Rogers Communications Inc. (RCI) Q1 2014 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Rogers Communications Inc. Q1 2014 Results Analyst Conference. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, Monday, April 21, 2014, at 4:30 p.m. Eastern time. I'll now turn the conference over to Bruce Mann, with the Rogers Communications management team.

Thank you, Ron, and good afternoon, everyone. We appreciate you investing a bit of your time with us today for Rogers' first quarter 2014 analyst teleconference. It's Bruce Mann here. Joining me in Toronto are Rogers CEO, Guy Laurence; our Chief Financial Officer, Tony Staffieri; Keith Pelley, who's President of our Media Group; Bob Berner, our Chief Technology Officer; and Ken Engelhart, from our regulatory team; and then, joining us telephonically is Rob Bruce as well, President of our Communications division. Everyone should have our first quarter results, which we put out over the wire right upon the market close shortly after 4:00. Today, we want to just crisply provide you with a bit of additional background at the front, and then answer as many of your question as time permits. The remarks and discussion will undoubtedly touch on estimates and other forward-looking types of information, from which our actuals could ultimately be different, and as such, please review the cautionary language that's in today's earnings report and in our 2013 Annual Report, it goes through all the factors, assumptions, risks, et cetera, that could cause our actual results to differ. It also explains some of the non-GAAP measures that we use to discuss our results, and they all apply equally to our dialogue on the call. So if you don't already have copies of our first quarter release or 2013 Annual Report to accompany the call, they're both available on rogers.com, at the Investor Relations section. With that, I'm going to turn it over to our CFO, Tony Staffieri, and then, to Guy Laurence, for some brief remarks on the quarter, and then, the management team here would be pleased to take any or all of your questions. So over to you, Tony.

