Rogers Communications Inc. (RCI) Q3 2015 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Rogers Communications Q3 2015 Results Analyst Teleconference. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, on Thursday, October 22, 2015, at 8:00 a.m. Eastern Time. I'll now turn the conference over to Ms. Amy Schwalm with the Rogers Communications management team. Please go ahead.

Thank you, Ron. Good morning, everyone. I'm here with our President and Chief Executive Officer, Guy Laurence; and our Chief Financial Officer, Tony Staffieri. Today's discussion will include estimates and other forward-looking information from which our actual results could differ. Please review the cautionary language in today's earnings report and in our 2014 annual report regarding the various factors, assumptions and risks that could cause our actual results to differ. With that, let me turn it over to Guy to begin.

Thanks, Amy, and good morning, everyone. This morning we released our Q3 results and I'm pleased to report that we continue to make solid progress on the fundamentals. We delivered growth in revenue, adjusted operating profit and free cash flow whilst delivering a steady stream of new commercial initiatives. These figures show a disciplined approach to our plan and continue to drive positive financials along with a steady improvement in subscriber metrics. Diving into the figures. Revenue growth was up 4% year-over-year whilst adjusted operating profit increased 3%. At that time -- at the same time, free cash flow was up almost $300 million. In Wireless, network revenue grew by 3%. Adjusted operating profit was marginally down as a consequence of new customer additions up 19% and hardware upgrades up 14% from the same quarter last year. We successfully acquired and retained customers at a lower average cost, thanks to strong channel discipline and pricing discipline. We added 77,000 postpaid wireless subscribers and I'm also pleased to report postpaid churn was flat year-over-year for the first time in 4 quarters despite a highly competitive market and the double cohort. During the quarter we made a number of moves to strengthen our Wireless proposition. In September, we expanded Roam Like Home to another 40 countries in Latin America. This industry-leading program is now available in 75 countries around the world with 97% of our customers' roaming activity now covered by these plans. We now have 2.1 million customers enrolled in Roam Like Home and customers are now using their devices like they do at home. In the U.S., customers are using 800% more data and in Europe, they're using 1000% more data. A year ago, I said we would solve the roaming problem for our customers and we have. We also expanded Share Everything with the launch of Share Everything plus. Customers subscribing to these plans can now choose from 1 of 3 content experiences in their packages: Texture by Next Issue, shomi, or up to 3 Spotify Premium accounts. We now have 2.7 million customers on Share Everything plans. We also launched WiFi calling, which lets our customers make calls and text over a WiFi connection. So if a customer enters an area like a basement, where there is no cellular coverage, they can make a call over the WiFi network. We were the first to launch this in Canada over the iPhone and as more devices come to market with this capability, we'll continue to roll it out. Continuing on the network front, our LTE network is now over 3x larger than at the beginning of 2015. We offered unsurpassed LTE coverage in Canada through our new extended LTE coverage arrangements. We also activated AWS-1 spectrum just 1 month after acquiring it, increasing LTE network capacity and the speed millions of customers can get on our LTE network in key cities in BC and Alberta. Turning to residential. Cable revenue was up 1%, thanks to strong growth in Internet and the significant uptake of Rogers IGNITE. Interestingly, the majority of our new customers are now asking for speeds of 100 megabytes. So it's clear the need for speed is now becoming the norm. As the customer need for speed increases, we're readying our network for the rollout of IGNITE gigabyte. We'll start in Downtown Toronto in the GTA this year and complete our entire Cable footprint of 4.1 million homes by the end of 2016. In case you missed it, that's well ahead of the competition for a fraction of the cost. Even today, over 3.4 million homes in Ontario can access Internet speeds that are up to 5x faster than the competition. For 2016, we recently announced the world's largest commitment to the broadcasting -- to broadcasting live sports in 4K with HDR. This is the next big evolution in television viewing. This announcement is a great example of how we are bringing together our assets to strengthen our residential business and bring more innovation to customers. The delivery of 4k content requires considerably more bandwidth that will allow us to exploit our fibre-coax technology advantage and also further differentiates Sportsnet. Beginning next year, customers will have access to over 500 hours of live sports, movies and shows in 4K, including every Blue Jays home game, over 20 marquee NHL games and 4K movies, TV series and shows on shomi and Netflix. This comes as we approach the holiday season when it's expected that 40% of all TVs sold will be 4K. Moving to Media, both revenue and adjusted operating profit were up substantially with improved financials at the Blue Jays and continued strong growth of Sportsnet. Sportsnet continues to be the rated #1 most-watched televised sports brand in Canada by a widening margin. And we've seen some impressive viewership stats coming out of Sportsnet, thanks to the great performance of the Jays. It's actually been amazing to see how the city and the country have come together to cheer on Canada's ball team. Congratulations to Paul and Alex. They deserve all the credit for a great season so far with more to come in Kansas City over the next 2 games. We also took shomi out for a successful beta trial and made it commercially available to all Canadians. It's early days, but we are pleased with its progress. On the enterprise side, we introduced the first in a series of leapfrog technologies with the launch of our managed WiFi service. This new service will help manage as free uptime and capital associated with managing legacy IT technologies and infrastructure. These solutions offered as-a-service will remove costly legacy hardware, alleviate their maintenance and security concerns and allow businesses to connect quickly to their people, sites and customers. Finally, we continue to make steady progress on customer experience. We continue to reduce calls into the call center again this quarter. Year-to-date, we've reduced the number of calls by 12.4% as we continue to invest in self-serve. In the next 6 weeks, the annual CCTS report will come out and we expect to see a continued decline in the number of customer complaints. In summary, it was a busy and productive quarter. Our results show we've got the right plan, we're executing with discipline and we're delivering steady improvement. I expect this progress to continue. I'll now turn it over to Tony to provide further details on the financials.

