Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Rogers Communications Q1 2016 Results Analyst Teleconference. [Operator Instructions] I would like to remind everyone that this conference call is being recorded on Monday, April 18, 2016, at 4:30 p.m. Eastern Time. I will now turn the conference over to Ms. Amy Schwalm with the Rogers Communications management team. Please go ahead.

Good afternoon, everyone, and thanks for joining us. I'm here with the 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 2015 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 afternoon, everyone. This afternoon, we released our first quarter results. We delivered another solid quarter of revenue growth and continued improvements in our key subscriber metrics, despite sustained competition in both Wireless and Cable. We executed well in Wireless. Network revenue grew 4%, the best year-over-year improvement we've seen in 3 years. You can now see that we've reestablished momentum in the Wireless market. Postpaid churn was 1.17%, representing a year-over-year improvement of 7 basis points. This marks our lowest churn in the past 7 quarters and our best Q1 churn since 2010. We have posted 2 consecutive quarters of churn improvement at a time when our key competitors are trending in the opposite direction. We delivered Wireless postpaid net additions of 14,000, up 40,000 year-on-year. Favorable trends in churn and net additions are the result of 3 factors: Our high-quality network, our value-added content offerings and continued improvement in customer experience. Wireless adjusted operating profit was flat in the quarter, driven by the competitive market and the double cohort. We spent more to get the high-value customers we want and to drive improvements in churn and lifetime value. Q1 turned out to be more competitive than we expected, and we will continue to go toe to toe with the competition to get the high-value customers we want. Turning to Cable. Overall, revenue was down 2%, primarily due to the cumulative effect of subscribed losses in TV and home phone as well as our response to discounting in the market. We continue to deliver upgrades of our Navigatr platform, launched 2 new Sportsnet 4K channels and delivered the first 4K broadcast of a Major League Baseball game with the Toronto Blue Jays. Consumer interest in 4K TV continues to grow. Thus far, in 2016, half of…

Thanks, Guy, and good afternoon, everyone. I'll provide more context around our first quarter financial results, and then we can get to your specific questions. We delivered another quarter of meaningful progress. The investments we have made in our network, content and the customer experience position us well to compete in this environment. We continue to deliver top line growth as our consolidated revenue grew by 2% year-on-year to $3.2 billion. Our adjusted operating profit of $1.1 billion was down 2%, as competitiveness in the market led to increased customer investments in both Wireless and Cable, and profit was also impacted in the quarter by softness in conventional Media revenue. Our Media restructuring plan began mid-Q1 and continues into Q2 as we work to align our costs to the evolving advertising landscape. In the coming quarters, we expect to report improved Media profitability year-on-year. We see opportunities for cost efficiencies and improvements in each of our segments and continue to expect growth in AOP as for our full year 2016 guidance. Below the operating profit line, consolidated adjusted net income and EPS were down 4%, primarily driven by lower AOP and higher depreciation, partially offset by lower income taxes. Turning to our segments. Wireless network revenue was up 4% year-on-year. Share Everything plans were an important driver of the revenue growth. The number of Share Everything customers was up 43% from a year ago. This increase in penetration also led to ARPA growth of 4%, as customers take advantage of the opportunity to share services across multiple devices. Blended ARPU grew 1% in the quarter, excluding the impact of the Mobilicity acquisition. So good progress on that front. Importantly, roaming had a negligible impact on both ARPU and Wireless revenue growth profiles in the quarter as volume increases offset roaming…

[Operator Instructions] Your first question will come from the line of Vince Valentini with TD Securities.

Good job on the wireless subscribers and churn front, but can you give us a little more detail on the costs you had to incur to get that growth? I don't see any mention of retention costs in the MD&A. If you can give us any color on directionally what happened to the COA and retention in the quarter, that would be helpful.

