Rogers Communications Inc. (RCI) Q2 2015 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Rogers Communications Q2 2015 Results Analyst Teleconference. [Operator Instructions] I would like to remind everyone that this conference is being recorded on Thursday, July 23, at 7:30 a.m. Eastern Time. I will now turn the conference over to Bruce Mann with the Rogers Communications Management team. Please go ahead, sir.

Thank you, Ron. Good morning, everyone, appreciate you joining us bright and early here in Toronto with our President and Chief Executive Officer, Guy Laurence; and our Chief Financial Officer, Tony Staffieri. What we'll do is crisply provide you with a bit of additional color and detail on the results upfront, and then we'll spend the majority of the time we've got this morning answering as many of your questions as time permits. The discussion will undoubtedly touch on estimates and other forward-looking types of things, and from that, our actual results could ultimately differ. So please review the cautionary language in the earnings release today and in our 2014 annual report. The various factors, assumptions, risks, et cetera that could cause the results to differ apply equally to our dialogue this morning. So with that, I'll turn it over to Guy and then to Tony, and then we'll be pleased to take your questions.

Thanks, Bruce, and good morning, everyone. So last quarter, I talked about early traction and the execution of our Rogers 3.0 plan. I'm pleased to report that the quarterly results released this morning demonstrate both the continuation of positive financial trends and improvements in subscriber metrics. Our revenue and free cash flow growth is continuing, and we're delivering a steady flow of strong new commercial initiatives. Before I comment on what we've been doing from a product and customer experience perspective, let me highlight a couple of key financial points before Tony gets into the detail. As you saw, on a year-over-year basis, consolidated revenue growth was 6%, consolidated adjusted operating profit increased to 2% and free cash flow growth was up by 9%. In Wireless network, revenue grew by 2%, with adjusted operating profit flat year-over-year. Importantly, however, this represents a 3 percentage point improvement in the growth rate sequentially from Q1, despite the fact we are managing the double cohort. Also notable is the postpaid wireless subscriber net additions, which turned positive after 2 quarters of decline as we gained traction across multiple segments. At the same time, average revenue per wireless account, or ARPA, was up about 4%. And while postpaid wireless churn was up very marginally year-over-year, it was down from Q1, and importantly, there wasn't a significant spike after the start of the double cohort. In cable, the reported revenue was basically flat, as the 5% growth in Internet revenue was offset by declines in TV and Home Phone. However, we saw sequential improvements from Q1 in subscribers, with positive Internet net additions and TV sub losses improving somewhat. This part of the business is obviously operating in a highly competitive marketplace. But starting next week, we will introduce a newly enhanced guide for the Rogers NextBox, and this is the first of several new upgrades to our customers' TV experience in the coming quarters. Going forward, with a leading in-market 250-megabyte offering to almost all of our cable customers today and a clear path to a 1-gig offering as the cable industry implements DOCSIS 3.1 in the not-too-distant future, our broadband offering is well positioned vis-à-vis our telco competitors. Especially given our fiber coaxial network platform, where we have inherent advantages in terms of widely deploying 1-gigabit speeds without the need for expensive and time-consuming rebuilds to replace the last mile of plant. In terms of the evolution of our consumer offering, we also announced that following a successful beta trial, our shomi streaming video service will be available to Canadians right across the country later this summer. It's interesting to note that the leadership we ensure are showing in this area is being copied by a competitor who clearly craves the success we've been having, although they won't be launching until next year. In Media, both the revenue and adjusted profit were up substantially, as the first season of our exclusive national NHL rights came to a successful and profitable conclusion with a plus 10% profit margin for the season, almost bound [ph] with our plans. The seasonal trend from Q1 to Q2 is exactly as we told you it would be last quarter. Closely associated with that, Sportsnet was rated the #1 most-watched televised sports brand in Canada. While subscriber and ratings momentum have been building for some time, there is no doubt that the addition of the national NHL rights this season pushed us solidly to the #1 spot. With the first season now concluded, I think it's clear that the NHL has been a success. Separately, I'm sure that you saw that the Mobilicity and Shaw spectrum acquisitions we successfully executed on late in the quarter, both of which we've now closed, with Shaw concluded by the end of the quarter and Mobilicity on July 