Thanks, Guy, and good morning, everyone. I'll provide a bit more detail around certain aspects of the Q3 financial results, then we can get to your specific questions. We're pleased with our progress in the third quarter. We continue to generate solid operating margins leading to strong cash flow, notwithstanding the continued investments we are making in our customers. While at the same time, as Guy mentioned, we continue to gain traction driving top line revenue growth, which grew 4% year-over-year with good pull-through from our value-added offerings. And adjusted operating profit this quarter of $1.35 billion was up 3%. So we're clearly making steady progress. Wireless network revenue growth of 3% was driven by our ongoing strategic focus on lifetime value, and this is supported by the growing penetration of our Share Everything plans, which now represent 33% of our total postpaid base, up from 17% last year, helping to drive another quarter of ARPA growth of 4%. So ramping up well and with plenty of room for continued growth. And Q3 represented the fifth consecutive quarter of year-over-year growth in blended ARPU. 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 are seeing unique users on the uptick. So that sequentially, the increased volumes are beginning to offset the pricing changes and on a year-on-year basis, the rate of decline in roaming revenues is decelerating. When adjusted for roaming, Wireless Home Phone and the addition of lower ARPU Mobilicity customers, blended ARPU growth was 3% in the quarter. New postpaid gross customer additions were up 19% in the quarter as new product differentiators gain traction with solid channel execution, while we continue to maintain pricing discipline. Our cost of acquisition per total customer add came down 9% year-on-year. And importantly, as Guy mentioned, churn was flat year-over-year despite heightened competitive activity associated with the double cohort, which helped boost postpaid net additions to 77,000, so continuing improvements in gross and net addition trends. Smartphone demand has remained strong as we activated 737,000 in the quarter, 1/3 of which were new subscribers. Not only were smartphone activations up 20% overall year-over-year, in particular we saw a 28% increase in higher-value iPhone customer activations during the quarter versus Q3 of last year. Smartphone penetration of our postpaid phone base now sits at 88% and we're ramping on LTE-enabled smartphone activations. These devices continue to drive significant growth in data consumption as customers consume roughly twice the data on LTE versus 3G. This quarter we upgraded 14% more devices for existing subscribers than the same quarter last year with a corresponding increase of 13% in retention costs. Wireless adjusted operating profit was down slightly at 1% year-over-year as top line growth was offset by higher customer acquisition and retention spending. Turning to Cable. Revenue was up 1%. We had strong growth in Internet revenue offset by declines on Home Phone and television reflecting the household mix shift that is occurring in the market and the importance of Internet in driving household ARPA and margin growth. We continue to incur losses in the quarter on video subscribers and continue to evolve our offering on this front to serve the changing ways consumers are viewing content. They want more on-demand and greater flexibility in how, when and where they consume content. We improved the features of our existing set-top box platform and we see our recent 4K announcement as a key differentiator. And we're investing to offer an even more compelling video offering that embraces OTT, IP video broadcast and pick-and-pay. We're investing in our product to where the consumer is headed and so changing our trajectory on subscribers for the video product will take some time. Cable adjusted operating profit was up 2% year-over-year in the quarter on revenue flow-through and from cost efficiency initiatives. While the overall change in Cable TSUs was flat year-over-year, we continue to see some improvement in churn across all 3 cable products. We saw strong growth in Internet net additions, which were up 50% to 24,000. And we are seeing an increasing demand for speed. As we see this demand grow, we are pleased with the competitive advantage that our fiber and co-ax network is delivering both from a customer experience perspective and importantly from an investment return lens. On the customer experience front, today we offer Internet speeds across our entire footprint at multiple times the rate which our telco competitor can deliver. Virtually all of our footprint can receive speeds of up to 250 megabits per second. And as announced, we'll deliver 1 gig of speed to our entire footprint by the end of 2016. From a capital efficiency perspective, we can offer these speeds with little incremental investment, thereby providing immediate financial payback models. We do not have to make upfront $1 billion investments that come with the execution uncertainty of penetration rates. Under our 1 gig announcement, we will able to make these speeds available to our entire footprint using DOCSIS technology at an incremental cost of less than $50 per home passed. And, of course, we'll continue to invest in bandwidth capacity as demand evolves, but that will be within our CapEx envelope, which we expect to decline in coming years. We view this as extremely capital efficient compared to what an immediate fiber-to-the-home investment strategy means for telcos. As we continue to focus on growing our return on assets in the near term, we see network investment payback models measured in months rather than decades as a key capital differentiator for our company. Turning now to our Media segment. Top line growth was up 8%, the result of continued strong growth at Sportsnet and the Toronto Blue Jays, partially offset by continued softness and structural shifts in conventional TV and print advertising. Overall, media's adjusted operating profit was up $35 million year-on-year with solid revenue flow-through, combined with the realization of cost savings, particularly in the television and publishing divisions. On a consolidated level, free cash flow for Q3 was up 78% to $660 million, result of higher adjusted operating profit with lower CapEx, lower cash income taxes and interest. Normalizing for the cash tax benefit from the consolidation of Mobilicity, free cash flow would have been up approximately 30% year-on-year. This allowed us to deliver $247 million in dividends to shareholders, an increase of 5% from the same quarter last year. CapEx was lower in Q3, primarily due to timing of spend in Wireless. We expect full year CapEx for 2015 to come in just below the top end of the guidance range we had previously provided. Turning to consolidated results below the operating profit line. Adjusted net income and earnings per share were up about 17% on growth and adjusted operating profit and higher equity income from our joint ventures, partially offset by higher depreciation and amortization expense. On the balance sheet, we ended the quarter with $1.9 billion in available liquidity and leverage sits at approximately 3x. We continue to be focused on reducing leverage to our 2.5x target. To sum up, I'd say that Q3 showed steady progress on our growth objective, strong financial results underpinned by solid customer growth and operating fundamentals. With that, let's get into the questions you have.

