Rogers Communications Inc. (RCI) Q4 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Rogers Communications Fourth Quarter 2013 Results Analyst Conference Call. [Operator Instructions] And at this time, I would now like to turn the conference over to Bruce Mann with the Rogers Communications management team. Please go ahead.

Thanks very much, Luke. Good morning, everyone. Thanks for investing a bit of your time with us this morning for Rogers' Q4 investment community teleconference. It's Bruce Mann here. Joining me on the line in Toronto are Rogers' President and CEO, Guy Laurence; our Chief Financial Officer, Tony Staffieri; Rob Bruce, President of our Communications division; and Keith Pelley, President of our Media division. Bob Berner, our Chief Technology Officer, and Ken Engelhart, from our Regulatory team, are here as well. We released our Q4 results earlier this morning. The purpose of the call is to crisply provide you with a bit of additional background upfront and then to take as many of your questions as possible as time permits and answer them. Today's remarks and discussion will undoubtedly touch on estimates and other forward-looking information from which our actual results could be different. And as such, please review the cautionary language in today's earnings report and in our 2012 annual report. They include the different types of factors of assumptions and risks that could cause our results to be different, and they also explain many of the non-GAAP measures that we discuss as we talk about our results. All of those cautions and explanations apply to our dialogue this morning on the call. If you don't already have a copy of the earnings release or our 2012 annual report, they're both available on the Investor Relations section of rogers.com. Lastly, and before we dive in, I want to just very quickly make sure that everyone appreciates that under Industry Canada's relatively strict rules surrounding the 700-megahertz spectrum auction, which is currently underway, that none of the auction participants, including Rogers, are allowed to make any comments with respect to the auction, whether it's about progress, potential outcome, implications, et cetera. Not only that, once the auction concludes and the preliminary results are announced by Industry Canada, the participants will continue to be relatively limited in the types of comments that we're allowed to make for an additional 30-day period, at the end of which the final payments are made by the winter. So please just be aware of those restrictions that we'll be dealing with this morning and over the coming days and weeks. So with that, I'll turn it over to our CFO, Tony Staffieri, for some brief remarks on the quarter. And then Guy Laurence, who joined Rogers a few weeks ago as our new CEO, will make a few comments as well. And then I know importantly for everybody, the management team here will be pleased to take your questions. So over to you, Tony.