Yes, Vince, I can -- as you said, we don't disclose the details of COA and COR. But directionally, what I can tell you is, you may recall last year, we had heightened our investment in retention spending ahead of the double cohort. When you look at our retention spending this year, it's slightly down. When we look at the dynamics of the components of COR on a unit basis, what we found was very good progress in the costs through our channel, and that was offset by heightened hardware subsidies. You saw continued competitiveness in the marketplace in terms of the pricing of hardware. We continued to follow the market, and so that put pressure on our unit costs. But overall, from a COR perspective, slightly down from last year. That same phenomenon impacted hardware subsidy costs for our COA. And so directionally, what you saw is again channel cost come down with hardware subsidies being up on the COA front. The higher volumes this year on gross adds clearly contributing to the higher overall equipment subsidy spend.

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

I want to ask a question about the Cable operation segment. The Internet numbers were obviously very strong, both on subscribers and also revenue. But I guess, Home Phone is starting to see a bit of an accelerated decline, and I wanted to get your input on whether you're starting to see sort of an accelerated pace of cord cutting that's going on, on the Home Phone side? Because I guess, that's one of the -- perhaps one of the trends that we're seeing in the marketplace. And then the second part of that is, as you look forward, do you think the Internet growth is really going to be sufficient to offset some of the decline that you're seeing both on television and Home Phone?

Jeff, 2 pieces. I'll start with the second part of your question. We think about the business in terms of -- as we've talked about, we think about the business in terms of home passed, our penetration of those homes passed and the ARPA that we ultimately get from that particular home. And what we see is with the trend in Internet, the continued need for speed and what that drives in terms of ARPU growth. So if we were to look at revenue at 11% in the quarter for Internet, ARPU is very closely behind that, so very solid growth on that front. And so as you see some of the 2 dynamics in TV. I should highlight, one, the revenue decline that you see for TV is largely, as Guy mentioned, a result of subscriber losses over the last year. ARPU continues to hang in there in a relatively solid way. And so as we make progress on the subscriber front, TV, video will continue to improve as the year comes along. And then on Home Phone, to touch on the last piece of it, we continue to see that product declining, both in terms of subscribers. And so you get the cutting that you're talking about, but also competitiveness in the marketplace in terms of how it's priced. And so that continues to move that down. And so overall, from an ARPA perspective, as we think multi-quarters and multi-years, we do see the ability of Internet to continue to move positive returns in the Cable space.

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

Tony, with respect to providing guidance last quarter, you talked about factoring in trends in Alberta, factoring in the double cohorts and the potential impact of unbundling. Can you just give us an update on how each of those are tracking relative to the expectations that you set when you set guidance?

So a couple of things. On the double cohort, we're certainly not over it, but I would say we're into what you might describe as the long tail. I mean, it will continue to play out for several quarters, particularly as we head into the fall, as we see some customers holding onto their handsets to see what some of the iconic devices might look like in the fall. So while we're past the majority of the double cohort, it's -- there's still some of it out there. In terms of -- and so I would say on -- relative to the assumptions we had for the year, the way we're seeing it play out is not materially different from what we expected. If we were to look at Wireless in particular in the West, we previously indicated that while we expected possibly a softening on ARPU levels, not much in terms of on the subscriber front, I would say what we are seeing is generally that. We aren't significantly indexed to Alberta specifically, so it's less of an impact for us. And so while we don't talk about regional, I would say on that particular one, it's playing out pretty much as we expected and for us not a significant impact.

Okay. And then just on the unbundling, still early days on that front?

Still early days. So more to come on that.

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

Following on that question. Perhaps you can just touch a little bit more on the macro in Ontario and particularly perhaps just talk about some of the advertising commentary that you gave. Is that primarily structural issues? Is it macro issues? And then how do you see that evolving over the rest of the year?

Simon, if you could just clarify, you're referring to the Cable side or Wireless side or both?

Yes, both.

So I think, at a macro level, as we've said in the upfront commentary on the Wireless side, much of the competitive intensity that we saw in the fourth quarter continued into Q1, particularly in handset pricing. And so that continues to be a very active environment that we saw in Q1. And that was spread out, I would say, across the country, not necessarily just in Ontario. If we look to -- and I think your comment on advertising relates to some of the heightened advertising and our share of voice on the Cable side. I would say we toggled that up and down, depending on the week, depending on the quarter, and we had some heightened activity of that in Q1 over the course of the year for obvious reasons. We don't want to disclose what that looks like in the remaining quarters. Suffice it to say, it will all be in -- within the AOP guidance that we've provided.