Thank you, Bruce, and good afternoon, everyone. I'll spend a few minutes providing you with some context and color around the results we've just released a little while ago. Overall, I describe the quarter as a continuation of the trends you saw in the previous quarter. We continue to make investments throughout our businesses. These investments range from changes to our consumer pricing plans, upgrades to our call center experience, as well as ramped up deployments associated with our network and products. There are, however, certain trends we aren't happy with, and we'll continue to execute on the changes needed. But at the same time, we see progress in some underlying fundamentals. During the first quarter, we further expanded our strong operating margins at Wireless and Business Solutions 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, which were both up 10%. In addition, we further reduced the rate of churn in our Wireless business and the rate of basic subscriber losses in our Cable businesses, and we put up some good revenue growth numbers at Rogers Media as well. So we've continued to make investments in our core businesses, and while there were some solid achievements and areas of improvement, several of the operating trends we saw in the latter part of 2013 continued into the first quarter, which had the effect of slowing growth. Clearly, reaccelerating top line revenue growth and continuing to enhance the customer experience are very key focuses for us. From a strategic and innovation perspective, we also made good progress in the quarter. Rogers secured 24 megahertz of contiguous, paired, lower 700 megahertz band spectrum, covering the vast majority of Canada. We introduced suretap wallet, the first smartphone mobile wallet from a wireless carrier in Canada. Rogers Business Solutions opened Alberta's first tier 3-certified state-of-the-art data center, further expanding its portfolio of data center locations. And we launched Rogers' next early upgrade installment program, allowing customers to obtain a new premium device every 12 months. We announced multi-platform partnership extensions with Major League Baseball and the Canadian Hockey League. And we issued $2.1 billion of debt securities this quarter at historically low rates, and retired USD 1.1 billion of higher coupon notes, helping to lower average cost of debt by more than 65 basis points from the first quarter last year, down to 5.1%. These are just a few examples of achievements we put up during the quarter. In terms of the financial results, on the top line, our consolidated revenue was essentially flat for the quarter, with revenue growth of 8% at Media; 1% at Business Solutions; and relatively flat at Cable, offset by a decline of 2% of Wireless. The results of the acquisitions of Mountain Cable, theScore and BLACKIRON from last year are included in the growth rates I just quoted. Excluding the impact of these acquisitions, consolidated revenue growth would've been down a little over 1% year-on-year. The relatively flat overall revenue we saw was driven by a continuation of several trends we saw coming out of 2013. At Wireless, the 2% revenue decline reflects the impact of pricing changes associated with the near-term impact of our move to simplified, customer-friendly, all-in pricing plans, in addition to the lower-priced, higher value roaming packages we put in place earlier in 2013. As we said last quarter, in Q2 of 2013, we began including features such as voicemail 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 end market pricing changes over the past few quarters, such as the inclusion of domestic long distance, continue to impact our ARPU, as large 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 3% year-on-year, with solid margin expansion of 280 basis points to 48.3%. In addition, we drove a 2 basis point improvement in postpaid churn, which was down to 1.20%, while at the same time, managing retention costs down by 14%. On the Wireless subscriber front, we activated 579,000 smartphones, 30% of which were new subscribers to Rogers. So smartphone demand continues to be healthy, although there has been a bit of a continued slowing on the gross add front, as we saw across the industry last quarter, following the industry transition from 3 to 2-year contracts. And this trend clearly continued during the first quarter, resulting in the 8% decline in gross additions, which even after the continued improvement in churn brought net postpaid additions down to 2,000. 76% of our postpaid customer base now has a smartphone, and wireless data now accounts for 51% of our network revenues. So we're making -- so we're continuing to have success concentrated in the high 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, with operating cost at Wireless down year-on-year by 1%, excluding cost of equipment. Turning to Cable. Revenue growth at Cable was flat, led principally by the impact of basic subscriber losses over the past year. A couple of other areas are contributing to the revenue softness at Cable, including the impact of promotional and retention pricing, as well as the timing of when we put price changes into effect last year and this year, where last year, they went into effect in the middle of the quarter, and this year, they don't come into effect until early second quarter. Significantly, though, I'll note that TV subscriber losses improved again this quarter, both sequentially and year-on-year, an important data point in the trajectory of this segment. Cable's adjusted operating profit was down year-on-year due to a 4% increase in operating expenses. This was a result of a non-recurring positive $8 million adjustment in the first quarter of last year related to CRTC's Part II fees. In addition, during the quarter, we made investments in customer care and incurred weather-related network maintenance costs. Also impacting operating expenses were the incremental costs associated with the acquisition of Mountain Cable on May 1 of last year, while these increases were partially offset by cost efficiency and productivity initiatives. At our Business Solutions segment, the shift to and growth of on-net, next-generation revenues continues to drive improvements in the financial profile of this business. Next gen revenue now represents 69% of total service revenues and grew 45% 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 the business. Turning to our Media segment. Largest contributor to Media revenue growth of $26 million or 8% was our Sportsnet properties, which grew at double-digit rates, as well as good, continued growth at The Shopping Channel. Excluding the acquisition of theScore made in 2013, on an organic basis, Media's revenue growth was still a healthy 6%. 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 sports content and our digital platforms. Looking at Media's adjusted operating profit line, we reported a decline of $17 million year-on-year. This was a result of higher programming costs, startup costs related to the Next Issue launch and a nonrecurring positive adjustment in Q1 last year related to CRTC's Part II fees. Turning to consolidated results below the operating profit line, you'll see that the adjusted net income and adjusted diluted earnings per share declined by 18% or $0.14 year-on-year. This was driven primarily by 3 factors. First, higher depreciation and amortization expense contributed $0.14 to the decline. As mentioned last quarter, this was a result of deliberate increased penetration of our new NextBox 3.0 digital set-top boxes at Cable, which are now amortized over 3 years. As well, we reduced the cycle time to 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 increased intangible assets, resulting from the acquisitions over the past year. Second, modestly higher interest rates and lower adjusted operating profit contributed $0.05 of the adjusted earnings per share decline and reflects an increase in the amount of outstanding borrowings, partially offset by the previously mentioned improvement in our weighted average cost of debt. And finally, reduced income tax expense contributed an offsetting $0.06 improvement. Looking at the balance sheet. We ended the quarter with $4.4 billion of available liquidity, consisting of $2.2 billion in cash and $2.2 billion in available capacity under our credit facilities. Subsequent to the end of the quarter, we paid the remaining 80% installment on our 700 megahertz spectrum purchase. After taking the spectrum purchase payment into account and the expansion of our bank credit facility, available liquidity on a pro forma basis would have been $2.1 billion, with leverage at 3x debt-to-EBITDA or closer to 2.8x if you give effect to the approximately $950 million of marketable equity securities we hold. We plan to manage this ratio back down to within our 2 to 2.5x target leverage range, and as we go forward, utilizing portions of the significant free cash flow we generate, even after the payment of income taxes and dividends. We've been very transparent with the rating agencies on this approach and have had very productive discussions with each of them who understand the priorities and will all reiterate their investment-grade ratings on our balance sheet. Although not factored into our leverage ratio, I should highlight that our pension liability was reduced down to only $150 million at quarter end, further reducing pension funding obligations to within approximately $50 million per annum. To sum up, I'd say that, overall, from a financial perspective, it was a somewhat mixed quarter, with the continuation of several of the operating trends we saw in the latter parts of 2013, offset with what were otherwise some solid achievements and areas of improvement. Clearly, reaccelerating top line revenue growth and continuing to enhance the customer experience are very key focuses for us as we progress into 2014. And with that, I'll pass it over to Guy.

