ROGERS COMMUNICATIONS INC.
-- Rogers closes 2016 with continued strong revenue growth and solid flow
through to adjusted operating profit and free cash flow:
-- Total service revenue and adjusted operating profit both up 3%
-- Wireless service revenue growth of 6% and adjusted operating profit
growth of 5%
-- Wireless postpaid net additions of 93,000, up 62,000 year on year,
with steady churn of 1.35% year on year
-- Cable revenue up slightly and adjusted operating profit growth of 2%
as higher-margin Internet represents a greater proportion of total
Cable revenue
-- Positive Cable total service unit net additions for the second
quarter in a row, driven by Internet net additions of 30,000, up
14,000 year on year
-- Achieved 2016 growth targets and announced a stronger growth profile for
2017 guidance
-- Announced a long-term agreement with Comcast to bring X1 IPTV to our
customers, expected in early 2018; net income impacted by a $484 million
charge due to discontinued investment in our own IPTV product
-- Over 45% of Rogers' residential Internet base is on speeds of 100 Mbps
or higher and Ignite Gigabit Internet service is now available to our
entire footprint of over 4 million homes
TORONTO, Jan. 26, 2017 /PRNewswire/ - Rogers Communications Inc. today announced its unaudited financial and operating results for the fourth quarter ended December 31, 2016.
Consolidated Financial Highlights
Three months ended Twelve months ended
December 31 December 31
------------------- --------------------
(In
millions
of
Canadian
dollars,
except
per
share 2016 2015 % Chg 2016 2015 % Chg
amounts,
unaudited)
-----------
Total
revenue 3,510 3,452 2 13,702 13,414 2
Adjusted
operating
profit
(1) 1,259 1,226 3 5,092 5,032 1
Net
income
(loss)
(2) (9) 299 n/m 835 1,342 (38)
Adjusted
net
income
1,2 382 331 15 1,481 1,479 -
Basic
earnings
(loss)
per
share
(2) ($0.02) $0.58 n/m $1.62 $2.61 (38)
Adjusted
basic
earnings
per
share
1,2 $0.74 $0.64 16 $2.88 $2.87 -
Cash
provided
by
operating
activities 1,053 950 11 3,957 3,747 6
Free
cash
flow
(1) 392 274 43 1,705 1,676 2
===== === === === ===== ===== ===
(1) Adjusted operating profit,
adjusted net income, adjusted
basic earnings per share, and
free cash flow are non-GAAP
measures and should not be
considered substitutes or
alternatives for GAAP measures.
These are not defined terms under
IFRS and do not have standard
meanings, so may not be a
reliable way to compare us to
other companies. See "Non-GAAP
Measures" for information about
these measures, including how we
calculate them.
2 As a result of the IFRS
Interpretations Committee's
agenda decision relating to IAS
12 Income Taxes, certain amounts
have been retrospectively
amended. See "Accounting Changes"
for more information.
"We ended 2016 with continued momentum and strong operating performance in the fourth quarter. We maintained robust Wireless revenue growth, underpinned by strong subscriber metrics, and translated this to healthy adjusted operating profit. Internet results showed sustained strength as Rogers offers customers the fastest widely available Internet speeds in our marketplace," said Alan Horn, Chairman and Interim President and CEO. "Our momentum to date as well as our commitment to further improve the customer experience, and enhance our execution, position us well to achieve our stronger growth targets for 2017."
Key Financial Highlights
Higher revenue
Revenue increased 2% this quarter, largely driven by Wireless service revenue growth of 6%.
Wireless service revenue increased primarily as a result of a larger subscriber base and the continued adoption of higher-value Share Everything plans and the increase in data usage on these plans.
Cable revenue increased marginally as strong Internet revenue growth of 9% was largely offset by the decline in Television and Phone revenue. We continue to see an ongoing shift in product mix to higher-margin Internet services. Excluding the impact of lower wholesale Internet revenue as a result of the CRTC decision that reduced interim access service rates, Cable and Internet revenue would have increased by 2% and 12%, respectively.
Media revenue decreased as a result of fewer postseason Toronto Blue Jays games compared to last year, lower overall advertising revenue, and lower circulation revenue within publishing, partially offset by higher sales at The Shopping Channel (TSC).
Higher adjusted operating profit
Higher adjusted operating profit this quarter reflects an increase in Wireless adjusted operating profit due to the strong flow through of top line growth described above and improved Cable performance due to the shift in product mix to higher-margin Internet services. Excluding the impact from the CRTC decision to reduce wholesale Internet interim access service rates described above, Cable adjusted operating profit growth would have been 5%.