[Operator Instructions] And your first question will come from the line of Jeff Fan with Scotiabank.

I wanted to just explore the comments regarding broadband and DOCSIS 3.1 for a second. Tony, you mentioned the less than $50 per home. Can you just break that out with respect to -- is that all fixed and what's the rough success base CapEx for home going forward going to be? And also just broadly speaking, you talked about cable CapEx or CapEx intensity coming down. I'm wondering if that's -- you're talking about just consolidated or is that just in relation to cable? And also speak in light of all the investments you're making including DOCSIS, 4K as well as the next-gen video service because I think this is a pretty important subject given how much the telcos are spending. I mean, we're estimating close to $2,000 plus for their spend, so this is an important thing, I think, to address.

Thanks for the question, Jeff. Couple of things. I'll start with the second part of your question. In terms of our CapEx envelope and capital intensity, my comments related to our CapEx envelope overall. So this year, we provided guidance of up to $2,450,000 and we intend to come in slightly under that for the coming year. Next year, we expect to actually take that down as a number of our programs have been fully implemented. On the Cable front specifically, we'll continue with some of what I would call business as usual programs, segmentation for example, our set-top box deployment while we had a ramp-up in previous years is now coming down. And so those bode well for the Cable side of it. With respect to your question on providing 1 gig, a couple of clarifications. Our 1 gig offering isn't dependent necessarily on DOCSIS 3.1. We can offer 1 gig of speed with our existing DOCSIS technology. The $50, or less than $50, I should clarify, is making that available to our entire footprint. We will continue through segmentation to broaden our capacity as demand evolves, just like we would in any other case and just as we do today. DOCSIS 3.1 as we roll that out next year, that will be an opportunity to more efficiently offer the bandwidth needed for 1 gig and so as demand for that level of speed grows, DOCSIS 3.1 will provide an elegant, what I'd describe as capital efficient way, of deploying that more broadly. So overall, the cost of it to make it available is within the $50 number that I provided. The success-based capital is nominal. It's not unlike what you see today in terms of modem spend and minor miscellaneous CapEx related to it.

If I may chip in on this, Jeff, actually. The -- and I think that there is probably an under-appreciation of the success of our strategy of buying the 700 spectrum a couple of years ago coupled with the Mobilicity acquisition and swap of spectrum with Wind. So this has enabled us to significantly reduce our anticipated CapEx on Wireless, which is adding into this overall consolidated view of our CapEx spend over the coming years. Basically, we've deployed the Beach Head [ph] from spectrum and we've been able to deploy the Shaw spectrum and we're in the process of deploying the other spectrum with Mobilicity and Wind. It really does have a significant effect on what we then need to spend going forward on Wireless. Also on the Cable side, we've made significant investments on Cable infrastructure, as Tony alluded to on the segmentation side, in the run up to our announcement on 4K. So although you see it from the perspective it's suddenly announced, say that's good, they started to do this. We've actually been working on this for over 18 months.