Thanks, Bruce, and good morning, everyone. As you can see from this morning's earnings release, with our Q4 results, we delivered solidly on all of our financial guidance commitments on a consolidated basis for the full year 2013. During the fourth quarter, we further expanded our strong operating margins at both Wireless and Cable on a year-over-year basis. We also continue to leverage our superior networks to deliver double-digit data revenue growth across both our Wireless and broadband cable platforms. In addition, we further reduced the rate of churn in our Wireless business and the rate of video subscriber losses in our Cable business, and we put up some good revenue growth numbers at Rogers Business Solutions and at Rogers Media as well. From a strategic and innovation perspective, we also made good progress in the quarter. Rogers was named both the fastest broadband Internet service provider and the fastest wireless network in Canada by PC Magazine, an important acknowledgment by a respected third-party source and key to our data monetization strategy. And as I'm sure you're all aware, we announced our exclusive broadcast agreement with the NHL, giving us the ability to broadcast national NHL games across Canada for 12 years, including all of the related online, wireless and other digital rights to all NHL content, including both Canadian and U.S. games, current and past. Rogers Business Solutions further expanded its data center hosting business through the acquisition of both a newly expanded data center in Edmonton and a new Western Canada flagship data center in Calgary, and we officially launched Rogers First Rewards, an innovative, new loyalty program allowing customers to earn points on their Rogers purchases and redeem them online for products and services. Customers can then further leverage these loyalty credits by utilizing our new Rogers branded credit card to accumulate additional points on all of their purchases as well. We announced Suretap, the first mobile wallet from a carrier in Canada, which is a significant and innovative step in the drive towards adoption of mobile payments technology in Canada. We launched Next Issue Canada, an innovative all-you-can-read subscription digital magazine service that provides consumers with exclusive and unlimited access to a catalog of more than 100 premium Canadian and U.S. magazine titles. Rogers Sportsnet announced an 8-year extension of our Canadian broadcast rights for Major League Baseball and expanded the agreement to include all multi-platform broadcast rights for online and wireless as well. And these are just a few examples of strategic achievements we made in the quarter. In terms of financial results, our consolidated revenue was down modestly year-on-year, as you can see, a bit under 1% for the quarter. This was driven by our decline in Wireless network revenue of 2%, offset with growth in all of our other segments: 11% growth at Business Solutions, 4% growth at Media and 2% growth at Cable. The results of the Mountain Cable, theScore and data center acquisitions we made during 2013 are included in the growth rates I just quoted. Excluding the impact of these acquisitions, consolidated revenue on an organic basis declined 2%. Relative to Q3, much of the sequential slowing of revenue growth we saw overall was driven by a combination of several items. At Wireless, the 2% decline in network revenue reflects the impact of pricing changes associated with the introduction and evolution of our new simplified Wireless plans and, as well, reflects the lower-priced higher-value roaming packages we put in place earlier in 2013. As we said last quarter, in the first quarter of 2013, we began including voice features, such as voice mail and caller ID into our simplified all-in data sharing plans, which was required to remain competitive in the postpaid voice space. So this and other in-market pricing changes over the past 3 quarters, such as the inclusion of domestic LD, continue to impact our ARPU this quarter as larger portions of our customer base moved on to the simplified sharing plans. However, at the same time at Wireless, we were able to drive adjusted operating profit growth of 1% year-on-year with solid margin expansion of 150 basis points to 41.7%. And importantly, we drove a 6-basis-point improvement in postpaid churn, which was down a 1.34%, while concurrently spending 9% less on retention costs. On the subscriber front, we delivered net postpaid growth of 34,000. In the quarter, we activated 790,000 smartphones, 29% of which were new subscribers to Rogers. So demand continues to be healthy, although there has been a bit of continued slowing on the gross add front as we saw across the industry last quarter following the transition from 3- to 2-year contracts. 75% of our postpaid customer base now has a smartphone, and wireless data now accounts for 49% of our network revenues. So we're continuing to have success concentrated in the higher end of the market as we continue to attract and retain our highest lifetime value customers in this segment. At the same time, we continue to be successful around our cost management and efficiency initiatives. Our operating cost at Wireless actually decreased year-on-year by 1%, excluding equipment margins. We executed well in terms of operating efficiency at Cable as well, where margins expanded 30 basis points to 49.7% and adjusted operating profit grew 3%. Margin expansion at Cable was helped not only by continued successful cost management, but significantly by the favorable mix shift in revenue growth from the higher cost of goods sold TV product to higher-margin Internet services. Overall, revenue growth at Cable of 2% was led by Internet, which grew at 14%, together with Cable telephony growth at 2%, both of which more than offset the revenue decline for the TV product stemming from subscriber losses in previous quarters. Significantly, though, I'll note that TV subscriber losses improved sequentially from Q3 by 28% or 11,000 subscribers, an important improvement on the trajectory of that product. Our Business Solutions segment, the shift to and growth of on-net next-gen revenues continued to drive improvements in the financial profile of this business. Next-gen revenue now represents 65% of total services revenue and grew 47% year-over-year, helped by both organic growth and our data center acquisitions. These were, in turn, partially offset by planned ongoing declines in the legacy off-net lines of business. Turning to our Media segment. The largest contributors to revenue growth of 4% were our Sportsnet properties and The Shopping Channel. Excluding the acquisition of theScore made earlier in 2013, on an organic basis, Media's revenue growth was 3% in the fourth quarter. We've seen a modest continued deterioration in the advertising markets, particularly on the broadcast TV and print sides, underscoring the importance of our growing subscription revenues and continued investments in our Digital platforms. Looking at Media as adjusted operating profit line, we reported a decline of $26 million year-on-year. However, the significant difference in the number of NHL games broadcast in the fourth quarter of this year versus Q4 of last year masked Media's underlying margin expansion. Specifically, you may recall that we benefited from approximately $30 million in onetime savings in the fourth quarter of last year, associated with the hockey lockout and the non-airing of NHL games. And then in the fourth quarter of this year, we aired considerably more NHL games with the hockey schedule condensed in order to accommodate the 2-week Olympic break in February. This reduced adjusted operating profit by $7 million in the fourth quarter of 2013. If we normalize for these 2 unusual items, Media delivered adjusted operating profit growth of 22%, reflecting solid efficiency gains in this segment as well. Turning to consolidated results below the operating profit line, you'll see that net income and earnings per share were down year-on-year. Adjusting for a number of onetime factors, including the $233 million Inukshuk gain in the fourth quarter of last year, lower stock-based compensation expense and the absence of an asset impairment charge this year, the adjusted net income and adjusted diluted earnings per share declined by 20% year-on-year. This was driven primarily by 3 factors. Firstly, higher depreciation and amortization expense accounted for 65% of the adjusted earnings per share decline. Similar to last quarter, this was a result of delivered increased penetration of our new NextBox 3.0 set-top boxes, which are now amortized over 3 years. As well, we reduced the cycle times implementation of our asset construction projects, which accelerated the commencement of depreciation but also assisted in reducing cash taxes payable. And finally, there was the amortization impact of the increased intangible assets resulting from the acquisitions over the past year. Higher interest cost accounted for 12% of the adjusted earnings per share decline and reflects an increase in the amount of outstanding borrowings, partially offset by a decrease in the weighted average interest rate. As a result of various refinancing activities over the past year, we reduced our average cost of debt by 60 basis points. Higher income tax expense accounted for 18% of the adjusted earnings per share decline and primarily reflects lower tax expense in the fourth quarter of last year that benefited from realizing a large capital gain in the prior year, which was only partially taxable. Looking at the balance sheet. We ended the quarter with $2.3 billion of cash and $2 billion available capacity under our credit lines. With a combination of our strong cash flow and liquidity, we ended the year with a leverage ratio of approximately 2.3x within our target of 2 to 2.5. During the fourth quarter, we returned $224 million in cash to our shareholders, up 10% year-on-year and reflective of the company's ongoing dividend growth. To quickly touch on our full year results, 2013 revenue was up 2% and adjusted operating profit up 3%. Productivity initiatives that lowered non-hardware-related cost by 1.5% led to a strong margin expansion of 60 basis points to 39.3% overall, led by Wireless margins at 46.8% and Cable at 49.4%, up 120 and 160 basis points, respectively. We also had considerable success on our data monetization strategy, with Wireless data revenue growth of 17% and broadband revenues up 16%. As a result, adjusted operating profit and pretax flow -- pretax cash flow were above the midpoint of the 2013 guidance ranges we set out, with CapEx at the high end and cash taxes right on the improved guidance provided with our Q3 results. So as I said at the start, we delivered across-the-board on the consolidated guidance targets we set out at the beginning of the year. Today, we also set out 2014 guidance ranges for several of our primary consolidated financial metrics, along with several underlying assumptions. As you can see, we expect continued growth in adjusted operating profit and for cash income taxes to remain flat to our new lower amount of 2013. However, as a result of modestly increased capital investments targeted for 2014, we expect after tax free cash flows to decline between 3% and 8% year-on-year. I'm pleased to highlight that we also, this morning, announced the 5% increase to our dividend rate effective immediately with a quarterly dividend, which was declared by our board today and will be paid on April 4, 2014. To sum up, overall, it was a quarter of continued solid free cash flow generation and returns to shareholders with strong operating margins and the successful execution of a number of strategic initiatives. Clearly, restoring sustainable top line revenue growth will continue to be a key focus for us moving forward. While we expect that we'll continue to be a highly competitive market and there's clearly no shortage of regulatory work on the agenda, we have no doubt that the strength of our franchise and Rogers' superior asset mix will remain a great platform for continued success. And with that, I'll pass it over to Guy.