Net loss and higher adjusted net income
We recorded a net loss of $9 million this quarter, primarily as a result of the $484 million impairment and other charges we recognized related to the discontinued investment in our Internet Protocol Television (IPTV) product. See "Review of Consolidated Performance" for more information. Adjusted net income increased this quarter as a result of higher adjusted operating profit, lower depreciation and amortization, and lower finance costs, partially offset by higher income tax expense.
Substantial free cash flow affords financial flexibility
This quarter, we continued to generate substantial cash flow from operating activities and free cash flow of $1,053 million and $392 million, respectively. Free cash flow was higher this quarter as a result of increased adjusted operating profit and lower additions to property, plant and equipment, partially offset by higher cash income taxes.
We ended the fourth quarter with an adjusted net debt / adjusted operating profit ratio of 3.0. Strong operating cash flow allowed us to repay a net amount of more than $300 million of debt in the quarter. See "Managing our Liquidity and Financial Resources" for more information.
Our solid financial results enabled us to reduce outstanding debt, continue to make investments in our network, and still return substantial dividends to shareholders. We paid $247 million in dividends this quarter.
Achieved 2016 Guidance
The following table outlines guidance ranges that we had previously provided and our actual results and shows 100% achievement for the selected full-year 2016 financial metrics:
(In millions of
dollars, except
percentages) 2015 2016 2016 Achievement
Actual Guidance Ranges Actual
--- ------ --------------- ------
Consolidated Guidance
(1)
Revenue 13,414 Increase of
1% to 3% 13,702 2.1% SQRT
Adjusted operating profit 5,032 Increase of
(2) 1% to 3% 5,092 1.2% SQRT
Additions to property,
plant and equipment (3) 2,440 2,300 to 2,400 2,352 n/m SQRT
Free cash flow (2) 1,676 Increase of
1% to 3% 1,705 1.7% SQRT
================= ===== ============ === === ===== === ===
Missed x Achieved SQRT
(1) The above table outlines
guidance ranges for selected
full-year 2016 consolidated
financial metrics provided in
our January 27, 2016 earnings
release. Guidance ranges
presented as percentages
reflect percentage increases
over 2015 actual results.
(2) Adjusted operating profit and
free cash flow are non-GAAP
measures and should not be
considered substitutes or
alternatives for GAAP
measures. These are not
defined terms under IFRS and
do not have standard meanings,
so may not be a reliable way
to compare us to other
companies. See "Non-GAAP
Measures" for information
about these measures,
including how we calculate
them.
(3) Includes additions to property,
plant and equipment for the
Wireless, Cable, Business
Solutions, Media, and
Corporate segments and does
not include expenditures on
spectrum licences.
2017 Outlook
As noted in the guidance ranges in the table below, we anticipate an even stronger growth profile in 2017. We expect to have the financial flexibility to maintain our network advantages, continue reducing debt, and return cash to shareholders.
2016 2017 Guidance
Actual Ranges 1
------ --------
(In millions of dollars,
except percentages)
------------------------
Consolidated Guidance
Revenue 13,702 Increase
of 3% to 5%
Adjusted operating profit (2) 5,092 Increase
of 2% to 4%
Additions to property, plant
and equipment, net (3) 2,352 2,250 to 2,350
Free cash flow (2) 1,705 Increase
of 2% to 4%
================= ===== ======== === ===
(1) Guidance ranges presented as
percentages reflect percentage
increases over full-year 2016
actual results.
(2) Adjusted operating profit and
free cash flow are non-GAAP
measures and should not be
considered substitutes or
alternatives for GAAP
measures. These are not
defined terms under IFRS and
do not have standard meanings,
so may not be a reliable way
to compare us to other
companies. See "Non-GAAP
Measures" for information
about these measures,
including how we calculate
them.
(3) Includes additions to property,
plant and equipment for the
Wireless, Cable, Business
Solutions, Media, and
Corporate segments net of
proceeds on disposition, but
does not include expenditures
for spectrum licences.
The above table outlines guidance ranges for selected full-year 2017 consolidated financial metrics. These ranges take into consideration our current outlook and our actual results for 2016. The purpose of the financial outlook is to assist investors, shareholders, and others in understanding certain financial metrics relating to expected 2017 financial results for evaluating the performance of our business. This information may not be appropriate for other purposes. Information about our guidance, including the various assumptions underlying it, is forward-looking and should be read in conjunction with "About Forward-Looking Information" and the related disclosure and information about various economic, competitive, and regulatory assumptions, factors, and risks that may cause our actual future financial and operating results to differ from what we currently expect.
We provide annual guidance ranges on a consolidated full-year basis, which are consistent with annual full-year Board-approved plans. Any updates to our full-year financial guidance over the course of the year would only be made to the consolidated guidance ranges that appear above.