Thanks, Tony, and welcome, everyone. We appreciate you joining us this afternoon. Following on from what Tony said, in a number of ways, the Q1 results reflect a continuation of what we saw in Q4 last year. Whilst there are areas of strength, including continued strong margins, modest improvement in wireless churn and reduced losses in basic cable subs, overall, I still think that we can and will do better over time. I also said that last quarter, but now I can say it with more confidence, given the experience I've gotten from being inside the business over the past 3 months. Just to give you an idea of what I've spent my time doing, it included spending 24 days on the road, traveling some 22,000 kilometers visiting our 12 largest markets. I've met over 11,000 of our employees face-to-face from coast to coast in various different -- variety of different forums. I've held deep dives business reviews with every functional leader in the company and their respective teams. I've also met with a huge number of stakeholders, including customers, regulators and other government officials, as well as suppliers and technology partners. In addition, I've been seeing, on a one-on-one basis, all of our Board and 59 of our senior managers, in total, 77 people, that alone took over 2 working weeks. I've also asked the staff what they thought, and nearly 2,500 of them have contributed their views on how we should take the company forward. There's no question in my mind that we have meaningful opportunities to put our customers' needs more front and center in everything we do to deliver a better and more consistent experience. We've also strengthened our value proposition and our brand differentiation. And we have the opportunity to best align and focus our investments in key areas to help reaccelerate our growth. I don't think there's any magic or rocket science needed. It's not about massive M&A or expanding outside Canada. I think it's about rigorous prioritization, disciplined execution, clear accountabilities and consistent operational excellence. We have a board meeting in a few weeks time, during which I'll take the directors through my plans and future priorities, after which my team will move to operationalize and quickly cascade them throughout the organization. We have the assets to win. We just need to make them dance together better than we have done previously. We'll update you on our plans for the future in a few weeks time. I also want to touch quickly on the positive outcome of the recently concluded 700 megahertz spectrum in Canada. As you know, Rogers took home twice as much prime contiguous low-band spectrum as almost anyone expected. And did so across virtually all geographic markets in Canada. This was, without doubt, the beachfront property and first prize in the auction. We paid prices in line with historical and recent 700 megahertz precedents in the U.S. And interestingly, what we paid was within 1% of the valuation we had gone through our board for approval to spend before the auction. We'll earn a return on these investments over time through a combination of more spectrally efficient capital deployment, as well as better churn, ARPU and market share. So [indiscernible] we hadn't required it. We've already started rolling out the spectrum in Toronto, Calgary and Vancouver, and this will continue as the weeks go by, further enhancing what is already the better-performing LTE network in Canada. So thank you. And with that, I'll turn it back to Bruce.

All right. Well, thank you very much. Ron, quickly, before we begin taking questions from the participants, we'll just ask, as we do on each of these, that those analysts or investors that want to ask questions on the call, please limit them to 1 topic and 1 part so that as many as people as possible have a chance to participate. And then, to the extent we have time, we'll circle back and take additional questions or we'll get them answered for you separately after the call. [Operator Instructions]

[Operator Instructions] Your first question comes from Simon Flannery with Morgan Stanley.

Guy, you talked about having the assets dance together more effectively, and I think, one of the big differences between Europe and the U.S., perhaps, is this triple play versus quad play concept. Can you just talk a little bit more, Rogers has some unique assets, not too many cable companies have the wireless assets or the media assets together that Rogers has. So just talk about your perspective on, can that quad play model be more effectively utilized in a Canadian context?

Thank you for the question. The short answer is yes, I believe it's a cap. And in fact, we started discussing a concept internally, called One Rogers, which is where we actually use the assets we've got to work together in an explicit way. I don't want to give too much detail on that right now because it would preempt the Board meeting I've got coming up in the next couple of weeks time. But I do think there's upside from that. And I would say that it's been received enthusiastically internally.

Your next question comes from Drew McReynolds with RBC Capital Markets.

Just on wireless, just wondering, when we look at, obviously, the postpaid ARPU pressure, I believe, last quarter, you're able to kind of strip out for us the impact of kind of roaming and x roaming. And I'm just wondering if you could just give us a little bit more clarity on what is continuing to kind of drive the pressure on ARPU? And then, just as a data point, just wondering if you could provide us with just a percentage of the postpaid base that was upgraded in the quarter.