Thanks, Tony. Welcome, everyone. We appreciate you joining us this morning, and I look forward to meeting and interacting with you over the coming quarters. So I think Tony did a good job of capturing the essence of the fourth quarter and how the company closed out 2013. As I was only here for the last few days of the year, I'll focus my comments more looking forward. However, I will say that with respect to the results of Q4 and certain of the trends, that whilst there are areas of strength, overall, they're not satisfactory to me, and over time, I expect to do better. Looking forward, let me start by saying with genuine enthusiasm that it's great to be here at Rogers. I took this post because Rogers is a remarkable company with a rich history and unrivaled mix of assets, and I thought it was a good match for -- with my background and experience. During the recruiting and on-boarding process, I spent considerable time with the Rogers family, the Board of Directors and the leadership team. I have to say I'm struck by their energy and passion and drive to win, which I know we can harness to do even greater things. I also value the support and the long-term focus of the founding Rogers family who own significant equity in the company. Since joining, I've crisscrossed Canada meeting my team, external stakeholders and customers. I've also conducted numerous business reviews, been involved with the 700-megahertz spectrum auction and reviewed the regulatory agenda. I'm now about halfway through that process, and obviously, this is with the view of developing a detailed set of priorities and plans for the company going forward. Once I've completed the exercise, I'll outline a detailed strategy and business plan roadmap and agree that with the board in May. After that, we'll start to operationalize it with my management team, and we'll articulate that more broadly to you with the specific priorities and focuses on what we're going to be doing going forward. Rogers has many strengths, and I intend to capitalize on them. This is a financially strong company, and we have highly advanced Wireless and Cable networks and a robust portfolio of Media assets. And yes, I do believe there is value into our Wireless and Cable businesses from owning a high-quality content division. We also have a strong pipeline of new products and services to offer our customers and some of the most passionate and committed employees I can say I have ever worked with. While it's early days from what I can see -- what I've seen so far, I believe we can evolve the business in a winning way that will be even more rewarding for our customers, our shareholders and our employees. And whilst the industry faces the challenge of moderating growth and regulatory uncertainty, few industries are more dynamic and better at leveraging new technologies than ours. Our margins, cash flow and return on assets are strong but we split in terms of our growth rate relative to our peers, and we need to execute in an even more methodical and disciplined manner as we go forward and look at ways to closing that gap. We have opportunities to put our customers' needs more front and center in everything we do to deliver a better and more consistent experience. I think we can strengthen our value proposition and differentiation and of opportunity to better align and focus our investment in key areas to help reaccelerate our growth. Winning, in my experience, always comes down to disciplined execution, rigorous prioritization and operational excellence. And to get there, you'll see a lot of focus around us clarifying accountabilities and strengthening our teams at all levels of the company. So stay tuned, more to come, and I look forward to leading Rogers through the next phase of its growth. Thank you. And with that, I'll turn it back to Bruce.