Your next question will come from Simon Flannery with Morgan Stanley.

A very nice job on the net adds and the gross add up 19% was very healthy. Perhaps, I think, you did touch on it, but if you could just aggregate it more, do you think this is mostly a doubled cohort thing? Or is this reflecting perhaps getting the why Rogers question that more people, you've got more share, mind share and you're getting driving more traffic to the stores that this will be sustainable beyond the end of the double cohort? And related to the net adds, the churn flat year-over-year that's good, but there's still a gap to the best-in-class. Do you think there's an opportunity over the coming year or so to really start to turn that downward and have improvements year-over-year?

Well, I'd say yes to all of the above, and we'll solve world peace while we're at it. So I would say, you think -- companies like ours are not one-trick ponies. I mean, this is the coming together of a number of different strategies. The first 1 is our inclusion of content in our packages, which is getting leverage in the marketplace. It's very clearly that the customer sees value in these. And as you know, we have content in the majority of our high-end packages now. The second area is channel discipline. Is we put a lot more discipline into how and what we invest in terms of each channel by week, by device and so on and so forth and we're getting better and better in that. Thirdly is we're getting better at customer service. We got a long way to go. I'm like a broken record in saying this is a journey, not a destination. But the nevertheless, we are seeing green shoots in this area and that is also contributing. If I'm honest with you, I don't actually sit there and break down which of those is actually contributing towards the 77,000. I'm more focused on making sure that every week we just get better at each and every one of those headings.

And on the churn side?

Well, the churn side is the next step after you've solved some of the other issues. As you get more traction with your offers, as customer service gets better, et cetera, et cetera, then eventually will impact churn. But it's interesting that you're asking about that. I mean, most people have been asking for last year when we'll get churn to a point where it's flat and everyone said, I think, in the run up to this goal that it couldn't be done during a double cohort. You know I'm not saying it's going to be flat next quarter by the way because there'll always be some vibrations in the figures. But nevertheless, this represent significant movement in a positive way.

Your next question will come from Drew McReynolds with RBC.

Guy, you've mentioned in the past over the last couple of quarters your focus on ARPU and being greater than ARPU. I was just -- can you comment on that just in the absence of postpaid ARPU dynamic? And then secondly, just on the Internet revenue growth up within Cable a little bit higher than expected. Can you just talk to pricing and usage dynamics? And then on the Internet net add front, can you comment at all kind of what percentage is consumer versus SMB.

Let me talk to the -- I'll do the Internet one and I'll let Tony cover the other point. So what we're seeing is the need for speed. The customers have started to realize that actually they need significant speeds coming into the home to cope with the number of connected devices in the home that they've got. So you've got 2 phenomenon going on. The number of connected -- devices connected to a router is going up and the amount of consumption per device is going up and that just means you need more speed because they use simultaneously -- the traditional family model of husband, wife, 2 children, labrador dog sat watching the TV has broken down and the fact is they're all in different rooms watching different things at the same time. And therefore, the need for speed is increasing and therefore they're trading up to the higher packages, which is why when I look at my new customers coming in, the majority now going for 100 megabytes, which is a relatively new phenomenon, but it's there. I don't think it's going to change. Let me turn it back to Tony for the first point.

Drew, on your question of net adds. From a net adds perspective, consumer and business, we don't split that out externally. What I can tell you is we're pleased with the net additions on both those sides of the customer fence. And then if you could just clarify, I think your question was on postpaid ARPU in versus out. And let me try to answer it and hopefully it gets to what you're getting at. We continue to see very good progress on ARPU in versus out. Our ARPU in is at the point where it's clearly above ARPU out, and so our customer growth is accretive to our ARPU profiles.

Your next question will come from Greg MacDonald with Macquarie.

I want to focus a little on Media ad trends. And I'll ask a couple -- this a couple of ways. Number 1, excluding sports, I wonder what the trends are. We're seeing some reasonably negative trends in other companies, sort of negative 3% to 5% on the revenue front and that is supported by Corsa's results this morning. Can you talk a little bit about what's happening excluding sports? And then let's focus on sports. Fantastic result out of baseball. Clearly, that's additive. I wonder if you might comment on the NHL viewership, the view of that being somewhat disappointing relative to targets and what that means for renegotiation of ad trends next year versus the baseball, which I think it's an understatement to say has beat in terms of viewership and what that means for renegotiate on ad trends next year? Will you -- are you prepared to say whether that's a net flat or positive or whatever? I'll take a punt and ask you that, or if you're not prepared to talk future trends, then what can you say kind of on your expectations overall for what you've seen out of sports? It looks like things are relatively positive, but I would like to see if you'd give a little more color.