It's Tony. I'll start off, and then, pass it to Rob for additional comment. Your first question related to postpaid ARPU and splitting it out between roaming and the other impacts. So let me help on that. Of the 5% decline that you saw in ARPU in the quarter, in postpaid ARPU, half of that relates to the roaming impact, and the other half relates to the simplified plans that we talked about, mainly the inclusion of various features that we used to include. So that's roughly the split between the 2. And then, the second question you asked related to percentage of -- actually, if you could repeat it, Drew?

Yes. Just percentage of the postpaid base that was upgraded in the quarter.

The volumes for the quarter. Let me see. I've got them right here. About 408,000 customers got upgraded in the quarter.

Yes. That represents 68% of our upgrades of our base, I should say.

Your next question comes from Glen Campbell with Bank of America.

So my question is on wireless subscriber trends. We're seeing more pricing discipline in the market. Both with respect to promotions and headline prices. Can you talk about the outlook for subscriber growth for the balance of the year? And I guess, as a follow-up, with this more disciplined pricing, do you see an opportunity to, I guess, bring up ARPU for the base through retention pricing?

So it's Rob, Glen. The first thing I would say is I'd echo something both Tony, Ted and Guy reiterated, and that was that being focused on revenue is one of our #1 priorities. So we're very, very focused in translating the changes that we're making into ARPU and doing all the operational things to ensure that, that comes to fruition. Just a comment on where we were in the quarter. The postpaid gross adds, we believe, remains strong. The market, we believe, is still soft. Of course, very hard to tell until the others release. But our conversations with the device manufacturers and others all point to gross adds slowing as a consequence of end market pricing for both devices and plans. And we've seen that through -- and we saw it in some of the retailers' results in Q4. And I'm advised that, that continues. It was good to see the incumbents and some of the price moves that happened in the quarter. Consistent with the past 2 quarters, we're also seeing a much smaller switcher market as each incumbent carrier continues to show improvements on churn. The other thing that was a factor in the quarter, I think, is there were really no iconic devices, the GS5 launch fell into Q2. I think it's easy to forget as well that with our much bigger base, our gross adds don't translate quite as quickly to net adds as we continue to have a bigger base of customers deactivating. So we were pleased to see the churn down in the quarter. We think that's a promising trend going forward. The other thing that we've chosen not to count in the numbers is we sold about 15,000 wireless home phones, and it's a continuation of a trend we've seen in past quarters. It's a very promising product, a real opportunity to bundle up our wireless customers out of footprint. We continue to do that quite successfully. So I think, it's going to take a little while until customers adjust to the new pricing in the market.

Just a quick follow-up on that. I mean, the pricing, my sense, was fairly aggressive through most of the quarter. And now, sort of late in the quarter and into Q2, it's much, much more disciplined. So would it be fair to say that you're making the tradeoff for ARPU at the expense of some growth for the balance of the year?

Glen, it's Guy. If I may answer. I think that is true to say. What I would say is that Rob and I have decided to change tactics slightly. I'm not saying it's a structural change, but we're experimenting with changing tactics, taking some of the noise out to the market, there wasn't necessarily a [indiscernible] in the first place, by the way. But nevertheless, we have reduced the amount of promotional activity, and we're continuing to monitor that to see how it plays in the marketplace more widely and how it obviously affects our own trajectory going forward.

Your next question comes from Jeff Fan with Scotia Capital.

My question is on spectrum, and it's probably a question for Guy. Given the amount of spectrum that you acquired in the 700 auction, can you talk a little bit about just the return? I think you touched on it a little bit. I guess, specifically, how do you expect to gain the return from the amount that was spent? And maybe help us think through whether the returns come more from revenue side, or whether it's more going to come from the cost side, and whether you think there are changes that's going on in the market, where, perhaps, more comes from the cost and less from revenue. I'm just wondering if you can talk a little bit about that? And then, also, part 2 of that is as you look forward, given the focus on spectrum, wondering if Rogers will continue to be very focused on acquiring more spectrum as they become available to help you attain some of the return that you're going to -- that you're looking for.