2. These were a complicated set of deals, almost akin to solving a Rubik's Cube, involving multiple stakeholders with differing interests and objectives. At the end of the day, we were able to procure a significant amount of prime spectrum. This is contiguous with our existing holdings across 3 of the largest-population regions in the country: Ontario, BC and Alberta. And importantly, we did so at very favorable prices, especially compared to recent AWS auctions both in Canada and the U.S., which saw prices paid by carriers up to 3x higher in metropolitan areas like these. As an example, one of our competitors just 4 months ago spent over $6 per megahertz pop at auction for the AWS 3 spectrum in Toronto and Southern Ontario, nearly 3x as much as we paid for the prime spectrum we acquired across the 3 very large population centers with this deal. The key to the AWS spectrum we acquired, besides the fact it is contiguous to our existing spectrum in these areas, is that, unlike AWS 3, it is immediately deployable on our current LTE network without additional equipment investments and without waiting for new devices that can operate on it. Indeed, the spectrum out West is now live for our customer to enjoy even faster speeds, and this comes just 4 weeks after its purchase from Shaw. And tax less -- loss carryforwards we acquired at the same time from Mobilicity are also of significant value and as you can see in today's release, enabled us to increase our free cash flow guidance for 2015. We also participated in a 2,500 megahertz spectrum auction during the quarter, which shores [ph] top up our spectrum holdings in that frequency range with an additional 41 20-megahertz blocks of [ph] licenses across Canada for a modest $27 million, all-in. This means we now have 40 megahertz of contiguous 2,500 megahertz spectrum, essentially across the country. Both of these spectrum acquisitions clearly fit with the Rogers 3.0 strategic pillar of maintaining our network leadership. In terms of another key pillar of the plan, customer experience, we continued to make important investments and strides there as well. A couple of examples include introducing a simplified new customer build for Rogers' services that makes it easier for our customers to understand their spending, which is the #1 reason for calling us. Not only is the new bill less complicated, it's available across multiple platforms, including mobile. Over 3 million customers are now receiving the new bill, and we've had 2.5 million downloads of our MyRogers app, following those -- allowing those customers to view their bill on their mobile device. At the same time, we have expanded our online self-service offerings to make interacting with Rogers easier for the 0.5 million customers who go online to pay their bill. Not only did we notably speed up the website response times, we also enhanced the look and feel whilst greatly improving search and navigation capabilities and the customer self-serve portal as well. All in, we have already reduced the incident of customers contacting us by 12% year-over-year in just the first 6 months of 2015. This quarter, we also expanded our leadership in international wireless roaming by extending ROAM LIKE HOME to 35 countries across the EU. We now have 1.6 million customers enrolled in ROAM LIKE HOME, and we're seeing an 800% increase in U.S. data roaming volume. So far, competitive reaction has been muted, although one competitor launched an imitation product recently that is 40% more expensive, which customers tell us is not very attractive. We also launched Fido Post wireless plans that target the millennial cohort, with attractive value-add services, including a music-streaming subscription to Spotify and VICE Canada that is gaining considerable traction with this target segment. Turning to the regulatory front. The government of Canada has now met their regulatory objective of having a fourth carrier operating in all territories across Canada. The wholesale roaming cost proceeding is still outstanding, and so there's nothing to report on that file, with submissions due later this year. But importantly, we now know that MVNOs aren't the future of the Canadian wireless market or certainly not anytime soon. On the wholesale broadband decisions that came out late yesterday, our initial read is that it appears to create a more level playing field between cable-co and telco providers of high-speed Internet offering, in that it won't be exempt -- it won't exempt telco fiber-to-the-home from wholesale requirements. Assuming that CRTC gets the cost models right, we see little risk that the overall regime will hinder continued network investment by incumbents provided. Over time, it also seems that the decision will require resellers to invest more in infrastructure, which is a fairer sharing of the required costs and is more consistent with a facilities-based competition model. In summary, this quarter has some clear positives and shows we are making steady progress against our Rogers 3.0 plan. Expect that to continue as we move through the second half of the year. With that, I'll turn it over to Tony to provide a bit of additional detail and perspective on the second quarter's financials.