Thank you very much, Guy and Tony. [Operator Instructions] So with that, Luke, if you would quickly explain to the participants how you want to organize the Q&A polling process and we're ready to go.

[Operator Instructions] Your first question today will come from the line of Drew McReynolds of RBC Capital Markets.

Just my question is obviously around Wireless and just on the ARPU pressure. We know you're facing tough comps and obviously are fully aware of the competitive environment out there. Just wondering, on the roaming side, whether, Rob, you're seeing any kind of improving traction with respect to increased volumes and just how that kind of demand curve is responding to the lower rate?

Thanks, Drew. Yes -- no, it's a fair point. And as most of you on the call know, our efforts on customer-friendly roaming call fees have kind of been -- have been central in terms of trying to build that up as a future revenue stream, but at the same time, the short-term pain has been significant. I think without some of the things we did on roaming last year, our minus 2.5% decline would've been about a minus 1.3% decline. So the impacts remain significant. We're starting to see a bit of a turnaround, albeit slow and it's early to declare success. But we're starting to see some growth in unique users, particularly on our hallmark $7.99 U.S. plan, and we're looking at more ways that we can continue to kind of stimulate that and get that growing through. So it's definitely an area we're very focused on, and we intend to continue to work the revenue plans until we get through the turnaround, but I expect that will take a couple of quarters.

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

Could you talk a little bit about metrics? You talked about accountability, execution, prioritization. Maybe you can just talk about how you really measured success at Vodafone. Are you focused on free cash flow, return on investment, Net Promoter Score, churn, ARPU? There's a lot of different ways you can measure that. What are the sort of your kind of go-to metrics for measuring success?

I'm proud to say all of the above to be quite frank. The -- I mean, the difference between my ex company and this company is obviously that we have the Media arm, which is important to this company, and therefore, they've got different metrics. But to be honest, it's the standard metrics that you mentioned. I don't have a special set.

Okay. And financially, was it -- is it more to EBITDA, to free cash? Is there one that you prioritize over the other in terms of compensating employees, et cetera?

One of the -- I don't think it's probably relevant to talk about compensation plans here. But free cash flow is a hobby of mine, I would say. EBITDA, I think, is well used by the business because it's less relevant to the Media arm.

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

As far as my question, it's to do with the core Cable assets. On the positive side, if you can give us some idea as to why there was a sequential improvement in terms of net basic Cable subscriber loss? Was it promotional? Was it something else? Was it something to do with competitive activity? And going forward, our view from management has been that you're going to trial IPTV as an overlay over cable this year 2014 with a potential introduction next year 2015. But talking to some of your key vendors, they suggest that IPTV overlays for cable codes are much more problematic than they initially thought, much more expensive, require a lot more bandwidth and probably aren't going to happen. I wonder if you can respond to that and whether you see some sort of a hybrid solution rather than a full IPTV overlay or whether you're still committed to IPTV.

So why don't I take the first part of the question [indiscernible] around the improvement and thank you for noting the improvement we made in the decline of our basic fee subscribers like that. We worked at -- I think it's fair to say, we talked about the game plan on calls before. We continue to be very focused on working our game plan. We won by focusing on our superior Internet offering, and we continue to hammer away on that. And I think most of you have seen the ads, notice that we highlighted the recognition of continuing to earn from companies like PC Magazine, who recognize the excellence that we deliver every day. In the quarter, we did chase some of the crazy competitive pricing out there. But we, I think, successfully gap-managed on some of the key areas, which I think slowed down the success others were having. We invested and promoted the advantages of our platform versus IPTV, streaming to the tablet, tablet remote control, our superiority on VOD, which is also almost twice what our competitor's is. And probably most importantly and most promoted divine you would've seen it out there is our push on NextBox 3.0, which, again, brings a superior experience for our customers. We spent and invested energy on revamping RAPTV, which is highly important to a subsegment of our total base. We improved the online experience and got a lot of accolades about it, and we also launched the Kids Zone. We've improved our retention. Sequentially, churn improved by 23 basis points. So we felt some real positives there. And lastly, and as a continuing theme, I think the success around our guerrilla tactics, both in the IPTV footprints and satellite areas, yielded some success that contributed to the improvement in the number. So with that, I'll turn it over to Bob to talk just a little bit about the move to our new IPTV platform in the future.