I guess, I also wanted just some color on advertising revenues out of the Media segment.

Oh, I see.

Yes. So I would say the issue is in conventional TV and publishing. To a tiny extent radio, but not to the same degree. Sports is still strong. The nature of which sports advertisers are directing their dollars to has changed a little bit, depending on the performance of the teams with hockey up but still -- but not quite where we expected it to be and Jays better than we expected. So the real issue is in conventional TV and publishing, and that's where we're focusing in terms of making sure that we have the appropriate cost levels for the revenues we're enjoying.

And is that structural? Or is that macro, do you think?

I think it's structural. I don't think it's macro.

Your next question will come from Greg MacDonald with Macquarie.

So Guy, you mentioned some willingness to spend more to get the subscribers that you want. And indeed, it's nice to see the churn numbers coming down and the sub and revenue numbers are going in the right direction as well. I wonder though if you might put some of the costs in context of revenue? ARPU is flat, yet ARPA is growing 4%. Could you, yourself or Tony, talk about margin per account, for example, or lifetime value of customers? Are you measuring on those metrics and being scrutinizing in the way that you spend money on device subsidies?

Yes. A couple of things, Greg, to help you get, as you said ARPA, strong at 4%. Blended ARPU is what we do disclose. We'll say on the postpaid ARPU side, while we don't disclose it, it's trending nicely and on the positive side of where we previously had been in terms of postpaid ARPU growth. So that's moving well. So in terms of your question, how does that relate to the lifetime values? I would say we continue to see very strong lifetime value. So while we're spending more on handset subsidies than you would have seen us, say, a year ago and even before that, what we are seeing come in very nicely is the ARPU coming -- ARPU in as we describe it. And so we're seeing that up year-on-year, and so that's a big plus. When we look at lifetime value, again, positive indices on that, and so we like what we're seeing there. Share Everything has been one of the key catalysts for the churn improvements that you see. And so as we put that whole portfolio together, looking at churn, looking at ARPA and looking at ARPU together, all of those are contributing to strong lifetime values.

Can you say, Tony, what the margin per marginal customer on postpaid was this quarter to give us a better sense of x-ing out the subsidy on the handset or promotional costs?

No, we don't disclose that.

Would you be willing to say what the churn per marginal customers?

Maybe what we'll do, Greg, is -- the answer right now is no. But if we decide to disclose it, then we'll make it widely available.

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

I wanted to follow back up on the Wireless margin side. I was wondering to what extent the reduced discount on the BYOD plan and, therefore, a higher mix of traditional subscribers requiring a subsidies is driving a little bit higher costs on the quarter since you guys put through some of the pricing changes as everyone else has as well earlier in the year? And then a quick follow on, on the Cable side. We've seen some pretty -- we've seen the increased promotion on fiber service from Dell in buildings where they have passed fiber-to-the-home in Toronto. Just wondering if you've seen any significant reactions from customers in those buildings or neighborhoods where they have stepped-up promotions, especially since you guys already have very high speed available and very soon, 1 gigabit per second service as well.

So on the -- just dialing a little back to Greg's question and your question, Phil, is I would say the BYOD mix has changed a little bit. So it has gone down a little bit, but not much. I don't think it -- I wouldn't describe it as the biggest factor affecting the figures this quarter. We -- but I mean, we have a best level of sophistication in terms of knowing where to invest acquisition monies and the likely LTV, lifetime values, that we're going to get from those customers is. That gives us more confidence to invest in certain types of customers as a higher level than maybe we previously had. So actually under the current COA, particularly figure, there's lots of different things moving about, there's some BYOD shift, not major and those are -- an appetite to go after higher-value customers and pay the appropriate acquisition costs because we have more certainty on their LTV. The second part of the question on competitive activity in Cable. I would say I'm surprised that the level of discounting that we've seen in particularly MDUs, and find it difficult to reconcile that with the enormous investments required to service that market with fiber. So I mean -- I don't know, they've -- I think they just have a different calculator to us because I can't get it to add up.