Okay. So I think, the -- to the first question, it's really a smorgasbord. I don't know what that word is in Canadian, but it's a smorgasbord of different things that actually deliver the return on investment because you've got -- if you take -- [indiscernible] you've got better penetration in buildings now, deeper into buildings and things like elevators and so on and so forth, and therefore, people will have more places that they can access. The Internet and their consumption, we know is growing. And therefore, you get an upside there. You also get the cylinders, not spots or areas in cities, where particularly, you've got areas with coverage difficulties maybe based on the fact you can't get another tower, that kind of thing. And then, as you broaden out into more of the rural areas so you get considerably -- you get spectrum efficiencies from deploying the spectrum because of its reach. So as a consequence of all of that, you then get the ability to acquire or retain more customers because it's available to you. On top of that, I would cite the importance of video, which I fundamentally believe will be one of the killer use cases going forward. So what we've seen -- I saw in Europe was the clear role of media -- sorry, of video increasingly becoming more important. And to go back to the very first question I had, also the importance of having content put across mobile Internet in order to drive video usage. So what we saw was Europeans starting to pick up and use video in a significant way. And this spectrum is particularly well-suited to that. So I think the combination of having the beachfront spectrum and the NHL rights, we shouldn't forget that, the 2 things together produces a very attractive use case to either retain or acquire new customers. And therefore, I think, it'd be quite difficult new models to break that down, I'm sure you'll all have a go, but I know from my past, it's quite difficult to break it down. But I do fundamentally believe it will give us an upside versus the others. On the second thing -- on your second question about more spectrum. I think, well, maybe I should quote Ted Rogers. I think he said he'd never met a megahertz he didn't like. It's, of course, quite liked as well. But having said that, we'll buy spectrum where we think we need it for the future. And obviously, in the case of the 700 megahertz auction, you're talking about a 20-year play. So if you miss out on it, you miss out on it for 20 years. So we'll continue to look for opportunities to buy spectrum if we think we need it. And that will continue as we see demand from customers who use it.

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

A question for Guy. Just elaborate a little bit on the remarks that you made in the MD&A. I recognize you have yet to meet with the board. But I was wondering if you could give us some directional color on what some of the opportunities might be, and whether some of those opportunities to improve the business are what you would consider lower-hanging fruit that you could quickly show improvements. Or are you looking at more foundational changes that would have bigger payoffs but also take a little bit more time, just directionally what your thoughts on that?

Yes, that's a good question. I think, it's more of the latter than the former, to be quite frank. There's always low-hanging fruit when you come into a company. But I think that it may be relatively modest. But I think more of the upsides will come from things that may take a longer period to change, if I'm honest.

Your next question comes from Maher Yaghi from Desjardin Securities.

I was just -- maybe a follow-up to a previous question that was asked. In terms of the operating margin improvement in Wireless, it practically is equal to the lower retention spending you had in the quarter versus last year. And vice versa, when you look at the Cable business, the subscriber improvement, it's coming at the cost of the margins. And when you look at the business in general, you mentioned, Guy, you are trying to step away from some of the aggressive pricing. I believe you're talking about Wireless because in Cable, you're still -- I mean, we're looking at $99 for Atlantic Canada. You're still very -- spending a lot on retention in Ontario. How's your view on the Cable business in terms of pricing versus Wireless?

Maher, it's Tony. I'll lead off on this one. I think a couple of things. When you look at -- a couple of things you touched on. When you look at Cable performance, if we're to look at the impact of the promotions that we put out there, you see that in the ARPU, the margins were more impacted by specific investments we decided to make in a few areas. The biggest one is the call center piece of it. And then, the second piece of it related to improving -- improvements in the network that were caused by weather-related items. And so, that's the bigger part of the cost aspect of it. If we were to look at the subscriber performance, I would say we've been pleased with the way that's been coming along over the last several quarters. As our competitors' fiber build overlap with us, approaches what we estimate to be 80% to 85%, I think we're seeing a pretty good progression downward, not dissimilar to the pattern that we saw in the U.S. several years ago. The reback that we are getting is that many customers we're finding are coming back on a win-back, without necessarily having to rely on promotional offers, and so that's a good trend, as they come off what would've been the competitors' promotions or 2-year contracts or commitments. So those are some of the primary dynamics on the Cable side, Maher.

Then on the -- to your point about my earlier comments, yes, they were primarily on Wireless because that's where Rob and I were focused over the last quarter. We're also looking at a number of opportunities in Cable as well. Slightly different dynamics in the Cable business, depending on the competitive sets and so on and so forth. But as a principal, we're looking at the possibility of where we take froth out of the market on that side as well. You'll always get the odd promotion that's in the system, that works its way through. You will see on a flyer or whatever, because some of them are in a train and so on and so forth. You shouldn't see this as a wholesale abandonment of all promotions from now on in both Wireless and Cable. This is more of an experimentation phase to see what can be accomplished.