Thanks, Rob. Dvai, I'm trying to think back about all the sections of the question you asked. But I don't know which vendors you're talking to, but you are correct in what you indicated that we will be in market in 2015 with IPTV services. Rogers has always led the TV market, and we're confident that we will be in market with standard-based TV over IP services during 2015 with vendors that can actually do it.

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

My question is on Wireless pricing. It seems that low flanker pricing has been a problem for the industry. We're seeing the repricing pressure in your numbers. And it seems that your competitors have concluded that what they need to do is up the data overage to sort of firm up that $39 price point. You're still in there with the markets. I'm wondering if you plan to stay there or if you think this is an appropriate price point. And then if -- on the corporate side, our sense is that roaming rates are moving down sort of separately from the -- from I guess what's been announced on the consumer side. I wonder if you could talk about any changes there during the quarter and what sort of traction you're getting, any impacts.

So I'm going to come back to the -- and just asking, just to clarify, the second part in a second, Glen. On the first part, it's not really appropriate for me to comment on our plans on pricing on a call. So I'm going to actually -- if you don't mind, I'll just sidestep that question. Can you repeat the second part of the question, Glen, I wasn't -- I couldn't hear part of it?

Sure. So we've seen your moves on data roaming price in the U.S., which we think make a ton of sense.

Yes.

And on the corporate side, it seems there've also been some recent moves to reduce the voice roaming to the U.S. as well. I mean, have you been participating there? Is this part of the impact we're seeing in your results, or are there further impacts we should expect?

So when you say the corporate side, Glen, I mean, large accounts, most of the pricing that we do for large accounts is customized. And selectively, depending on the needs of customers, we adjust various aspects of the offerings that we lay out for customers. Is that what you were referring to?

Yes. And sort of standard roaming packages?

Yes. I would say we do have sort of, what I would call, a standardized flavor of roaming packages that are inserted in our customized large account pricing. And then we have occasional customers who spend a lot of time doing roaming and roaming as if it is of high import to them, in which case, we'll modify those and make the plans more friendly for their needs, so.

But not a significant factor in the...

No, not at all, not at all. No lock, stock and barrel changes to our standard roaming processes on large account contracts.

Your next question will come from the line of Vince Valentini of TD Newcrest.

Hoping I could sneak in a clarification and a question. The guidance for EBITDA and free cash flow, Tony, are there any restructuring or severance costs embedded in that?

Vince, it's Tony. In response to your question, on the cash flow numbers that you see, we put in a modest amount for restructuring. And we're not going to disclose the absolute number of it, but there is some there. And as following Guy's comments, as we look to changes that we may make going forward, we'll firm up that number and provide the guidance on that going forward at that time.

But that's suggested in the free cash flow guidance, not in the EBITDA. Is that right?

That's correct, Vince. Consistent with how we reported in the past, restructuring cost would be below adjusted operating profit but would be included in our after tax free cash flow.

And the one question -- that was the clarification. The question quickly is you've been doing this $99 bundled offer for cable in New Brunswick. I'm wondering if you're seeing much traction from that and good retention versus, obviously, a pretty aggressive phone company with their fiber out there. Do you think that pricing plan is working and do you see enough evidence to suggest you might bring something like that to Ontario?

Ontario and the Atlantic, very, very different markets for sure. So I wouldn't assume anything that runs in the Atlantic. We're in a quite a different competitive situation in both of those markets. For sure, we had some luck with the $99 plan and it has worked well. The last time I took a really hard look at it, we were moving pricing up in the Atlantic so -- and I think it's already kicked in.

Your next question will come from the line of Richard Choe of JPMorgan.

Just one quick question or clarification for Guy. After you talk to the board in May, should we expect kind of a big announcement or call, or is it something that's going to be rolled out over time, the new strategies?

I don't know whether we'll do it as a big announcement or not because I haven't decided what it is yet. But I what I would say is once we've got clarity with the board, we'll announce it internally. And at that time, I think it's appropriate to also inform you at the kind of high level what our -- what my priority is going to be. So watch this space.

Okay. And then a question on the Cable side. I guess you reached 84% digital penetration. Can you talk a little bit about where you expect this to go over time and how fast do you want to get there and how that's impacting kind of what you're seeing in the new digital markets versus non-digital?

