converting capacity from analog and digital broadcast to ability to deliver of large parts of IP to a home and transport around the network for about the same amount of money that we'd be spending to do other things.

Ladies and gentlemen, we have time for 2 remaining questions today. The first of which will be from the line of Rob Goff of Euro Pacific.

My questions would be on what potential do you see on the Wireless local loop and security services on a national basis?

And I, too, would like to join in extending thanks and best wishes to Nadir.

Thanks, Rob.

Yes, Rob, I'll start with something that I referred to -- which is not quite your question around the Wireless local loop, but gives me the chance to plug something that we introduced as a new service. Which is a the [indiscernible] of the IP solution that leverages the IP connection and our Wireless technology is essentially [indiscernible] chip that enables the home into a Wireless offering. I think the idea of Wireless local loops at this stage is probably a while away, because if you think of bandwidth requirements from a [indiscernible] perspective, it's unlikely that we could look at it as the complete replacement for kind of video-type consumption that's required on that thing. What we see is the kind -- probably a complementary situation where we have WiFi in the home which is used to effectively offload traffic, and then backhaul onto the wire line and/or cellular network over time. That will be what we see in the home and that portion of the local loop will, essentially, be WiFi.

And your final question today will come from the line of David McFadgen of Cormark Securities.

I had a question on the roaming impact as well. Did that offset any benefit from higher pricing for customers that go from a 3-year plan to a 2-year plan?

No. Yes, I think I have to [indiscernible] apologize for not hearing the question. But if I understand the question it was around the impact of roaming offset some of the price changes as a result of the 3 to 2-year. Just one thing that I would point out is those changes actually happened in the back half of the quarter, so you'll see those positive changes in terms of ARPU over time. And obviously, to the extent that the roaming impact is negative, that change is actually -- is partially offset in the quarter and will be a bigger factor going forward.

Can I just follow-up? Do you, in fact, say in the fourth quarter that those positive changes would offset any pressure on roaming?

I think you're -- no doubt that you'll expect to. I'm not trying to be coy, but not giving specific units for the quarter. But directionally, clearly, we'll see the roaming changes taking some quarters work there the way through for elasticity to offset, and the ARPU changes will, in fact, have the benefit of the fourth quarter in Q4.

Ladies and gentleman, that does conclude the Q&A session for today. And I will now turn the conference back to Bruce Mann for any closing.

Thank you very much, operator, and everybody. The management here at Rogers appreciate your interest and support. And thank you for joining us here today. If you have questions that weren't answered on the call, please give myself or my colleague, Dan Coombes, a call. Our contact info is on the earnings release from this morning. This concludes today's conference. Have a nice day.

And thank you. Ladies and gentlemen, this does conclude the conference call for today. Again, we thank you for your participation, and you may now disconnect your lines.