Your next question comes from Richard Choe with JPMorgan.

I wanted to get a sense of how big you think Rogers Next could be in terms of your customer adds when it gets up to scale. I know it's early days there, but I wanted to get a sense of what you're looking for?

Richard, if you could please repeat the question. You cut out on a couple of the opening comments.

Sorry. I was just trying to figure out what the amount of Rogers Next might be in the plan.

Are you referring to the Next wireless program that we have?

Correct. Yes.

You want me to grab that?

Sure. That'd be great.

Richard, the next program is a program that recognizes that there is a subsegment of customers out there that would like to get a new phone every year. And they would be glad to pay a little bit for that privilege to have that accelerated update. As you so rightly put it, it's still early days, it's being met with some enthusiasm out there, but we'll continue to tweak and try to make it work for customers in the best possible way as we go forward. So I think the other thing that's important to take away is it's a very different program than what the U.S. carriers are doing. The U.S. carriers are literally not financing the next phone. They're financing the current phone with an add-on on the bill. And what it's causing is a pretty significant reduction in their handset subsidy, and as a consequence, a real uptick in EBITDA. The Next program that we have and that we've launched is different from that, and I think it's just important to make that distinction.

Your next question comes from Dvai Ghose with Genuity Capital Markets.

A question for Guy or for Rob. While it's good to see more rational pricing from Rogers than your other peers, you did lose 440,000 wireless subscribers in the quarter. And while we haven't seen the results from Bell or Telus yet, last year, you lost 6 -- 561,000 more subscribers than Telus on the wireless side, and 392,000 than Bell. You claim to have the best network, you clearly have as good if not a better handset supplier than your competitors. What are the main drivers of churn and what strategies are you pursuing to reduce churn further?

Great question, Dvai. And I think we probably talked about it before. We led off the call today talking about our investment in 700, beachfront real estate, the ability to be able to deliver superior video experience. And that speed advantage that we have, I think we've got an opportunity to merchandise it and sell it a lot better to customers. We believe we got a very strong value proposition around Share Everything. We've been working hard to improve all aspects of customer service and customer experience. And we've been creating excitement by highlighting some of the great new devices. And we've been continuing to try to innovate for customers with things like pre-hop and the Next program and other things to continue to show the value proposition for customers, Dvai. And we're pleased. We're starting to move the numbers. They're modest, still, and we'd like them to be better. And we continue to be very committed to putting a very strong focus on churn.

Your next question comes from Greg MacDonald with Macquarie Securities.

A variation of Dvai's question. I'll go back to the postpaid subscriber declined 8% in the quarter. And I think, as Tony was pointing out, that's not unique to Rogers. We've seen that both with Telus and with Bell. One might speculate that you'll continue to see that trend evolve further. What -- I mean, what gives you, Guy and or Rob, what gives you so much confidence that the market is actually willing to absorb the higher-priced subsidy model? At what point does this market not have to move to equipment installment plans or something that strips out that subsidy in a greater way, and runs the risk, of course, when you do that, of highlighting exactly what they're paying for access, and therefore, potential for greater competition on wireless pricing?

Greg, it's Tony. If I could just lead off. One of the -- and then, I'll pass it to Rob, but one of the significant proof points that we are seeing is within our base, the propensity of the customer to upgrade on their nickel before they're entitled to a free upgrade. And so under our current flex program, they pay the unamortized portion. And so it's remarkable how many are upgrading before the 3 or 2-year timeframe, and their willingness to pay for the ability to get into the latest device. So that's one significant proof point. Rob, do you want add to that?

Yes. Listen, I think there is -- we will continue to do lots of things to stimulate the appetite for our customers. I think what we're all saying is, to make that a better business proposition for all concerned, it's going to be less focused on price and dropping handset devices and more about amplifying the value proposition and making that resonate more for customers. So look at Next as a step in that direction, look at some of the things that we can do with the NHL, with video and other things to kind of continue on to build on that value proposition and take us to a place where the customer sees the value, and it'll be less about price.

Just if I can just clarify as well and while we're on the topic of upgrade. I wanted to come back to a question, Drew, you had asked, and I don't think I was very clear. Your question was, what percentage of our upgrades were hubs. So the total activations of smartphones in the quarter, 68% were hubs. Of the total postpaid base, that represents 5.1%. So I want to make sure you got the right numbers on that.

And your next question comes from Tim Casey with BMO Capital Markets.