Yes, for sure. In fact, I would say we're actually further along than not on digital penetration. Depending on whether you're looking at the Maritimes or you're looking at Ontario, I think the numbers are 90% and 94% penetrated. By the middle -- in fact, by the end of this year, we'll be pretty much finished our digital migration. And again, that will continue to be incredibly helpful as we repurpose that bandwidth to improve VOD and to improve our Internet offering. So that's the scoop on that front.

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

Question is for Tony. Tony, the 5% DV bump, I think, surprised some people. I was looking for 10%. I think the market was. And it ends 4 years of that, plus 10% growth profile, you still have some reasonable room here with a 60-ish percent payout ratio. What should we conclude from that? Is there any messaging that we should draw from that? Is it sort of a special target that the company has always had, or is kind of -- given the CapEx increase that we saw in the guidance, are we to draw a conclusion that, hey, this is just a higher CapEx business now or, at least, for the next couple of years?

Greg, I would summarize that our dividend increase is reflective and commensurate with what you've seen in our after tax free cash flows over the last couple of years. And commensurate with the guidance that we've provided for 2014, we don't have a payout ratio guidance per se this year. Based on guidance, our payout ratio will be in the low 60s in terms of percent. For 2013, our payout ratio was 57%. And what you would've seen over the last several years is that payout ratio slowly increasing conservative relative to some of our peers. But we continue to want to have a dividend payout ratio that gives us the flexibility to do the things that we need to do with our business and the investments we need to make. And so I would say the 5% is something we're comfortable with, given where we're at, and a reflection of our approach to being responsible stewards of cash.

And the quick follow-on is CapEx kind of a new reality now, or are there special items in 2014 that might not recur?

Greg, I would say that CapEx is really reflective of a couple of things that we wanted to heighten our focus on in the near term. So I wouldn't necessarily infer from that, that is the new long-term view of CapEx. It'll continue to change depending on technology roadmaps, as well as the competitive environments. And so for 2014, the 5% increase that you see in CapEx in terms of the range is specific to 2014.

Your next question comes from the line of Phillip Huang of Barclays.

A question on Wireless. Aside from the ongoing repricing impact on roaming, as you look to the year ahead, do you expect any other specific pressures on postpaid ARPU to prevent it from going back to growth as the year-over-year comps get easier in the second half?

Yes. Thank you, Phillip. Just before I answer your question, just to -- Richard, just to follow-up on your question about the timing of the Digital conversion. I think I said end of '14. It's actually in '15, okay? Phillip, back to other things that are pressures from an ARPU perspective that are affecting us and will affect us going forward, and Glen Campbell alluded this to this in his question, but larger bucket-sized plans at lower prices continue to put pressure on ARPU in and also set up a base migration to lower-rate plans. So they continue to be very focused on things that minimize the impacts, and the availability of those larger-sized plans will continue to be important. I think the other thing that's important to recognize that go on in the background is I think we've all talked about the positive impact of some of the changes that we made as we moved from 3 year to 2 year from a COC perspective, and they are a positive. However, and Tony alluded to this in his remarks, in the background, as we migrate to simplified pricing, that simplified pricing had embedded in it, from some of the competitive moves, the inclusion of voice mail and calling line ID, which continues to have a negative effect on ARPU as many customers in our base would have been giving us $7 to $10 for these services. So those net migrations from old plans to new plans still are having a negative impact in spite of the positive that we're getting out of some of the COC changes.

Got it. So is the way you -- is it just a 2014 thing that we kind of see sort of ARPU being sort of relatively stable in the second half of the year?

Yes.

Or do you -- or is ARPU the metric that we should be looking at for your business going forward as you sort of look for different avenues of growth from here?

So that's a great question. Let me take 2 seconds and talk to you because I think there are some very important things we're going to do to continue to drive ARPU. I alluded them in one of the earlier questions, very strong focus on growing unique roamers. We believe by building reasonable pricing and an experience customers can trust, we can get back some of that roaming revenue and turn the corner. We further believe that there's an opportunity in our base for more data. We have a number of people, north of 1 million, with either a very small bucket or no bucket that actually have smartphones. We think that's a key opportunity. Price plan changed management improvements. Lots of people change price every quarter, how we manage those are critical, and we continue to sharpen our focus on that. Improvements on ARPU in and ARPU out management, driven by some operational improvements and a continued sharp focus on customer experience, I think, are going to be critical pieces of the puzzle. And I come back to the last part of your question. I think you're right. Over time, the focus will need to shift from ARPU to revenue and to ARPA. And you can count on the fact that we'll be very focused on looking at those things going forward. Thanks for your question.