Thanks, Guy, and good morning, everyone. I'll provide a bit more detail around certain aspects of the second quarter financial results, and then we can get to your specific questions. During the second quarter, we continue to generate solid cash flow and strong operating margins, while at the same time, as Guy mentioned, we continue to gain traction driving top line revenue growth, which grew 6% year-over-year. Excluding the incremental NHL portion of Media's revenues, consolidated growth was 2%. A year ago, it was flat. And adjusted operating profit this quarter of $1.34 billion was up 2%. Last quarter, it was down 3%. So we're clearly making solid progress. At Wireless, the network revenue growth of 2% was driven by our ongoing strategic shift to lifetime value over volume, as we continue to see higher ARPU in versus ARPU out. This trend is very much supported by the growing penetration of our Share Everything plans that now represent 42% of our Roger postpaid based, up from 38% last quarter. So ramping well and with plenty of room for continued growth. And importantly, we put up the third consecutive quarter of year-over-year positive postpaid ARPU growth. As I've described in previous quarters, our new roaming offerings, including our popular U.S. and European ROAM LIKE HOME plans have had and continue to have an impact on our Wireless revenue and ARPU profiles. The plans are working, and we're seeing unique users on the uptick, and the increased volumes are beginning to offset the pricing changes. And the rate of decline in roaming revenues is decelerating. If you exclude the impacts from roaming changes, postpaid network revenue and ARPU would have been up over 3%. Another important data point is that after 2 quarters of postpaid subscriber losses, postpaid net additions turned positive in Q2. While there was a slight uptick in wireless postpaid churn of 6 basis points year-over-year, new customer additions were strong and in line with the same period last year. So continuing improvements in gross and net addition trends, all of which is evidence that our new product differentiators and customer service improvements are starting to gain traction in the market. Smartphone demand has remained strong, as we activated 682,000 in the second quarter, 1/3 of which were new subscribers. Not only were smartphone activations up by 16% overall year-over-year, in particular we saw 24% increase in higher-value iPhone customer activations during the quarter versus Q2 of last year. This quarter, we upgraded 14% more devices for existing subscribers than the same quarter last year due to our selective early hardware upgrades in advance of the double cohort, resulting in a 6% upgrade. This drove retention costs up 11% or $21 million year-over-year. So we executed our upgrades more cost effectively this quarter than in Q1. You may recall that in that quarter we upgraded 18% more devices for existing subscribers, but retention costs were up 32% year-over-year. So another good trend for our second quarter. Despite the higher spending on retention this quarter, we were able to hold Wireless operating profit flat year-over-year, as the higher retention spending was offset by flow-through of the accelerating top line growth together with ongoing cost-efficiency improvements. Turning to cable, revenue was flat with Internet growth of 5%, offset by declines on Home Phone, Television and the impact of the CRTC-mandated 30-day cancellation notification policy change. Importantly, without this regulatory-driven change, cable revenue growth would have actually been modestly positive versus what you see reported. While TSUs were down year-over-year, TV and Internet ARPU were up 4%, which was a proof point of our successful focus on value over volume in this segment as well. We're also seeing improved churn on these 2 products. It is obviously being supported by the recent launch of our reinvigorated consumer bundled -- bundles under the Rogers IGNITE banner, which are gaining traction in the market. Cable adjusted operating profit was down year-over-year in the quarter on the impact of the cancellation policy change and a 1% increase in operating expenses that resulted from higher programming and customer-facing investments, which we partially offset by productivity improvements -- initiatives. At our Media segment, the 23% top line growth largely reflects the success of our NHL rights, which continue to deliver as expected, with strong audiences during the playoffs across all platforms. Excluding the incremental NHL impacts, the underlying Media segment revenue would have been down 2%. While we're experiencing strong growth at Sportsnet and positive contributions at the Toronto Blue Jays and Next Issue, these were partially offset by continued softness and structural shifts in conventional TV and print advertising. Overall, Media's $36 million or 67% increase in adjusted operating profit year-on-year was for the most part the result of the contribution from NHL and Sportsnet, combined with the realization of significant cost savings, particularly in the television and publishing divisions. At a consolidated level, free cash flow for Q2 was up 19% to $476 million, the result of higher adjusted operating profit, lower cash income taxes and lower interest, which more than offset increased CapEx in the quarter as we continue to focus on more efficiently deploying our investments across the full year. This allowed us to return $248 million in cash dividends to our shareholders, with the addition of free cash flow helping to fund the Glentel investment and Shaw acquisition we completed in the quarter. On the balance sheet, we ended the quarter with $1.9 billion in available liquidity. And while there was a small tick-up in leverage to just over 3x at the end of the quarter on the close of the Glentel and Shaw spectrum transactions, we continue to focus on managing leverage towards our target range of below 2.5x debt to adjusted operating profit. Turning to 2015 guidance, we expect to be able to utilize all of the tax loss carryforwards associated with the Mobilicity acquisition in the current year. These losses will reduce our cash taxes for the year by $175 million as they offset cash taxes otherwise payable. Accordingly, we are increasing our full year 2015 free cash flow guidance by the $175 million to a range of between $1.525 billion and $1.675 billion. To sum up, I would say that Q2 delivered solid margins and cash flow, while continuing to demonstrate a positive financial trajectory on both the top line and adjusted operating profit lines and did so at the same time showing some positive inflections in our subscriber metrics. With that, let's get into the questions you have.