About Rogers
Rogers is a leading diversified Canadian communications and media company that's working to deliver a great experience to our customers every day. We are Canada's largest provider of wireless communications services and one of Canada's leading providers of cable television, high-speed Internet, information technology, and telephony services to consumers and businesses. Through Rogers Media, we are engaged in radio and television broadcasting, sports, televised and online shopping, magazines, and digital media. Our shares are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI).
Quarterly Investment Community Teleconference
Our fourth quarter 2016 results teleconference with the investment community will be held on:
-- January 26, 2017
-- 8:00 a.m. Eastern Time
-- webcast available at rogers.com/webcast
-- media are welcome to participate on a listen-only basis
A rebroadcast will be available at rogers.com/investors on the Events and Presentations page for at least two weeks following the teleconference. Additionally, investors should note that from time to time, Rogers' management presents at brokerage-sponsored investor conferences. Most often, but not always, these conferences are webcast by the hosting brokerage firm, and when they are webcast, links are made available on Rogers' website at rogers.com/events and are generally placed there at least two days before the conference.
For More Information
You can find more information relating to us on our website (rogers.com/investors), on SEDAR (sedar.com), and on EDGAR (sec.gov), or you can e-mail us at investor.relations@rci.rogers.com. Information on or connected to these and any other websites referenced in this earnings release is not part of, or incorporated into, this earnings release.
You can also go to rogers.com/investors for information about our governance practices, corporate social responsibility reporting, a glossary of communications and media industry terms, and additional information about our business.
About this Earnings Release
This earnings release contains important information about our business and our performance for the three and twelve months ended December 31, 2016, as well as forward-looking information about future periods. This earnings release should be used as preparation for reading our forthcoming Management's Discussion and Analysis (MD&A) and Audited Consolidated Financial Statements for the year ended December 31, 2016, which we intend to file with securities regulators in Canada and the US in the next few weeks. These statements will be made available on the rogers.com/investors, sedar.com, and sec.gov websites or mailed upon request.
The financial information contained in this earnings release is prepared using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. This earnings release should be read in conjunction with our 2015 Annual MD&A and our 2015 Audited Consolidated Financial Statements, our 2016 First, Second, and Third Quarter MD&A and Interim Condensed Consolidated Financial Statements, and our other recent filings with Canadian and US securities regulatory authorities, which are available on SEDAR at sedar.com or EDGAR at sec.gov, respectively.
All dollar amounts are in Canadian dollars unless otherwise stated and are unaudited. All percentage changes are calculated using the rounded numbers as they appear in the tables. Information is current as at January 25, 2017 and was approved by our Board of Directors (Board). This earnings release includes forward-looking statements and assumptions. See "About Forward-Looking Information" for more information.
We, us, our, Rogers, Rogers Communications, and the Company refer to Rogers Communications Inc. and its subsidiaries. RCI refers to the legal entity Rogers Communications Inc., not including its subsidiaries. Rogers also holds interests in various investments and ventures.
In this earnings release, this quarter refers to the three months ended December 31, 2016 and year to date or full-year refer to the twelve months ended December 31, 2016. All results commentary is compared to the equivalent periods in 2015 or as at December 31, 2015, as applicable, unless otherwise indicated.
Reporting Segments
We report our results of operations in four reporting segments. Each segment and the nature of its business is as follows:
Segment Principal activities
------- --------------------
Wireless Wireless telecommunications operations for
Canadian consumers and businesses.
-------- -------------------------------------------
Cable Cable telecommunications operations,
including Internet, television, and
telephony (phone) services for Canadian
consumers and businesses.
----- ----------------------------------------
Network connectivity through our fibre
network and data centre assets to support a
range of voice, data, networking, hosting,
and cloud-based services for the
enterprise, public sector, and carrier
Business Solutions wholesale markets.
------------------ --------------------------------------------
Media A diversified portfolio of media properties,
including sports media and entertainment,
television and radio broadcasting, specialty
channels, multi-platform shopping,
publishing, and digital media.
===== ============================================
Wireless, Cable, and Business Solutions are operated by our wholly-owned subsidiary, Rogers Communications Canada Inc. (RCCI), and certain of our other wholly-owned subsidiaries. Media is operated by our wholly-owned subsidiary, Rogers Media Inc., and its subsidiaries.
Strategic Update
Rogers' strategy is designed to re-accelerate revenue growth in a sustainable way and translate this revenue growth into strong margins, adjusted operating profit, free cash flow, an increasing return on assets, and returns to shareholders.
Our fourth quarter and full-year 2016 results reflect solid execution of our strategy and the value inherent in our unique asset portfolio, including our best-in-class wireless and cable networks.
In 2017, we plan to further enhance our financial flexibility and execution, as well as capture cost and productivity improvements we see throughout our business. We believe this will position us well to translate our revenue growth into increased profitability and free cash flow.