Greg, a couple of things in terms of -- let me start with the first part of your question. When you exclude sports, our conventional, what I would describe as our conventional TV ad revenue, which is a very small part of the portfolio, continues to decline. And so that's declining at a rate of 2% year-on-year. So not dissimilar to what you see in the rest of the industry, and sports continues to increase at very healthy rates on a year-on-year basis. When you look at sports overall, 2 things I wanted to clarify. One, absolutely the Jays continue to set records in terms of audiences and we're pleased with that, and that's translating into some of the revenue you see in our third quarter results. Keep in mind, that that's all pre-playoff revenue, and so there'll be additional upside as we look to Q4. With respect to the NHL, I'm not sure where you get your stats from. We were extremely pleased with the first season of NHL. Viewership was up year-on-year in total and our objective of increasing the number of eyeballs on NHL games was achieved in double-digit numbers in terms of year-on-year growth. So we're pleased with that and we're pleased how that translated into financial performance for the first year. As we head into the second year, we're looking forward to continued growth on that and continued leveraging of some of the things we did really well in the first season. As you look to the fourth quarter, I did want to caution, we will certainly have the upside -- financial upside related to the Jays playoffs. And on the flipside, when you look at our NHL performance, our costs are amortized on a per-game basis and we'll have a higher number of games compared to last year in the fourth quarter. And so while on an overall basis, we continue to expect year-on-year growth in NHL profit, you're not going to necessarily see that in the fourth quarter. I hope that answers your questions.

It is. And by the way, where I was getting my insights on is essentially from the media. The view that the media has put out that there were disappointments relative to budget on what the NHL numbers have been. But I think you addressed it in your view that will be -- there will be a net positive growth next year when it comes to advertising for overall Sportsnet and that's kind of what I was looking for.

Yes, when I would say is that the sports media have a lot of insights into the quality of the games and the teams and the tactics that they use. They don't have a lot of quality insight into what our budget is.

Your next question will come from Maher Yaghi with Desjardins Capital Markets.

I wanted to go back to your initial discussion about the differential between your investment and getting Internet speeds up into the 1 gigabyte versus the investments required by the telcos to do that. And I was surprised by you saying that you're seeing a lot of traction for clients at the 100-megabyte right now, which is much faster than I think a lot of people had expected since that -- the most recent numbers we're seeing from the CRTC indicate that the majority of customers in Canada are choosing speeds between 10 and 30 megabytes. So I'd like you maybe just to discuss a little bit how you see the deployment of your 1 gigabyte strategy helping and just in terms of cost, when you talk about the cost to deploy 1 gig, what's your definition of that cost from in terms of technology? What are you counting in those dollars? And are you counting the set-top boxes as well?

Let me take the first part and then I'll turn it over to Tony on the cost side. So the CRTC figures that you're quoting are kind of rearview mirror figures and actually not terribly current, and I'm actually talking about a phenomenon that has happened in the last couple of months. And what you're seeing is that the public has started to say to itself that they need to ensure they kind of -- the household is fit for purpose. There's nothing worse for mom or dad than to come home after a long day's work and have the kids complaining that they can't get into the Internet. There are many things that they'll put up with in life, but that is not one of them. And I think that given the plethora of announcements surround 1 gig and speed over the recent months, a number of competitors plus ourselves, the public has just working up to the fact that they need to get equipped for the future. So the need for speed is here. I don't see it being a one quarter wonder. I think it will continue. And I think then as 4K TVs come into the marketplace and again, I go back to our plans which we've been laid over very long time. We talked to the TV manufacturers a very long time ago about accelerating 4K TV sales in Canada. And I think when you come to Black Friday, you'll be amazed at how many 4K TVs are out there and the price points they are at. So this is a -- if you like loosely coordinated, but very clear intent across the industry to get 4K TVs with HDR into the marketplace, and that will then further drive the need for speed as we go forward.

With respect to your question on cost. So let me reiterate that the sub-$50 number that I quoted to you is all augmentation we need to offer 1 gig to the entire footprint. So it includes the equipment investment we need to make at the node and so that's all in that number. In terms of -- I wasn't clear about your question. In terms of CPE, set-top box, if you mean modems, to offer the 1 gig, it will be the next-generation modem that we have out today that is coming into market shortly, and that's at a price point that's not dissimilar to what we currently pay. So our incremental success-based capital is, I would say, not materially different from what it is today. As demand for the 1 gig or actual take-up rates on the 1 gig increase, we'll continue to invest in bandwidth capacity, we'll continue to invest in segmentation just like we have. And so we don't see that as an incremental CapEx investment from what we're otherwise doing today.