All right. Thanks, Guy and Tony. [Operator Instructions]. So with that, why don't you please explain how you want to organize the Q&A polling, and then we'll go into it.

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

I didn't hear any reference to the macro environment. Perhaps you could just touch on the impact of the weaker macro trends and, in particular, the weak currency and what that means for handset prices, upgrade rates, CapEx, et cetera?

Simon, I'll take that one. Let me start with the latter part of your question. In terms of foreign exchange, as you point out, certain portion of our costs and, in particular, handsets are tied to the U.S. dollars. We for the most part hedge our foreign currency exposures many years out, and so as we look to the near term, we find ourselves in a position to be well covered from much of the foreign exchange fluctuations that you see. Longer term, we'll keep an eye on what the foreign exchange looks like, but our intent is to continue to manage our lifetime value, so to the extent that our net handset costs go up, then we'll continue to follow an approach where we adjust our prices accordingly, market allowing, so that our economics remain whole.

And on the overall economy, bad debts, all of that kind of thing?

Today, we haven't seen any negative impacts from any of that. I think as you look to some of the broader trends in terms of economic factors for Canada, they're somewhat mixed, and from our perspective, we don't see any adverse implications as we look to our bad debts. Both in the consumer as well as the enterprise space, we continue to see that in line with our expectations and previous trends.

Your next question will come from Jeff Fan with Scotiabank.

A couple of questions around ARPU and ARPA. It looks like the postpaid ARPU growth slowed a little bit in the quarter, but on the other hand, Guy, as you mentioned, the ARPA growth accelerated. So I'm wondering if you can talk a little bit about that. Should we start to see the focus on ARPA and maybe multi-device accounts to see the ARPA growth continue to accelerate as we see more connections per account? And maybe you can just talk about the opportunity there in the market.

Thanks for the question, Jeff. A couple of things. In the near term, we see both ARPA and ARPU being relevant. Certainly, the proliferation of Share Everything and the movement of customers to that, ARPA is an important metric, and so we're pleased with the way that's moving. As we look to number of connections per device, that continues to move in a positive direction. We told you last quarter it was just under 2, and it's still trending towards 2 devices on average per account. So that's moving well. On ARPU, the slight downtick that you saw in this quarter is really a couple of things there. I should say, when we round the numbers, now this quarter was a 1% increase. Last quarter was 2%. If you added a digit to that, the difference is really less than 0.5%. But the second thing is, in the second quarter, we put in place some promotional offers that gave customers some larger data buckets. And so -- and that was on a very short-term basis, and so what that caused was a slight decline in what we typically saw as data overage revenues but isn't something that we expect to be a trend longer term.

Your next question will come from John Hodulik with UBS.

Now that you guys have successfully navigated the double cohort, as you look forward, just sort of should we see the inverse of some of the factors that affected the results heading into it, more specifically, some lower retention spending that could help drive margins and maybe continued improvements in churn?

So to be clear, the -- you say we've successfully navigated the double cohort. I think we've successfully navigated the start of the double cohort. Of course, double cohort is not a one quarter wonder. So we've got a number of quarters to go on it, and we are ready and prepared in terms of our plans, and we've executed extremely well this quarter. But we have to see what the market does in the coming quarters.

Okay. If I could just -- quickly just bounce in one more question on the spectrum, you guys have said you've deployed the new spectrum you got from Shaw on the West, but can you talk a little bit about some of the benefits you may be seeing from a network performance or speed standpoint? And when can we see the extra 10 megahertz you guys picked up in Toronto deployed?

West, we've only had it live a couple of days, so I'm not sure I've got any results to share with you, to be quite frank. In terms of when we deploy it in Toronto, it's going to be a little while yet. We've got some more work to do, but we're also not short of speed in the area anyway. So it was more future-proofing than immediate need, and it'll come onstream later this year.

Your next question comes from Maher Yaghi with Desjardins.

I wanted to ask you -- as it relates to Wireless, you have launched over the last couple of quarters some interesting new product offering with some attractive deals, some additions like music, et cetera. Can you talk a little bit if those new product innovations that you discussed initially on the call were the main drivers behind the improvement and the subscriber trends, or it is more related to the promotional activities that you undertook in the quarter?

No, the improvement in subscribers is related to the propositions where we're using content. So the use of promotions is somewhat muted and has been since I joined the company. So it's very much related around content.

Your next question will come from Phillip Huang with Barclays.

First, just want to clarify on the double cohort. Our sense is that consumer awareness of June 3 has been relatively low so far, but I was wondering -- and you guys have made significant progress on the volume-to-value strategy. I was wondering if you -- as we're heading into the more competitive back half, do you expect to see the improvement we saw this quarter on the wireless trends to sustain. And then my follow-up on the roaming side is, it looks like the decline -- while it's still dilutive to ARPU, the decline seems to be really improving. I was wondering if you could give us an update on the penetration of your ROAM LIKE HOME plans and the resulting usage growth and whether we have better visibility to it becoming accretive to ARPU.

Can I just clarify the first part of your question? Did you say that you thought the awareness of the double cohort was low amongst consumers?