Improving the Customer Experience
Our priority is to offer the products and services our customers want and need for the best experience. With that in mind, we launched a number of tools and offerings in 2016 with a focus on becoming a leader in self-serve options. For instance, we expanded worry-free wireless roaming, simplified mobile-first billing, and introduced a tool that allows families to manage their wireless data usage in real time. In 2015, we were the first telecommunications company in the world to launch customer care via Facebook Messenger, and this year, we were among the first globally to launch on Twitter. Our latest example of a self-serve option was the launch of Rogers EnRoute in the fourth quarter. This tool allows customers to track on their phone when a technician will arrive for an installation or service call. Our approach is resonating with customers, as we saw 42% more self-service transactions on the Rogers brand this quarter year on year and 56% more for the full-year 2016.
We look forward to doing more for our customers in 2017, including offering more self-serve options and new ways to interact with us digitally.
Maintaining Leadership and Momentum in Wireless
Despite an intense competitive backdrop, our fourth quarter results built on the strong momentum we have seen over the past year and we closed 2016 with the best Wireless service revenue growth and subscriber performance in many years. These results reflected a strong translation to adjusted operating profit, with fourth quarter growth of 5%. Fourth quarter Wireless service revenue growth of 6% was the highest since 2010 and postpaid net additions of 93,000 were the highest of any fourth quarter since 2009. On an annual basis, Wireless service revenue growth of 5% was the highest since 2009 and postpaid net additions of 286,000, up 180,000, were the highest since 2010.
Postpaid Wireless churn remained stable year on year in the fourth quarter and decreased four basis points in 2016 for the lowest postpaid churn rate since 2010. We will strive to make further improvements to churn going forward with our focus on further improving the customer experience.
We continued to make investments to enhance wireless network coverage and the quality of our network. Deployment of our prime 700 MHz LTE network has reached about 91% of Canada's population at the end of 2016. Deployment of our overall LTE network has reached about 95% of Canada's population at year-end.
Improving Cable on the Strength of Internet and our Partnership with Comcast
Subscriber trends have been improving in our Cable segment on the popularity of Ignite Internet, as Rogers offers the fastest widely available Internet speeds in our marketplace. For the second quarter in a row, we reported positive Cable total service unit net additions, driven by Internet net additions of 30,000, up 14,000 year on year.
Our Cable product mix continued to shift to higher-margin Internet services, driving overall Cable adjusted operating profit growth of 2% in the fourth quarter. We generated Internet revenue growth of 9% this quarter and double-digit Internet revenue growth of 11% in 2016. Excluding the impact of lower wholesale revenue as a result of the CRTC's decision to reduce interim access service rates, Cable revenue and adjusted operating profit growth this quarter were 2% and 5%, respectively. Similarly, Internet revenue growth increases to double-digit growth of 12% from 9% in the quarter, excluding this same impact.
Approximately 46% of our residential Internet base is on plans of 100 megabits per second or higher. We now offer Ignite Gigabit Internet service to our entire Cable footprint of over four million homes. Our hybrid fibre-coaxial cable network allows us to make incremental success-based investments as the demand for greater speed and capacity grows. We believe this positions us well to earn attractive returns on investment for our shareholders.
Late in 2016, Rogers announced a long-term agreement with Comcast Corporation (Comcast) to bring our customers a best-in-class TV product and expect to deploy Comcast's X1 IP-based video platform in early 2018. We are moving to this hosted platform to ensure we will have access to the scale and technical roadmap needed to meet the ongoing pace of IPTV innovation. Customers will benefit from Comcast's substantial research and development investments and their continuing commitment to innovation. Comcast attributes the transformative X1 platform to improving Xfinity TV subscriber performance, reducing churn, and increasing engagement for customers.
Our adoption of the X1 platform not only includes access to the most advanced IPTV solution, but also to Comcast's state-of-the-art customer premise equipment, including advanced DOCSIS 3.1 Wi-Fi gateways, Wi-Fi extenders, and wireless set-top boxes as well as the ability to send video to other third party companion devices (such as tablets and smartphones).
By mid-2017, Rogers plans to bring its customers the new advanced DOCSIS 3.1 Wi-Fi gateway, which is capable of delivering up to nine gigabits per second over Wi-Fi within the home, supports voice, home monitoring, and automation applications, and can act as the core in-home gateway for video and data applications. Throughout 2017, we also intend to provide our customers with further enhancements to our existing TV platform, including more 4K content.
First on the innovation roadmap, we intend to adopt Comcast's new Digital Home solution. This whole-home networking solution will provide customers with a simple, fast, and intuitive way to control and manage their connected devices. The cloud-based platform will link to the new DOCSIS 3.1 Wi-Fi gateway devices to deliver fast, reliable connectivity in the home and will allow people to easily add or pause devices, pair Wi-Fi extenders that boost signal strength, and use voice controls to see who is on the network, all in a safe and secure manner. This should help support the broader adoption of connected devices and the Internet of Things (IoT).