Yes, I think, you know, just again to echo about the fact that this program on 4K and 1 gig has been developed over a very long time. In fact, the modem design for the 1 gig modem I signed off, I think, it's the second week of December last year. I mean, this has been a project in the development in complete secrecy for a very long time, which we're now bringing to the market because we've had so much time to develop it, it allowed us to make sure that we're not burning unnecessary capital on the production of these boxes and modems because we've built into our run of business as we've come up towards the announcement.

And just one follow-up question on the incumbent investments in fiber-to-the-home. During the CRTC hearings, they alluded to the fact that they need 50% market share take-up of fiber-to-the-home -- in fiber-to-the-home territory to make that investment worthwhile? What's your view on that assumption, Guy?

I can't speak for my competitors. I'm sure they're right.

The next question will come from John Hodulik with UBS.

Great. I guess just following up on the last question. Guy, given all the focus on the increasing need for speed and your guys' positioning and the rollout of the 1 gig, I mean, do you expect to see a change in trend on what we've been seeing on subscriber trends in broadband and maybe ARPU trends as well? It seems like, if I put 2 and 2 together, you saw something of meaningful improvement this quarter. I mean, should we expect that the rest of the year and into '16 as this gets rolled out? And two, should this have a pull-through effect on video as you're -- if you are, in fact, adding more high-speed data subscribers? And then lastly, on the 4K strategy, can you talk about the set-top box requirements? I mean, are you guys going to be rolling out 4K compatible set-tops to new subscribers going forward? And if so, is there a change in the cost of those boxes?

Yes. So on the last one, the 4K set-top box, again like the modem, we developed this over a number of times. So what we're doing is basically upgrading the current box to the 4K box. No change in the cost profile of that other than a couple of dollars. What was the -- just remind the other 2 earlier part?

The first is really just they -- with this new trend in terms of in the last couple of months the need for speed and your positioning, can we see some faster subscriber growth in high-speed data more similar to what we saw, say 2011, 2012, and the change in trend in the ARPU side as well?

I think it'll come. I wouldn't get too overheated on the fact it's going to now happen instantaneously in the next 12 weeks. And the reason for that is because you see a number of things are coming together, but they'll come together in a certain way. You've got the penetration of 4K TVs, you've got the penetration of the 4K set-top box, you've got the content of course, which is critical. There's no point of having the first 2 if you don't have the third. And what we've committed to is a number of marquee NHL games together with the start of the Jays season next year. And so therefore that the -- what happens is those things come together, then the public awareness is increasing. That turns into purchasing consideration. That turns into then acquisition. That then turns into a bill. That turns into ARPU. So all of -- what we said is we're focused very much on steady improvements every quarter with a long-term perspective to growing the top line, and that's what we're focused on. So it will come through now because all the pieces [ph] parts are now in place to make this happen. And for instance, we are very, very confident now for the first of the Jays' games next season that we'll have not only 4K, but 4K with HDR which produces fantastic brilliance in color and bring something to the game that no one seen before. But all these things will come through one quarter after another and they will pull through the customers and the ARPU with them as we go.

Your next question will come from Bob Bek with CIBC.

Guy, just on the Internet topic again. I mean, increasing with each one of these quarters in these calls, you've highlighted the strength of your pipe more and more, and we built to a bit of a crescendo here as to your advantages, which I think is great. But do you think this -- should we think that this is going to translate into a greater push from a consumer perspective? I mean, I think most people or some people know the advantages you have currently, but do we expect to see that picked up in the promotional, not necessarily price, but in advertising the strength you have, especially given the advantage you have on rolling to bigger speeds in 4K relative to your competitor? Can we expect that to be more obvious to the average consumer and therefore perhaps a bit more of a battle for subs going forward?

Well, I think, it's interesting because we didn't actually wake up the market on speed. It was actually our competitors who are disadvantaged on speed, who woke up the market first. We weren't ready to announce because we have our plans and we were intending to announce them this quarter. So actually, I really can't thank my competitors enough the markets on speed. And, of course, now we come up with a strategic advantage. We'll now build on it.

Okay. And coming back to your comments on the changing offer at some point, I know you won't elaborate on that at the moment. But perhaps a bit of kind of blue sky thoughts on how a package might change? And for timing perspective, I mean, would we look for things to change more as we get to the CRTC timetable on pick-and-pay? Or is this something that will kind of transition over time?