Right, yes. Our sense is that the -- while we certainly are watching closely, consumers don't really appear to be very aware that June 3 was the date where all the senior [ph] contracts have ended, and so there wasn't a whole lot of -- there was certainly no mad dash to the retail stores for upgrades that we were concerned about months before. So I was wondering what you're seeing in the market.

Yes, just to clarify that point. Actually, the awareness of the double cohort is quite high amongst consumers, primarily thanks to national press writing very large articles encouraging customers to look at their contracts. So I don't think it's a safe assumption that awareness is low. Behavior is certainly different to what it could have been in that you haven't queues forming out stores. But awareness continues to grow and at a relatively high base. I'll let Tony answer the question about the roaming there [ph].

Phillip, I believe your question was on data usage, and just to clarify, were you talking about domestic or roaming?

Yes, my question relates to the penetration of your new ROAM LIKE HOME plans both in the U.S. and, I guess, early signs in Europe, if any at all; and also whether the usage volume growth is increasingly starting to offset the repricing impact and whether we have better visibility to when roaming might actually become accretive to ARPU rather than dilutive currently.

So there's 2 dynamics there. In terms of the U.S. ROAM LIKE HOME, which has been in market a little longer than the international side of it, we're seeing good traction there. So when you look at both data usage as well as number of unique roamers, that's up significantly. When you translate that to roaming revenues from the U.S., what we're seeing is we're pretty much at the inflection point where we're starting to see actual revenues flat to slightly positive. So as we continue through the summer months, it'll be something we keep our eye on, but the trajectory seems good in terms of what we expected. On the international side, that was introduced subsequent to the U.S. one, so it's still earlier days for that one. What we are seeing is very good traction, again, in terms of number of subscribers using it as well as actual data usage per subscriber. So we're getting the right behavior, and so we expect the trend to follow what we've seen in the U.S. In terms of impact on our ARPU and revenue profiles for Wireless, still several quarters we expect to have an impact. And as I said, Q3 will be an important one in terms of heavy travel season, so it probably won't be until early 2016 that we start to see a change in impact on ARPU and revenue.

Your next question will come from Vince Valentini with TD Securities.

Congrats on the better sub adds this quarter. Just wondering, if you're getting some traction on the better customer experience, and you certainly have identified several programs there, do have any expectation of when you think postpaid churn will flatten out or even decrease year-over-year?

It's a good question, Vince. I think the short answer is no, because there's lots of moving parts. So you've got customer expectations, which are not static. They move over time. You've got competitors who are obviously doing stuff in addition, and then you've got the work that we're doing. So it's a difficult -- in my experience kind of over the last 15 years, it's very difficult to forecast at what point you achieve what you're describing. So I wouldn't like to hazard a guess on that, except that we're committed to the program of improving customer experience and always will be. As long as I am doing these calls, we'll be talking about our plans to continue to improve it.

Your next question comes from Richard Choe with JPMorgan.

Just to follow up on the double cohort a little bit, I know you've talked about it a lot. But just kind of going forward, are you expecting things to get worse? Have you seen any evidence of that, or is this going to be less of a negative issue than everyone else thought? And also in terms of the prepaid business, it seems like nice rebound there. Should we expect that to continue to be positive going forward?

So on the first one, I don't know, because it depends on what happens in the marketplace, and I only dictate what we do. I don't dictate what the market does. So it's not that it's not competitive out there. I don't think you should take away from this call that it's not competitive or that consumers are not aware of the double cohort. It's just that we have managed to navigate this quarter very well, and as we go into the next few quarters with new handset models and so on so forth, and the situation may change. It may get even better. It may get slightly worse. I don't know. But I don't think we can -- I think the point is, is that we have managed this quarter very well in terms of our retention spend, where we've invested in customers, despite the fact that awareness is high and there's been a lot of noise in the marketplace and the press. Second part of your question, I didn't catch actually. Could you repeat it please?

The prepaid business, we saw growth there. Should we expect that to kind of grow going forward? You mentioned it a little bit with the new plans.

Yes, Richard, the prepaid piece, we're quite pleased with the way that it's trending. As you all know, we relaunched the Chatter brand with a new identity. And it's still very early days, but there's a renewed focus on that segment of the marketplace. And so we're pleased with the way it's going, but it is very early days and tough to extrapolate a trend at this point. It'll depend on a number of different dynamics.

I think it is true to say that our -- as we, over the last year, as we've been cycling through revisiting different parts of our business, Chatter was pretty much at the back of the list, given its size. Now we've applied the same treatment as we're applying to Fido and to Rogers brands in terms refreshing them charting their commercial offers. You're seeing now a reflection of that phenomenon. I don't think we know how big the market is for prepaid yet, so we'll experiment as we go on. We just hired a new person to run prepaid for us. He has got a lot of experience. And so let's see what happens on that one.

Your next question comes from Aravinda Galappatthige with Canaccord Genuity.