The all-IP combination of voice, data, video, smart home monitoring, and IoT using a combination of the most extensive DOCSIS 3.1-based, gigabit-capable network in Canada, along with Rogers and Comcast technology, will provide our customers with a best-in-class next generation residential service suite in Canada.
Media Focused on Sports
Media remains focused on our strong portfolio of live sports entertainment, including our ownership of the Toronto Blue Jays, our exclusive NHL agreement, and our joint venture interest in MLSE. For the second year in a row, Sportsnet was the number-one sports media brand in Canada and the gap has widened. Sportsnet plans to deliver more than 100 live sporting events in 4K in 2017. Consumer interest in 4K TV continues to grow as evidenced by leading manufacturer expectations for 4K TV sales to top 50% of all TV sales in 2017. To achieve the high quality 4K resolution, significantly higher bandwidths are required. With more 4K television sets and video streaming devices in the home, the high bit rate requirement further emphasizes the speed and capacity advantages of Rogers' hybrid fibre-coaxial cable network over the legacy networks of our telecommunication competitors.
In the fourth quarter of 2016, we committed to accelerating our shift from print to digital media in order to keep pace with changing audience demands. Since then, we have been realigning resources and developing the roadmap that will drive innovation and new content ideas while increasing digital audiences and revenue. A particular focus in 2017 will be the launch of some new initiatives that will help solidify our position in the digital space.
Corporate Developments
We intend to hire Joseph Natale as President and CEO effective July 2017. Alan Horn is currently acting as our Interim President and CEO.
Summary of Consolidated Financial Results
Three months ended December 31 Twelve months ended December 31
------------------------------ -------------------------------
(In millions of dollars,
except margins and per
share amounts) 2016 2015 % Chg 2016 2015 % Chg
------------------------ ---- ---- ----- ---- ---- -----
Revenue
Wireless 2,058 1,981 4 7,916 7,651 3
Cable 858 855 - 3,449 3,465 -
Business Solutions 96 95 1 384 377 2
Media 550 560 (2) 2,146 2,079 3
Corporate items and intercompany
eliminations (52) (39) 33 (193) (158) 22
-------------------------------- --- --- --- ---- ---- ---
Revenue 3,510 3,452 2 13,702 13,414 2
------- ----- ----- --- ------ ------ ---
Adjusted operating profit
Wireless 792 754 5 3,285 3,239 1
Cable 435 426 2 1,674 1,658 1
Business Solutions 30 30 - 123 116 6
Media 49 56 (13) 169 172 (2)
Corporate items and intercompany
eliminations (47) (40) 18 (159) (153) 4
-------------------------------- --- --- --- ---- ---- ---
Adjusted operating profit 1 1,259 1,226 3 5,092 5,032 1
--------------------------- ----- ----- --- ----- ----- ---
Adjusted operating profit
margin 1 35.9% 35.5% 0.4pts 37.2% 37.5% (0.3pts)
Net (loss) income (2) (9) 299 n/m 835 1,342 (38)
Basic (loss) earnings per
share (2) ($0.02) $0.58 n/m $1.62 $2.61 (38)
Diluted (loss) earnings per
share (2) ($0.04) $0.58 n/m $1.62 $2.60 (38)
Adjusted net income 1,2 382 331 15 1,481 1,479 -
Adjusted basic earnings per
share 1,2 $0.74 $0.64 16 $2.88 $2.87 -
Adjusted diluted earnings
per share 1,2 $0.74 $0.64 16 $2.86 $2.86 -
------------------------- ----- ----- --- ----- ----- ---
Additions to property,
plant and equipment 604 773 (22) 2,352 2,440 (4)
Cash provided by operating
activities 1,053 950 11 3,957 3,747 6
Free cash flow (1) 392 274 43 1,705 1,676 2
Total service revenue (3) 3,306 3,214 3 13,027 12,649 3
======================== ===== ===== === ====== ====== ===
n/m - not meaningful
1 Adjusted operating profit,
adjusted operating profit margin,
adjusted net income, adjusted
basic and diluted earnings per
share, and free cash flow are
non-GAAP measures and should not
be considered substitutes or
alternatives for GAAP measures.
These are not defined terms under
IFRS and do not have standard
meanings, so may not be a
reliable way to compare us to
other companies. See "Non-GAAP
Measures" for information about
these measures, including how we
calculate them.
2 As a result of the IFRS
Interpretations Committee's
agenda decision relating to IAS
12 Income Taxes, certain amounts
have been retrospectively
amended. See "Accounting Changes"
for more information.
3 As defined. See "Key Performance
Indicators".