No, I think again, don't look for kind of one-day wonders. It's really a series of different things. I mean, we haven't even talked on this call yet about the fact that we continue to improve our legacy product. We have a number of new software upgrades coming out before Christmas and some more in the new year. Then we've got also the development of IP TV, which will come in its fully fledged form at the back end of next year. So and then you've got the CRTC, let's talk TV change to packages as well. So no one's going to be bored in the TV sector the next year because there's so much happening. And all of it I see as an opportunity for us to exploit.

Your next question will come from Mike Rollins with Citi Investment Research.

Curious on 2 things. First, can you talk a little bit more about how you think consumption caps change as you increases speeds towards that gigabit level? And then secondly, what are you seeing in terms on Wireless for usage trends and your ability to get paid for the growth in data consumption on that side of the business?

Okay. We didn't hear the first part of your question because we had a glitch on the line. You said -- we heard the word consumption and we lost you so can you just repeat the first half, please?

Sure. I was curious how the consumption caps might change for your broadband customers as they move towards gigabit speeds?

We don't have any caps because most of our tariffs are unlimited. Is that what you meant?

Yes, so would you put consumption caps in place as you move towards gigabit speed?

No. I think while we don't divulge forward pricing on lease [indiscernible] but what I can say is the majority of our high-speed tariffs are actually unlimited. Actually, I think you make a good point actually. I'm not sure you intended to, but you actually make a good point in that making these high-end packages unlimited have unlocked a lot of demand because people were worried about going outside their bundle. So they could see their kids consuming huge amount of content, but they weren't actually quite happy with it because they're wondering what the bill was going to be at the end of the month. As a consequence, we've alleviated that concern a little bit like we've alleviated the concern on international roaming on the wireless side for instance, and that's definitely unlocked demand. And therefore, as we go forward, we'll continue to price accordingly as what we think we need to do in the market. On the wireless side, regarding usage, I think that they -- I shouldn't -- I don't think you should be looking at a 100% linear relationship between increasing consumption and monetization. I think that's unrealistic. It's the same as buying jam in the supermarket. It'd be smart to buy a small jar of jam, you pay a certain price, if you buy a huge jar of jam, then you don't pay the same per grams as you would for the small one. So as the consumers trade up to much larger buckets, they're looking for a better value for money. And we need to price that accordingly, but still make sure that we recoup our investments. But again, I go back to again 2 years ago to the acquisition of the Beach Head [ph] spectrum and the Mobilicity deal in recent months in terms of getting down our effective cost for delivering 1 gigabyte across the wireless network. We continue to drive that down by virtue of smart acquisition of spectrum, deployments of modern technologies, and we've done significant changes to the wireless network to help get its OpEx profile in the right position as demand increases.

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

Question on ARPU maybe for Tony. Given that you aren't giving us postpaid ARPU this quarter, I'm fearful that the addition of Mobilicity has maybe skewed the blended ARPU numbers more than we might expect because obviously there's very little growth in blended ARPU. Are you able to extract the Mobilicity impact? I know you extracted that combined with roaming and home phone customers in your opening comments. But, I mean, just the Mobilicity impact, is that significant?

So, Vince, let me just clarify. The Mobilicity customers are included in our prepaid base numbers, and so they're included in the blended. And so as I talked about when you exclude Mobilicity roaming, I gave you the number for blended ARPU. The way you ought to think about it in terms of postpaid that we previously used to provide, nothing that would have been unusual this quarter on that. And generally, the roaming impact equates to 1 point. So on ARPA for example of 4% growth, roaming would have -- excluding roaming, it would otherwise have been at 5%. So in terms of postpaid impact, Mobilicity isn't a factor.

So postpaid ARPU growth this quarter would have been similar to what we saw in the first and second quarter if you had reported. Is that fair?

You wouldn't be surprised by the number. Let me say it that way.

Okay. And one other one. Guy, you mentioned some green shoots on the customer service front. Is there any data you can give us there yet of Net Promoter Score or other customer satisfaction metrics that you've seen improvement in?

Well, I'm not sure how your day goes in an average week, but I'm not sure when you get into work on a Monday morning, you sit there and think what should I do for fun this week. Let me call a wireless call center. And it's true for the public as well. They just don't do it as a hobby. So the number of calls goes down by over 12%. You have to take that as a green shoot. Simple as that.

Ladies and gentlemen, we have time for 2 additional questions today. The first of which will come from Tim Casey with BMO.

Two for me. One, Tony, any impact from handsets on the wireless numbers, was the iPhone impactful on a year-over-year basis? And, Guy, on the 4K development, is there kind of a chicken and egg argument here about content versus hardware? I recall HD, we talked about it for a long time. It took a while for the production of HD content to become available and then, then it really accelerated. I'm just wondering if there's a similar kind of time frame for the evolution of 4K that you're expecting as this develops?