I just wanted to -- I just had a question on the enterprise side. Now that you've got the sort of team together and sort of ready to go, maybe if you can just expand on the magnitude of the opportunity there and what sort of initial milestones you're looking for as you kind of roll out there.

So we -- Nitin started at the beginning of the year, and he has been -- he had a good team that he inherited, but we supplemented that with a number of other people from Canada and beyond. And so I think they're still pulling everything together. I don't want to say too much about what the milestones because, unfortunately, our competitors listen to these calls. But what I would say is, is that, I think, as we probably get to Q4, we'll be ready to start making announcements in terms of product sets and commit new commercial offers in line with the plans that we've got. Overall, the opportunity for -- on enterprise is very large, because we are underindexed significantly. I think we are somewhere around the 20% market share, which is very low versus our consumer market. So there's lots of upside, but we're approaching the entry to that in a methodical way rather than trying to rush out into the marketplace and then say -- in terms to Nitin, he's only been here, I don't know, 25 weeks so far. I would say more to come on that. I'm sorry I can't give you more detail, but more to come, but not for this quarter, not for next quarter. It will probably be, in terms of the first announcements, probably Q4.

Your next question will come from Drew McReynolds with RBC.

Just back to the roaming. Obviously, we're kind of cycling through the 9 99 year-over-year, and we got the ROAM LIKE HOME in the U.S. and international that's impacting things. Just big picture, maybe for you, Tony. Just wondering, when you look out over the medium term, do you think that the changes that you've put through, those 3 changes are roughly sufficient to what you have to do to recalibrate the business and get the volume growth? Or is it one of those scenarios where you're constantly putting kind of new -- kind of recalibrations into the roaming equation? And then just secondly, just on the double cohort, just wondering if you can update what percentage of contracts are still on the 3-year.

I'll take the roaming one over, mate [ph]. I think the fact that the uptake on ROAM LIKE HOME is so all-encompassing for our Share Everything customers, it's so well liked, tells you that we've got the formula right. And we're constantly reviewing the consumer feedback we get on it, but it's broadly positive. So I'm not sure how much more we need to do on roaming, in fairness. There are -- there is a stubborn group of customers who still don't sign up for us even though they're eligible, believe it or not, because they just can't believe it's true. So my challenge is actually winning them over. But I think we've largely actually achieved what we wanted on roaming, and we've covered now the major destinations. So that, I think, is largely a tick in the box rather than a small part of the customer base we've yet to tackle. Also, as I said in my speech, the competitive reaction has been somewhat muted with one imitation offer out there that's 40% more expensive. But I wouldn't say I was -- I'm not flustered by that, if you know what I mean. Second half of your question, I'm going to turn over to Tony. Can you just repeat it again, please?

Yes, just an update on the percentage of the consumer postpaid subscribers that are still on 3-year plans.

So Drew, the short answer is, at the end of the quarter, it's 0, because what happens at June 30 is all of the customers then become out of contract. So going into June 3, 12% of our consumer postpaid base was still on 3-year contracts. And so as you would expect, some of those renewed into new contracts, largely 2-year contracts, if you were to look at the overall from -- for our consumer postpaid base at the end of the quarter, the impact in terms of total that are now out of contract, it was roughly a 1% impact or a 1-point impact, I should say, in terms of the total percentages.

Your next question will come from Greg MacDonald with Macquarie.

Question for you is on gross adds, postpaid gross adds. After a number of quarters on decline, it showed a nice flat number there. And guys, I'm going to make the assumption that there wasn't a major industry spike this quarter that, in fact, it seems like your gross add share has improved this quarter. Guy, you talked a little bit about the decline in inbound customer service calls. That's a good indicator. Was that the single biggest driver in that gross add improvement number? Or were there other things that mixed into that? And can you talk about the profile of gross adds this quarter, Fido versus Rogers, in any way, whether Fido was bigger than Rogers, whether there was a trend toward Fido? I know this is somewhat competitively sensitive, but what can you tell us on the profile?

I'm not sure I'd link the reduction in calls coming into the call centers with the increase in gross adds, if that's what you had in mind.

What I'm wondering is, overall improvements in customer service can improve customers coming to your brand, and I wonder whether that's the major thing or were there other things like product profile improvement that you're talking about.

I think it -- I don't think it -- I think we're too early in the game for that. You are correct, but I think we're too early in the game to claim that. Now I think the increase in gross adds came down to our different propositions out there, linked back to the previous question around the inclusion of content. So I think that's what increased -- sorry, I know that's what increased the gross adds. The decrease in the number of calls coming in is because we are increasing our online self-serve, number one; and secondly, because we are -- we've got a higher first-call resolution now in fixing customers' issues when they do call us without the need for them to call back and a number of other improvements. Customer service is always a cocktail. It's never 1 or 2 things. It's a whole series of things. So I wouldn't link those 2 right now. In the -- probably in the mid- to long term, we might -- I'd like to get to that point, to be quite frank, but it's a bit early for that.