Results of our Reporting Segments
WIRELESS
Wireless Financial Results
Three months ended December 31 Twelve months ended December 31
------------------------------ -------------------------------
(In millions of dollars, except
margins) 2016 2015 1 % Chg 2016 2015 1 % Chg
------------------------------- ---- ------ ----- ---- ------ -----
Revenue
Service revenue 1,858 1,747 6 7,258 6,902 5
Equipment revenue 200 234 (15) 658 749 (12)
----------------- --- --- --- --- --- ---
Revenue 2,058 1,981 4 7,916 7,651 3
------- ----- ----- --- ----- ----- ---
Operating expenses
Cost of equipment 584 569 3 1,947 1,845 6
Other operating expenses 682 658 4 2,684 2,567 5
------------------------ --- --- --- ----- ----- ---
Operating expenses 1,266 1,227 3 4,631 4,412 5
------------------ ----- ----- --- ----- ----- ---
Adjusted operating profit 792 754 5 3,285 3,239 1
------------------------- --- --- --- ----- ----- ---
Adjusted operating profit margin
as a % of service revenue 42.6% 43.2% (0.6 pts) 45.3% 46.9% (1.6 pts)
Additions to property, plant and
equipment 153 235 (35) 702 866 (19)
================================ === === === === === ===
1 The operating results of
Mobilicity are included in
the Wireless results of
operations from the date
of acquisition on July 2,
2015.
Wireless Subscriber Results (1)
Three months ended December 31 Twelve months ended December 31
------------------------------ -------------------------------
(In thousands, except churn,
postpaid ARPA, and blended ARPU) 2016 2015 Chg 2016 2015 Chg
--------------------------------- ---- ---- --- ---- ---- ---
Postpaid
Gross additions 436 365 71 1,521 1,354 167
Net additions 93 31 62 286 106 180
Total postpaid subscribers 2 8,557 8,271 286 8,557 8,271 286
Churn (monthly) 1.35% 1.35% - 1.23% 1.27% (0.04 pts)
ARPA (monthly) $119.90 $112.07 $7.83 $117.37 $110.74 $6.63
Prepaid
Gross additions 172 179 (7) 761 677 84
Net additions 38 27 11 111 75 36
Total prepaid subscribers 2,3 1,717 1,606 111 1,717 1,606 111
Churn (monthly) 2.62% 3.17% (0.55 pts) 3.32% 3.45% (0.13 pts)
Blended ARPU (monthly) $60.72 $59.16 $1.56 $60.42 $59.71 $0.71
===================== ====== ====== ===== ====== ====== =====
1 Subscriber counts, subscriber
churn, postpaid ARPA, and
blended ARPU are key performance
indicators. See "Key Performance
Indicators".
2 As at end of period.
3 On July 2, 2015, we acquired
approximately 154,000 Wireless
prepaid subscribers as a result
of our acquisition of
Mobilicity, which are not
included in the 2015 net
additions above.
Service revenue
The 6% increase in service revenue this quarter was a result of:
-- larger postpaid and prepaid subscriber bases; and
-- the continued adoption of customer-friendly Rogers Share Everything
plans and the general increase in data usage noted on these types of
plans. These plans generate higher postpaid ARPA, bundle in various
calling features and long distance, provide the ability to pool and
manage data usage across multiple devices, and grant access to our other
offerings, such as Roam Like Home, Rogers NHL GameCentre LIVE, Spotify,
and Texture by Next Issue.
The 7% increase in postpaid ARPA this quarter was the result of the continued adoption of Rogers Share Everything plans relative to the number of subscriber accounts as customers have increasingly utilized the advantages of premium offerings and access their shareable plans with multiple devices on the same account.
The 3% increase in blended ARPU this quarter was a result of:
-- increased service revenue as discussed above; partially offset by
-- the general increase in prepaid net additions over the past year.
We believe the increases in gross and net additions to our postpaid subscriber base and the stable postpaid churn this quarter were results of our strategic focus on enhancing the customer experience by providing higher-value offerings, such as our Share Everything plans, improving our customer service, and continually increasing the quality of our network.
Equipment revenue
The 15% decrease in equipment revenue this quarter was a result of:
-- an 11% decrease in device upgrades by existing subscribers; and
-- larger average subsidies given to customers who purchased devices;
partially offset by
-- higher postpaid gross additions.
Operating expenses
Cost of equipment
The 3% increase in the cost of equipment this quarter was a result of:
-- a shift in the product mix of device sales towards higher-cost
smartphones; and
-- higher postpaid gross additions; partially offset by
-- the decrease in device upgrades by existing subscribers, as discussed
above.
Other operating expenses
The 4% increase in other operating expenses this quarter was a result of:
-- higher commissions, primarily as a result of our higher postpaid gross
additions; and
-- higher marketing and advertising costs.