Could you talk a little bit about trends in wireline on subs and pricing? You seem to infer that given the overlap with 5, you thought it was 80%, 85%. You seem to be optimistic that competitive conditions on the wireline side are going to be mitigated. Yet, your pricing was down significantly on the video side and on the voice side. I'm just wondering how we should think about those 3 metrics as we proceed through the year?

Yes. Tim, I'm just -- I'm trying to make sure I answer the question that you want me to answer. Do you want me to talk a little bit about revenue trends on cable, and then, bounce to EBITDA and talk about where EBITDA landed and why Guy touched -- not Guy, but rather, Tony touched on that briefly, but I'd be glad to go through the revenue side.

I'm more thinking about the future, Rob, and what came through in the quarter.

Yes. So I think the thing that we didn't say in the earlier question because of the way the question was asked is, we're pleased because we're out there gap-managing. We're not chasing Bell's pricing where they're aggressively buying customers. We're gap-managing that. I think we're better executionally, and we kind of figured out more effectively where the gap is that makes the customer indifferent. And we're effectively -- we're more effectively leveraging that on a going forward basis. And just honing some of the tactics. Again, we hit about 76% overlap of our footprint, as Tony pointed out. We think that the numbers that we've heard from -- on Bell calls and other things is 80% to 85% is where it caps off. So I think in the future, that's a fairly good news story for us because they've been powering some of their acquisition on the expansion of footprint, and as that acquisition -- that expansion of footprint dries up, we think it will bode well for subscribers. The other thing that I get to talk about on some of the calls is we continue to play the Internet card very aggressively, because just like we have leadership in wireless, we have vastly superior Internet. And I would say, the other thing that we've been really active in doing is dialing up our Internet message, talking about what makes us different. We've been making some very aggressive investments in our current platform. We've moved an awful lot of customers onto our NextBox offering, which has an enhanced interactive guide, a better UI and search, full remote control, smartphones and tablets, and just generally, a much, much better experience. We continue to work hard on extending our video offerings to new platforms probably as aggressive as anybody in the business. And you know that we're truly focused on a long-term IP-based video platform, and we've mentioned that on past calls. And the last couple of things I would just touch on is our focus on -- a strong focus on retention and win-back. Tony made reference to that early. And significant tactical acquisition efforts, and what I call hand-to-hand combat in the footprint has been even more successful. So anyway, those are a few data points, and I hope some of that help.

Could you -- what do you mean by gap-managing?

Well, so gap-managing means you don't exactly go after the customer -- the competitors' pricing. So if I went back to my Pepsi days, when private label was at 3.99 a case, Pepsi didn't chase private label by taking their price to 3.99 a case. We figured out that getting it to 4.99 a case or some other number was loads good enough because, at that point, the customer would choose us over choosing a private label. Again, not a telecom example, but the same kind of mindset. Don't chase the competitors' pricing, but find the price at which your -- the customer is actually indifferent between yours and your competitor.

Your next question comes from Rob Goff with Euro Pacific.

It would be on the Wireless side. Could you give us perhaps your perspective on the Wireless revenues if you were looking at it and measuring it by ARPA, and what plans you may have in order to push the adoption of the shared plans?

Rob, it's Tony again. I'll lead off. We don't disclose ARPA today. Clearly, I don't want to chip it off. It is something we started to measure internally. And I would say, to be helpful, given the number of proliferation of multiple sim cards we're seeing per user, ARPA has a much, much better or slightly better trending, I should say, than ARPU. But it doesn't necessarily change some of the fundamental trends that we're seeing, to be transparent with you. Rob, anything you would add to that?

No. Just honestly, Rob, we're having great success with the Share Everything plans. I think they're very compelling for customers. Many of us are in a similar situation where we have multiple members of the family that are looking for a plan where they can share a large bucket of data. The vast majority of customers we touch are going on those plans. And while we were disappointed when the competitors drew in voicemail and calling line ID into the plans, we think the fundamental structure of the plans and the simplicity of the plans is a real positive, both for us and for the customers.

We have the time for 2 additional questions today, the first of which will come from David McFadgen from Cormark Securities.

I have a question on ARPU, both Wireless and Cable. So if you look at your wireless ARPU, looks like your voice revenue was down about 13%. Just wondering, when do you think that, that might materially improve? Because that would obviously have a very big benefit on your total ARPU. And then, when you look at the Cable ARPU on your telephony side, that was down quite a bit in the quarter. And I'm just wondering, is that a new level that you think you'll be using going forward?

Bob, do you want to take that one?