In terms of the split, Greg, on gross adds, we don't disclose, as you described, the specific numbers related to Rogers and Fido. But what I can tell you is 2 things: one is, the majority of the gross adds come in on the Rogers brand; and two, there hasn't been any significant or material shift between Rogers and Fido over the last several quarters.

Your next question will come from Bob Bek with CIBC.

Guy, you highlight in your comments the inherent strength of the cable play [ph] for broadband speed and throughput. Is it fair to say you're going to start pushing these advantages more going forward? I know you've got the IGNITE product in the market for a couple of quarters. But you've got a competitor that spent a few years building a brand about fiber and just looking to see whether you're at a position now where you think you might be more aggressive as far as pushing what is a very strong inherent strength of your network.

Well, I think, over the last year, we've -- being human beings, we can only talk to so many things at once, and we focused on the wireless business, and we've got traction there. We're certainly turning our attention now to the whole residential area. And my view was, is that we needed to accelerate the development of our legacy TV product, that we needed to reposition broadband and that we needed to make improvement to customer services there. And so we've repositioned Internet now with IGNITE. We've got new -- we got a new guide coming out on NextBox next week. And therefore, I would say we're getting ready to put our foot down to prosecute our natural advantage being a cable-co. So the short answer to your question is yes. But again, don't expect some sets of fireworks to go off tomorrow morning and then that's it. This is about steady, methodical improvements over the quarters. And given that we're coming from some way behind, it's going to take time to get traction on that. But we have a number of natural advantages. I would say those were enhanced by yesterday's decision by the CRTC in that they've created a level -- more level playing field between cable-co and telco, and I'm encouraged by that. And therefore, yes, we will put our foot down on improving that business as steadily as we have with cable -- with wireless, sorry.

Yes, that's helpful. Can I -- just a clarification for Tony while I'm on here. The tax loss carryforwards from Mobilicity, just to be clear, it's entirely used in 2015, so by 2016 we'd return to a more normalized cash tax outlook?

A couple of things, Bob. So one, that's correct. We are going to use all of the tax losses in 2015. And as we get into 2016, I don't want to extend myself and provide guidance for that year. There are a number of tax planning things that we continue to work on, and so stay tuned in terms of cash taxes for 2016.

Your next question will come from Tim Casey with BMO.

Guy, you mentioned that you're releasing a new guide this week. Can you just talk a little bit more about what you're doing on the video side to try and arrest some of the declines that you've experienced over the last several quarters?

Yes. So just to take you backwards to something I've said a couple of quarters, and I think you may have heard these comments before, Tim. But the -- so when we -- when they started the program for IPTV, which was before I joined, there was a decision to stop development of the current legacy products, which in hindsight was probably a mistake. And we had to fire that machine back up again, which has taken us a bit of time. And therefore, I'm continuing to invest in the legacy products in terms of the user experience, the way that particularly videos and -- the discovery mechanisms -- search mechanisms, discovery mechanisms, ease of use on use cases that the consumer uses repeatedly and so on, so forth. So this first release coming out is largely foundational in that what the public will actually see and play with is probably only about 25% of the codes that we're actually releasing. The other is preparation for future releases. Nevertheless, they'll see some improvements that they've been asking for, and we have had the new release out in test with 500 of our own staff for the last month or so while we've been refining it, and certainly, the feedback's been good. But I would say the general philosophy and trajectory is that we want to continue to enhance the legacy product. And whilst we continue to work on IPTV so that we can get into a better competitive situation, and that combined with my previous comments around Internet and prosecuting a revitalized residential play over a number of quarters is, if you like, encapsulates the plan.

So one of your -- one of the other cable companies has really started to de-emphasize the voice bucket and really look at other products. Are you guys changing any of the way you go to market with bundles? Or are you still pursuing a more wholesome offer?

I think we have some basics to fix, to be quite frank. And I would say I'm more focused on that. The fact that the search capability on our service wasn't good enough and will be vastly improved and things like that, I would say our direction of travel is more that than what you've described.

Your next question will come from Robert Peters with Crédit Suisse.

Maybe just circling back on to roaming for a second. With the deployment of the ROAM LIKE HOME plans in Europe, I was just wondering, I think in the past, you've indicated kind of how -- or at least that the majority of your roaming comes from people traveling in the U.S. I was wondering is there any -- is there any kind of way we can think about the proportion of the roaming that's coming from the U.S. versus Europe in terms of the impact of the new European roaming plans?