Adjusted operating profit
The 5% increase in adjusted operating profit this quarter was a result of the revenue and expense changes discussed above.
CABLE
Cable Financial Results
Three months ended December 31 Twelve months ended December 31
------------------------------ -------------------------------
(In millions of dollars, except
margins) 2016 2015 % Chg 2016 2015 % Chg
------------------------------- ---- ---- ----- ---- ---- -----
Revenue
Internet 378 348 9 1,495 1,343 11
Television 386 403 (4) 1,562 1,669 (6)
Phone 93 102 (9) 386 445 (13)
----- --- --- --- --- --- ---
Service revenue 857 853 - 3,443 3,457 -
Equipment revenue 1 2 (50) 6 8 (25)
----------------- --- --- --- --- --- ---
Revenue 858 855 - 3,449 3,465 -
------- --- --- --- ----- ----- ---
Operating expenses
Cost of equipment 1 2 (50) 3 4 (25)
Other operating expenses 422 427 (1) 1,772 1,803 (2)
------------------------ --- --- --- ----- ----- ---
Operating expenses 423 429 (1) 1,775 1,807 (2)
------------------ --- --- --- ----- ----- ---
Adjusted operating profit 435 426 2 1,674 1,658 1
------------------------- --- --- --- ----- ----- ---
Adjusted operating profit margin 50.7% 49.8% 0.9 pts 48.5% 47.8% 0.7 pts
Additions to property, plant and
equipment 284 308 (8) 1,085 1,030 5
================================ === === === ===== ===== ===
Cable Subscriber Results (1)
Three months ended December 31 Twelve months ended December
31
------------------------------ -----------------------------
(In thousands) 2016 2015 Chg 2016 2015 Chg
------------- ---- ---- --- ---- ---- ---
Internet
Net additions 30 16 14 97 37 60
Total Internet subscribers 2 2,145 2,048 97 2,145 2,048 97
Television
Net losses (13) (24) 11 (76) (128) 52
Total television subscribers 2 1,820 1,896 (76) 1,820 1,896 (76)
Phone
Net additions (losses) 4 (15) 19 4 (60) 64
Total phone subscribers 2 1,094 1,090 4 1,094 1,090 4
------------------------- ----- ----- --- ----- ----- ---
Cable homes passed 2 4,241 4,153 88 4,241 4,153 88
Total service units 3
Net additions (losses) 21 (23) 44 25 (151) 176
Total service units 2 5,059 5,034 25 5,059 5,034 25
===================== ===== ===== === ===== ===== ===
1 Subscriber counts are key
performance indicators. See
"Key Performance Indicators".
2 As at end of period.
3 Includes Internet,
Television, and Phone
subscribers.
Revenue
The marginal increase in revenue this quarter was a result of:
-- a higher subscriber base for our Internet products; and
-- the net impact of pricing changes implemented over the past year;
partially offset by
-- Television subscriber losses over the past year.
Internet revenue
The 9% increase in Internet revenue this quarter was a result of:
-- a larger Internet subscriber base;
-- general movement of customers to higher speed and usage tiers of our
Ignite broadband Internet offerings; and
-- the net impact of changes in Internet service pricing; partially offset
by
-- lower wholesale revenue as a result of a CRTC decision that reduced
access service rates.
Television revenue
The 4% decrease in Television revenue this quarter was a result of:
-- the decline in Television subscribers over the past year; and
-- more promotional pricing provided to subscribers; partially offset by
-- the impact of Television service pricing changes implemented over the
past year.
Phone revenue
The 9% decrease in Phone revenue this quarter was a result of:
-- the impact of pricing packages, primarily related to Ignite
multi-product bundles; partially offset by
-- less promotional pricing provided to subscribers as a result of the
pricing packages described above.
Operating expenses
The 1% decrease in operating expenses this quarter was a result of:
-- relative shifts in product mix to higher-margin Internet from
conventional Television broadcasting; and
-- lower service and programming costs.
Adjusted operating profit
The 2% increase in adjusted operating profit this quarter was a result of the revenue and expense changes discussed above.