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

Guys, wondering if you could offer your perspectives on the ongoing debate that we hear a lot from investors about the outlook for video versus broadband from a company such as yours. I mean, you guys have a unique perspective on it. Given the footprint you have in both services and a -- and have some content that you won't overwrite and have major investments in. What's your view on the longevity of the current video model with the Cable business and how the transition to more over-the-top services that's going to play out for Rogers?

If I'm honest with you, given I'm only 8 weeks in, I'm not sure. I've got a hard view of them, to be honest. I've done a number of reviews with the teams and heard their perspective of -- probably it's best that Rob answer that, I think.

Yes. I think the question that -- Tim, the toughest part of this question is like a lot of questions like it that we faced over the past 10 or 15 years. We know it's going to migrate along the pathway and we know that the consumption will shift from the platforms that we have today even the more sophisticated platforms that we're building to deliver television-like services to everything being consumed over the top. I think it's getting the timing right. And the other important thing is trying not to do some very short-term things, like driving endless amounts of unlimited data, which was -- are going to stand in the way of us monetizing that shift. So we remain very focused. We believe that timing will be longer rather than shorter, which is why we're focused on the evolution of our IP platform, which allows us to deliver, of course, to all devices and meet the customers' needs. And we're very focused on not taking some of the aggressive steps to make unlimited pervasive.

Your next question comes from Matthew Niknam of Goldman Sachs.

Two, if I could. One on top line growth. So with growth turning negative again this quarter, can you talk about management's priorities to improve or reaccelerate growth and where you see the greatest opportunities to achieve this? And I know you've touched on some, but if you can give just more broadly across the business. And then secondly, on Cable, can you talk about subscriber losses in markets where IPTV competition is a little more mature, specifically, if you started seeing any customer win-backs in any of these markets?

Matthew, it's Tony. I'll start with an overall comment on your top line growth question and then move it to Rob. In terms of top line growth, clearly, what you're seeing in the near term are the investments we've made in terms of things that we think are right for the customer on the Wireless front. As you look across the platform, data is going to continue to drive growth. If we look at actual data utilization across our platforms, whether it's in the wired portion or the Wireless side, it continues at very significant double-digit growth rates. And then as we extend that to Media, clearly, our specialized content drives significant improvements in our subscription revenues, and you see that also continuing to pull through at double-digit rates. And so from a consolidated standpoint, this is something we're clearly focused on and we continue to look to driving top line growth across all of our businesses. In RBS, the next-gen revenues, which is on-net and IP-based, now accounts for, together with data centers, 65% of our revenues in that business, and that continues to grow at substantial growth rates as well. And so with that, I'll pass it to Rob to talk more specifically on Wireless and your Cable question.

Yes. Matthew, I'm not going to regale you with the list of the game plans that I discussed just a second ago on Wireless, but needless to say, very, very focused on Wireless and remaining sharp on the top line, whether it be through roaming or ensuring that we've got the appropriate penetration in our base from a data perspective. On the latter part of your question, which was oriented towards Cable and customer win-backs, we are very active on the customer win-back front. We've been quite successful in all of our markets. We find that if -- that the most opportune time is when the roll-off of the big discounts. And typically, our competitor is out there with 6 months of half price service. A lot of these customers are fairly discontent when that first wave of discounts roll off, and we've had good success winning them back. And we'll continue to remain focused on win-back as part of our portfolio of tactical opportunities.

Your next question will come from the line of Jeff Fan of Scotia Capital.

One quick follow-up and then a question for Guy. Follow-up is regarding the Wireless ARPU. Rob, you mentioned larger buckets, lower prices. I mean, one of the things about the wireless industry is that over the long term, usage growth is really what's going to drive ARPU and revenue growth. So is what you guys are doing or what the industry is doing with giving more capacity a signal about the Canadian consumers ability to spend more? How should we -- I mean, what's your takeaway from that in terms of, I guess, just the ability for consumers to pay more on the Wireless side? And then on the question for Guy, I know it's still early and we're still a couple of months away before you operationalize your plans, but wondering if you can share with us some of your early observations about the Canadian consumer. Any behavior or spending habits that you think is kind of unique in Canada that's perhaps something you can bring to Rogers in the Canadian market?

So, Jeff, just leading off on your clarifying question. The success of the Wireless business going forward is about monetizing data. And I think the challenge we face is we're seeing that healthy growth in data utilization as people spend more time and more energy streaming video and doing everything that the Wireless device enables you to do. What I would say is we're going through an adjustment phase where we're trying to continue to bring on the next wave of subscribers where at the same time not make prices so cheap and bucket sizes so large that it gets in the way of our ability to monetize. And like most processes, it's imperfect. We jump ahead. We go too far as an industry and then we sort of retrench. And I think somebody on the call earlier made reference to a couple of other companies who've actually done some retrenching on flanker brand pricing. And I think we're in that adjustment phase right now. The critical thing is we have the growth in data that we need. We just need to make intelligent moves as an industry to ensure that we continue to be successful monetizing it. So I'll leave it there.