Robert, a couple of points to be helpful. First off, when you look at our total revenue profile, 7% of our postpaid revenues are coming from roaming. So just to put it in perspective of the size of the total bucket, of that, roughly 2 to 3 points is international, with the rest being U.S. And so as I've mentioned before, the U.S. one in terms of product, it has a bit more maturity than the international, and so positive trending on that is more pronounced. Still early days for international, and as I said, we expected to closely follow what we saw in the U.S. Hopefully, that helps in terms of putting it into perspective.

No, that's fantastic color. Thank you very much. And then maybe, when you're talking about the -- some of the inherent advantages in cable and specifically when we look to see the fact that there is DOCSIS 3.1 networking gear that's going to be coming out, I believe, later this year, if not out already, that can do higher speeds and, frankly, comparable speeds that have been seen by some of the fiber offerings, how do you guys think about managing the speeds available to customers going forward in, like, say, the next year or so?

Well, we have very clear points of view on that, and I'm absolutely not going to share them with you.

Ladies and gentlemen, we have time for 2 more questions today, the first of which will come from Adam Shine with National Bank Financial.

Guy, a lot of the talk around customer service obviously focuses on the call center. But maybe if we go into the retail stores, are you generally satisfied with where KPIs are trending? And is there an opportunity still to, perhaps, achieve some efficiencies and drive some more throughput through the retail outlets? I say that in the context of -- and I'm not suggesting the Rogers staff is slower than peers, but there's a lot of maintenance work going on, particularly on the weekends, maybe bogging down some of the sales. I'm curious if that's part of some of the back-end stuff that's being worked on to maybe drive, as I said, additional throughput through the system for low-hanging fruit in terms of additional subs going forward.

So we were lucky enough to recruit Woessner from Deutsche Telekom, who is, no doubt, expert in retail and managing retail channels. He joined us a number of months ago. And it's true to say he is taking a firm grip of what we're doing in retail, and we have -- I mean, I'm -- I'll never be happy about what we do in any channel, to be quite frank, because I always want to improve whatever we've got. He feels the same way, and we're making a number of enhancements on the retail back end, IT systems at the moment, which will continue over the coming quarter and beyond, in fact. So we're doing -- there's some work to do on the esthetics, because formats get tired and need refreshing, and foot traffic also degrades the stores as well. But primarily, our focus is, is actually on the IT and back-end process side. In addition, we've just built our first retail training center, which we launched in this quarter that's just gone. And now our retail managers are going through much more rigorous and formal training, and that will extend down to the front line that they manage as well, which brings us more in line with the, I would say, the European norms in terms of the amount of training that's done and the rigor with which it's done. So we've got some very talented people in retail estate, and I get letters from customers on a regular basis telling me that. But it's true to say that I think that perhaps the support mechanisms for the stores have not been optimal, and the training support as we develop new products and services has also not been there. And that's really what Dirk is focused on at the moment, and I think you'll continue to see improvement in that area as a consequence.

Okay, and maybe just one quick one for Tony just in the context of the Rogers Home Phone. Particularly, as we look to see wireless substitution accelerating, and we're obviously seeing the telephony disconnects across the marketplace picking up pace, but for wireless subscriber at Rogers, you can get the Rogers Home Phone for $10, in sharp contrast to what otherwise appears to be a $35 to $45 plus-plus landline proposition. Can you speak to any acceleration in the uptake of that product?

Yes, I can, Adam. If you look at trending on that, there's a couple of things. One is, on the Wireless Home Phone product, there is a propensity for it to do better outside of our -- what I would describe as our natural footprint. So that will give you a sense of the mix. And two, the volumes are low and relatively steady. So we don't see a significant increase in what you describe as substitution within the footprint. So I'd still describe it as relatively modest. Much of what you see on the revenue front for Home Phone continues to be some of the repricing that you're seeing in the market and us matching that, particularly as part of a bundle.

And your final question will come from Rob Goff with Euro Pacific.

My question would be on the 1-gig service for the high speed. To what extent do you see that as a niche service? Or is it a broadband flagship deliverable? And could you give us any additional perspective on your ability, timing cost to introduce that type of service?

I'd love to, but I think that's going to stray into areas which I don't want to share with the -- with my competitors right now. So I think I'd say stay tuned. Sorry.

And ladies and gentlemen, this does conclude the Q&A session for today. I'll now turn the call back to Bruce Mann for any closing remarks.

Well, thanks, everybody from the team here at Rogers, for investing some of your time with us this morning. I know it's a busy period, and I know it was a bit earlier than usual. But we very much appreciate your interest and support. If you have questions that weren't answered, please give myself or one of my colleagues, Dan or Bruce Watson, a call. Both of our -- all of our contacts are on the earnings release this morning, and we'd be happy to take care of you as quickly as possible. So this concludes today's teleconference.

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