Right. Ballpark, what is the market share split between, say, the wholesalers and B.C. and Rogers within your footprint? Do you guys know that? Is it a 50 40 10? Or is it 60 30 10 type of a market share split?

Well, we don't disclose that. But what I can tell you, Phillip, is it hasn't changed materially over the last 4 to 8 quarters, and I'll leave it at that.

Your next question will comes from the line of Maher Yaghi with Desjardins Capital Markets.

I wanted to just on the Cable price promotions. As you mentioned, there's been an increased volatility in promotions in Ontario. But I wanted to ask as well on your side, I've seen some price guarantees being offered for 2 years to protect share. I wanted -- I mean, in the past, we've seen companies try to protect share by offering discounts. These experiences often resulted in lower margins and profitability, especially if shares being protected with price guarantees. Could you describe the experience you've had so far with these promotions? And how long are you willing to stick with them? And just on Wireless. I have not seen such disparity in monthly price plans across different provinces as I -- as we have right now compared to, let's say, Ontario, Alberta on Share Everything plans with Quebec and Manitoba or Saskatchewan. It seems those discounts are taking place in provinces where you have 4 strong competitors and not 3. So I would like to get your view on the risks in ARPU leakage in additional provinces like we've seen Alberta when Shaw becomes a more meaningful competitor?

So on the Cable promos, I mean, to be honest, we -- in any 1 quarter, we experiment with different mechanics to attract and retain customers. So I'm not sure which particular campaign you're referring to, but we run multiple campaigns north of 20 in any 1 quarter. So we basically look at the return on investment we get for them, and that's not particularly new. I just think we're getting better at it in terms of experimentation and learning, putting stuff into the market, pulling out, but it's not much change, I would say, other than we're getting better at it. A little bit similar reply actually on Wireless as well. So again, as we get more sophisticated in terms of fighting by city level, not even province level, then we decide whatever tactics we see fit in that marketplace. I mean, Wind has been a competitor of ours for quite a long time, and I don't think much has changed in 12 weeks in terms of anything structural in terms of what they're doing. So you may see more variation in what we're doing by province, simply because we're doing -- we're trying out more things. But it's not particularly, I think, because Wind has done anything significant to the last 12 weeks. They continue to be a good competitor and a strong competitor and as simple as that.

Yes, I was kind of more figuring out a little bit down the road as they upgrade their network and become more aggressive, probably. Do you see this as risk to your long-term outlook for ARPU increases or ARPA across the country when -- especially in Alberta and B.C. where you have very high ARPU levels?

Hard to say at the moment. I mean, for sure, it's going to be a dog fight, but it's just very hard to give you a concrete prediction about the future when you're talking about competitor and I don't know what their plans are. So I know what our plans are, and we're pretty confident, but I don't know what their plans are.

Your next question comes from the line of Robert Peters with Crédit Suisse.

Just looking at the Internet side of things, it's good to see the continued ARPU growth. But I was just wondering, you mentioned the dynamics between subscribers upgrading their services on the IGNITE packages versus kind of a standard price increase flowing through. Would you say the service upgrades are driving about 2/3 of the ARPU growth? Or how should we think about the breakdown between the price increases and the kind of upscaling of the packages?

Rob, I would say it's -- I would think about it as both. Certainly the ones coming in that are new to Rogers are coming in at the higher packages. And so you generally see, for a number of different reasons, coming in at 100 plus as being generally the most popular entry point for new customers. Our existing customers are seeing good volume of up speeding or moving up tiers. Not sure how to answer your question in terms of which one is contributing which. I'll probably put them -- if your question is in terms of ARPU growth, how much of it is new versus existing. I'd probably put it in the category of existing up tier migration, probably being a little bit more of the majority in the overall ARPU growth, just because of the size of the base.

Perfect. And maybe to follow-up on that. Once you get into the unlimited packages, so the IGNITE 100 unlimited, are you seeing subscribers there in that package even going further up the package more for speed? Or is there a little bit of a consumption based in driving of the -- of kind of the switching of the packages?