In terms of early impressions, I've got to say, I haven't met everybody in Canada yet. If I had to sum up the experience thus far, I would say it was warm welcome, cold country is the way I'd describe it. With respect to kind of the consumer trends in all the rest of it, I think that from this kind of superficial analysis I've done, I would say that Canada generation Y attitudes towards technology embracing technology and using it is pretty much in line with Europe. And I would say more the gen X, the older generation, is not dissimilar, but have been -- both generations have been affected a little bit by the introduction points of different technologies. So for instance, LTE came here faster than the U.K. and you see adoption of it, therefore, racing ahead versus the U.K., which will presumably catch up over time. So nothing startling right now, but I'm still listening and I'm going halfway through winter.

Your next question will come from David McFadgen of Morgan Stanley.

Actually, it's with Cormark. But anyways, a couple of questions on the guidance. How much cost reductions are you forecasting to make the guidance? And then on the Cable EBITDA guidance, are you expecting any large increase in programming cost? Because it looks to me the EBITDA guidance was a bit light.

It's Tony. In answer to the first question on cost efficiencies, we've been on a path and continue to deliver what we describe as productivity improvements, generally in the 2% to 3% range year-on-year. And so if you look at our operating cost as a percentage of revenue, we look to eke out that type of efficiency improvement quarter-on-quarter and year-on-year. And so in our 2014 guidance, we've also targeted that type of productivity improvement overall into varying degrees in different parts of our business, and that would allow us to make investments in certain areas that we wanted to as well. So yes, cost-efficiency improvements are included in there. And then on the second question of Cable programming costs, I'll pass that to Rob.

We continue to work very hard to keep growth in cost of goods on the Cable front. I prefer not to be specific and tip off all the folks that I have to negotiate with over the next 12 months where we'd like to land, but we'll continue to be very focused on keeping those costs in check.

And ladies and gentlemen, we do have time for 2 final questions today, the first of which will come from Maher Yaghi of Desjardins Securities.

Just to follow up on the last question about restructuring. You've had about between $85 million to $90 million of restructuring expenses during the year. Tony, is that about the amount you're targeting in 2014?

The word I will say is, as we continue to work on those efficiency improvements, with that comes restructuring cost. And so generally, I would say what you ought to expect in 2014 is -- that we currently have today in the guidance we provided is about the same number.

Okay, great. And a question to Guy. Welcome, Guy, to Canada, very cold I know. Just when you look at how you would go about improving top line growth, which you mentioned you're not satisfied with, you can look at it from an organic point of view and acquisition point of view. Can you give us maybe your initial thoughts or your view with previous experience about how acquisition could be looked at to improve top line growth? And if those opportunities out there, which area you would think is best suited for you to improve through acquisition on the top line?

Well, to be honest, I have to say that's way too premature for me to kind of tackle that one head-on. So I'm going to duck the question at this point.

Yes. Maher, we've gotten -- we believe we're good for now. For sure, we'll -- and we've discussed it today. Tony laid out, I think, across the business and so did I. We've got lots of top line growth opportunities on the core business, and we continue to look at things as they come along and stay tuned.

And your final question today will come from the line of Rob Goff of Euro Pacific Canada.

It was very good to hear ARPA mentioned on the call. And so to that, my question to Rob would be, could you discuss some of the trends and the opportunities that you might be seeing in terms of device per account or the ARPA drivers?

Yes. For sure, I -- listen, I'm glad you emphasized it, Rob. We believe, and you can see through our Share Anything (sic) [Share Everything] plans, which, by the way, have been enormously successful, closing in on 500,000 subscribers in a very, very short time, almost 35% of our gross this quarter, I think it really recognizes how important it's going to be to start to look at how much we can sell an account as opposed to what is the amount of money that we're getting for an individual line. And we'll continue to be focused on that in terms of the way we plan and in terms of the way we focus on our metrics. So thanks for emphasizing it and I appreciate the question.

And ladies and gentlemen, this will conclude the Q&A session. And I will now turn the conference back to Bruce Mann for any closing.

Well, thank you very much, Luke, for moderating the call. The management team here at Rogers would like to thank everybody for investing a bit of your time during what we know as a very busy period for you. We appreciate your interest and support. Importantly, if you have questions that weren't answered on the call, please give myself or my colleague, Dan Coombes, a call. Both of our contact info is on today's release, and we'd be pleased to get whatever you have clarified. So with that, this concludes today's teleconference. Thank you again.

Ladies and gentlemen, again, this does conclude today's conference call. And we do thank you for your participation, and you may now disconnect your lines.