I'll take the 4k one and then I'll turn it over to Tony. So you have to look at it as a value chain. You start with -- start with a stadium. Then you put a team in it, then you have a series of cameras that connect to a production truck, and they upload a program to a sports channel that broadcasts through a set-top box onto a TV. So let's go back over that chain and look at it from our perspective. So let's take the Jays. So we own the team. We have the stadium. We have a production company that we own 50% of that creates the content, that then feeds it to a channel, called Sportsnet, then sends it to a 4K set-top box that we've developed, that's then broadcast onto a TV that's bought by the consumer that's 4K because the manufacturers are pushing them out as fast as they can. So the point is that we can look across the entire ecosystem end-to-end and take a decision to invest where we need to. So therefore, what you see in the U.S. is, for instance, the broadcasters are not actually investing in the 4K technology for the cameras as early because they can't monetize it with the broadcasters. And therefore that's what you also had on HD. There's a reluctance by the broadcasters to invest. There's really no interest for the teams, the stadium or the production companies to get involved with it because they can't monetize it either. And therefore, the whole thin stalls. The difference in Canada is our ability to influence that ecosystem for the benefit of the consumer. Because what the consumer actually gets on their screen is significantly improved viewing experience over what they got before. And if you can't get a ticket to the Jays, and believe me, trying to get a ticket to the Jays is quite difficult, then the best next thing we can do is to provide the ultimate TV experience in the home. And therefore, taking the look through position across the entire ecosystem and making sure that each and every part of that has the invested capital in order to deliver the experience is the main thing. The other thing is that we've got significant buy-in from the commissioners of both baseball and the NHL in terms of actually making these upgrades because they see the advantage to this as well because it pulls through and is a success in Canada. Then, obviously, it will be a success in the U.S. as well, which will then give each part of the fragmented ecosystem in the U.S. the chance to -- sorry, the confidence to invest in each of their piece or parts [ph] . So I think that the parallel with HD is true that the upgrade from SD to HD was significant and the upgrade to 4k with HDR is significant. But I think the big upside here is our ability to influence the end-to-end ecosystem and make sure that we deliver a stunning result for the consumer in a much shorter amount of time. The only bit that we missed was actually the 4K TVs. But what the manufacturers of the 4K TVs needed was the confidence of a company like Rogers that was prepared to invest in the ecosystem. And that's why next year, we will be the largest broadcaster of 4K content in the world. So let me turn it now back to Tony if he can actually remember the question you asked because I talked for so long because I'm really excited about the subject.

You had a general question about iPhone and so I -- let me give you some general stats. As I said, the activations on iPhone this quarter 28% higher than last year. There's nothing unusual I would note about the iPhone profile. We haven't had any -- we didn't have any inventory issues in Q3 and don't see any right now. And so the supply chain pipeline for that continues to be healthy. It's still early days in terms of the launch of the phone and so nothing unusual to report.

And your final question will come from Rob Peters with Crédit Suisse.

Just maybe touching on ARPU and specifically the impact of roaming. We are coming up to the lapping of the original debut of the Roam Like Home plan for North America. I was just wondering is that plan at a point this quarter where you kind of see the inflection in terms of the price discounting versus actual usage? Or is that still kind of a work-in-progress?

In terms of the overall roaming profile, there's 2 parts to it. One is the U.S. which would've been, as you mentioned, a year ago that we launched the value proposition of Roam Like Home for the U.S. market. I would say that one is nicely trending on to the uptick when you look at year-on-year and so it's having the impact that we expected in terms of users, in terms of total revenue. I think if your question is are we at the point that it's now an inflection and it's actually growing, that's tough to call. It varies week by week and month by month. I would say it's relatively close. So we're pleased with the way that's gone. And the other piece of it is on the international side. That one was launched later and so we're still going through the year-on-year impacts of that.

Yes, I think, the thing again to look on this, just because you put a press release out, people go, "oh fantastic" doesn't change the entire customer base's behavior the following day nor do they travel to the U.S. the following day just because you made a very good value for money. But the reality is that what we saw on the U.S. to be quite frank was a -- the suspended disbelief that it could be this true -- actually, I remember seeing the results when we launched it. There's a lot of customers were going, this is fantastic if it's true. And we actually saw a certain proportion of the customer base kind of wait to hang back to see if their friends actually got a bill that really represented the value that we were promoting. So therefore the penetration of people that were picking up on Roam Like Home, and you've seen this in our previous quarterly announcements in terms of the number of customers we've announced being on the plan, has built up over time. And therefore, the year-on-year effect and when we get to a point of accretion is also going to build up over time rather than just being a certain day that's the anniversary of when we launched the proposition.

Ladies and gentlemen, this does conclude the Q&A session for today. And I will now turn the call back over to Ms. Amy Schwalm for any closing remarks.

Thanks, everyone, for joining us today, and we'll conclude the webcast at this time.

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