Sure. So voice ARPU will continue to be under pressure over time as we migrate our existing customers to the Share Everything plans. I think, what Tony keeps us honest with is more and more the distinction between voice and data become more difficult to tease apart. And we're very, very committed and believe that we, as an industry, should start transitioning to just plain revenue because a lot of these plans now, what's in voice and what's in data becomes a bit of an allocation effort as opposed to something that's absolute science like it was 10 years ago. The second part of your question, David, was about Cable?

The ARPU was down a fair bit in the quarter. I was just wondering, is this a new level that you're probably going to use going forward, or do you think it could come again in Q2?

Again, I mean, I think the thing that's going on in Cable, and I think, we've talked about it a little bit before is as we continue to move customers to new pricing in Cable, that continues to have some impact. The real drivers of revenue and ultimately, ARPU in the quarter, I mean, TV revenue has decreased by about 6% year-over-year. Pay-per-use volumes continue to be light. We've seen, as would be expected with a new competitor in the market, we've seen some contraction of our subscriber base, and that's partially offset by the Mountain Cable acquisition, as Tony pointed out earlier. On the Internet, we're delighted because of the great product that we have. We've seen Internet revenue increase about 10% year-over-year. Some of that is basic expansion, about 4.8. Some of it is the third-party Internet. Again, we're very happy because our retail Internet piece of the business is growing well. Peer migration and rate increases on light, express, extreme, extreme plus and the ultimate tier. And lastly, telephony. Home phone revenue decreased about 2%. Higher acquisition and retention discounting, offset by home phone base expansion of about 6.5%. We've got some Mountain Cable in there, as Tony identified earlier, and some rate increases as well. So of course, the timing of the rate increases being different this year than last year also has an effect on the revenue for Cable.

And our last question in queue comes from Drew McReynolds with RBC Capital Markets.

Just a question on the media side, perhaps for Keith. Just 2 questions. First, obviously, you and your competitor have spent quite a bit on programming, in particular at Sportsnet. And just wondering, can you give us the dynamics in terms of the timing of carriage renewal, and to what extent you can -- there's a gap here between kind of programming cost going out and your ability to recoup that from a subscription standpoint? And then, just secondly, the comment on advertising trends, obviously, I think, we're all, on this call, aware of the structural headwinds in the ad market. And obviously, there's an Olympic impact in the quarter. Just wondering if you could talk to just the underlying cyclicality of the ad market as we look into calendar Q2. And if you can provide a little bit of granularity on specialty versus conventional versus print, that would be great.

Sure. I'll start with the advertising. There's no question, it is not a cyclical change, it's a structural change, for sure. There's just a plethora of opportunities for marketers to spend their advertising dollars. And as a result, what you really need is the strongest, most compelling content that resonates with consumers across any device. And hence, the reason that we were aggressive in our pursuit of the covenant content, which was the NHL. And as a result, we're in the market right now with the National Hockey League advertising, and it is having an effect on our entire business and really bodes well for us in Q3 and Q4. But there is no question that it is a structural, not a cyclical change. In terms of publishing, because you made reference to that, we believe that we're well-positioned in the Publishing business, based on the launch of Next Issue. To date, it has over 40,000 -- 45,000 subscribers, paid subscribers, another 20,000 that are receiving it on a free trial right now. And it's growing at a real torrid pace. And from a digital perspective and a publishing perspective, that's where we believe the market is going, and we're -- although we invested significant dollars in Q1, we're thrilled at the take on it already and believe that we're well-positioned. In terms of Sportsnet renewals, they vary with different BDUs. And we're in the market right now discussing them. Obviously, it has changed with the acquisition of the NHL because it has changed the actual value of those properties. When you look at adding 500-plus games to the marketplace, then we now have a stronger service. So over the next couple of months, we'll be looking to renew those deals. Obviously, with the acquisitions of the Vancouver Canucks and the 10-year deal that we have there, with the Oilers and the Flames, we're incredibly strong out west. And with the strong Blue Jays programming, we believe Sportsnet is well-positioned to get fair market value for those services.

Ladies and gentlemen, this does conclude the Q&A session for today. And I will now turn the call back to Bruce Mann for his closing remarks.

All right. Well, thank you very much, Ron. We appreciate everybody spending a bit of time with us during what we know is a very busy period. The team here appreciates your interest and your support. And most importantly, if you have questions that weren't answered on the call, myself and my colleagues, Dan and Bruce Watson are here for the evening. And we'll be happy to follow up with you on anything that you might need. Our contact information is on the release. This concludes this afternoon's call. We, again, appreciate your interest. Thank you very much.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating, you may now disconnect your lines.