No. The people -- as people discover the need for speed, so they'll start to move up. It's all linked back to this point I was making about the number of connected devices in the house. The average is 11. It seems staggering, but if you actually count your own household, you are probably not a million miles away. And so what happens is there's a lot of devices connected and the people want to consume Internet in different rooms simultaneously, and that's what drives the higher speeds. So the unlimited takes away the worry. But then the need to have multiple users in the house using the Internet at the same time is then what drives them to go to the higher speed. In the old days, I mean, the whole family sat down and watched Hockey Night in Canada and it was an appointment to view and all the rest of it. And now it sort of dad is stuck in the lounge by himself and as kids are up in their bedrooms, doing their stuff and mom is doing something else and all the rest of it in my stereotypical family. And as a consequence, the demands on the network are very high. No one wants to be the loser in that bandwidth fight within the household. And therefore, they need to be at the right speed if they're going to handle that contention issue.

Perfect. And maybe just one quick question on TV. I know you had mentioned it's very early days in the pick and pay. I think your comment is very consistent in the sense that we've seen a lot of value in the current packages. But I was wondering if you are seeing some customers look at the new packages, is there a specific type of customers that's tending to look at this? Or you just -- you're kind of getting across the board some people being interested, and other people not?

It's chief [ph] grandmother.

Ladies and gentlemen, we have two more questions. The first of which will come from the line of David McFadgen, Cormark Securities.

I have 2 questions on Wireless. So in order to meet your guidance for the year, are you counting on the Wireless EBITDA margin to be flat to up for the full year? And secondly, we've seen 2 quarters of improvement on the churn number, and I was wondering if you have visibility so far into Q2? Do you expect that you could see some more improvement in Q2 on the churn?

David, on the churn number, I'm going pass on that in terms of providing any forward-looking guidance. I will say that we continue to invest well in our base, and so we expect that to continue to reap rewards in terms of churn, and so we'll see how that plays out for the rest of the year. Back to your question in terms of overall wireless margin, I think your question, you faded out a bit was the expectation for wireless margins for the full year given Q1, is there an expectation that for the full year, it would be flat to higher? Was that your question, David?

Yes, that's the question.

Yes, I would put it in the category of generally flat Wireless margins. I mean, there's still 3 quarters to go and still a lot of volatility and a number of things that could happen. Most significantly of which probably is the type of the devices they get launched in the fourth quarter. So we'll see how that plays out.

Okay. And if I could just squeeze one more in. Could you sort of give us some commentary on what's driving the strength in the Internet net adds? Because they are fairly strong this quarter?

Well, I think, it's just a superior network and higher speeds and 4K and the need for speed and a number of connections in the household. It's all of those things. There's no -- that is it. Simple as that. People have woken up to the needs for speed.

And your final question will come from the line of Richard Choe with JPMorgan.

So I wanted to follow up on the Internet side. Should we think about the rollout being a very steady 100,000 per week? And so as we march through the year, you can kind of get more market share? And then in terms of the ARPU uplift, I think, a follow-up on an earlier question, can you give us an idea of how many kind of dollars it is on average Internet ARPU lift when you move from a normal to an IGNITE sub?

So on the first part of the question was about 1 gig. Can you just repeat the question, I'm sorry?

Is the network build going to be pretty steady? Or is it back-end loaded? Just...

It's up, 100,000 a week. My CTO is not allowed to go home on a Friday evening until he's done 100,000 houses. That's the deal I have with him. So -- and that just runs out until we finish the rollout. So that will be steady as she goes. And the second part of your question was that on ARPU, was what happen when they go from non-IGNITE to IGNITE?

Yes, we don't quote it. Richard, I would say just think about it in terms of tiers. As I said, if you think about it 100 MB plus, your entry point for that is generally between $85 to $95 range. And so compare that to the existing ARPU and that will give you a sense of the potential upside for ARPU growth.

Richard, are you based in Boston or in New York?

New York.

Okay. I was trying to find somebody who is based in Boston, just so I could go na-na-na-na because we beat Boston twice. It's just such a shame no one asked...

And ladies and gentlemen, this concludes -- that concludes the Q&A session for today, and I will now turn the call back to Ms. Amy Schwalm for any closing remarks.

Thanks, everyone, for joining the call, and we'll end it here.

Thank you.

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