BUSINESS SOLUTIONS
Business Solutions Financial Results
Three months ended December 31 Twelve months ended December 31
------------------------------ -------------------------------
(In millions of dollars, except
margins) 2016 2015 (1) % Chg 2016 2015 (1) % Chg
------------------------------- ---- ------- ----- ---- ------- -----
Revenue
Next generation 77 74 4 307 288 7
Legacy 17 20 (15) 71 85 (16)
------ --- --- --- --- --- ---
Service revenue 94 94 - 378 373 1
Equipment revenue 2 1 100 6 4 50
----------------- --- --- --- --- --- ---
Revenue 96 95 1 384 377 2
------- --- --- --- --- --- ---
Operating expenses 66 65 2 261 261 -
------------------ --- --- --- --- --- ---
Adjusted operating profit 30 30 - 123 116 6
------------------------- --- --- --- --- --- ---
Adjusted operating profit margin 31.3% 31.6% (0.3 pts) 32.0% 30.8% 1.2 pts
Additions to property, plant and
equipment 37 65 (43) 146 187 (22)
================================ === === === === === ===
1 The operating results of
Internetworking Atlantic Inc. are
included in the Business Solutions
results of operations from the
date of acquisition on November
30, 2015.
Revenue
The stable service revenue this quarter was a result of the continued execution of our plan to grow higher-margin, next generation on-net and near-net IP-based services revenue, offset by the continued decline in our legacy and off-net voice business. We expect this trend to continue as we focus on migrating customers to more advanced, cost-effective IP-based services and solutions.
Next generation services, which include our data centre operations, represented 82% of total service revenue in the quarter (2015 - 79%).
Operating expenses
Operating expenses this quarter were in line with fourth quarter operating expenses of 2015.
Adjusted operating profit
Adjusted operating profit was stable this quarter as a result of the marginal increases in revenue and operating expenses this quarter.
MEDIA
Media Financial Results
Three months ended December 31 Twelve months ended December 31
------------------------------ -------------------------------
(In millions
of dollars,
except
margins) 2016 2015 % Chg 2016 2015 % Chg
------------ ---- ---- ----- ---- ---- -----
Revenue 550 560 (2) 2,146 2,079 3
Operating
expenses 501 504 (1) 1,977 1,907 4
--------- --- --- --- ----- ----- ---
Adjusted
operating
profit 49 56 (13) 169 172 (2)
---------- --- --- --- --- --- ---
Adjusted
operating
profit
margin 8.9% 10.0% (1.1 pts) 7.9% 8.3% (0.4 pts)
Additions to
property,
plant and
equipment 19 28 (32) 62 60 3
============ === === === === === ===
Revenue
The 2% decrease in revenue this quarter was a result of:
-- fewer postseason Toronto Blue Jays games compared to 2015;
-- lower overall advertising revenue; and
-- lower circulation revenue within publishing, partly due to the sale of
certain brands; partially offset by
-- higher sales at TSC.
Operating expenses
The 1% decrease in operating expenses this quarter was a result of:
-- lower publishing costs due to revenue softness and the strategic shift
related to magazine content announced earlier in the year; partially
offset by
-- higher TSC merchandise costs; and
-- higher digital media costs.
Adjusted operating profit
The 13% decrease in adjusted operating profit this quarter was primarily a result of the revenue and expense changes discussed above.
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Three months ended December 31 Twelve months ended December 31
------------------------------ -------------------------------
(In millions of dollars,
except capital intensity) 2016 2015 % Chg 2016 2015 % Chg
-------------------------- ---- ---- ----- ---- ---- -----
Additions to property, plant
and equipment
Wireless 153 235 (35) 702 866 (19)
Cable 284 308 (8) 1,085 1,030 5
Business Solutions 37 65 (43) 146 187 (22)
Media 19 28 (32) 62 60 3
Corporate 111 137 (19) 357 297 20
--------- --- --- --- --- --- ---
Total additions to property,
plant and equipment 1 604 773 (22) 2,352 2,440 (4)
---------------------------- --- --- --- ----- ----- ---
Capital intensity 2 17.2% 22.4% (5.2 pts) 17.2% 18.2% (1.0 pts)
=================== ==== ==== ======== ==== ==== ========
1 Additions to property, plant
and equipment do not include
expenditures for spectrum
licences.
2 As defined. See "Key
Performance Indicators".
Wireless
The decrease in additions to property, plant and equipment in Wireless this quarter was primarily a result of higher LTE network investments incurred in the fourth quarter of 2015 relative to 2016 to enhance network coverage and the quality of our network. Deployment of our 700 MHz LTE network has reached 91% of Canada's population as at December 31, 2016 (December 31, 2015 - 78%). The 700 MHz LTE network offers improved signal quality in basements, elevators, and buildings with thick concrete walls. Deployment of our overall LTE network has reached approximately 95% of Canada's population as at December 31, 2016 (December 31, 2015 - 93%).
Cable
The decrease in additions to property, plant and equipment in Cable this quarter was primarily a result of higher investment in information technology infrastructure incurred in the fourth quarter of 2015 relative to 2016 to improve the capacity of our Internet platform to deliver gigabit Internet speeds. We believe this has allowed us to keep ahead of customer data demands, which allowed us to deliver Ignite Gigabit Internet across our Cable footprint by the end of 2016.
Business Solutions
The decrease in additions to property, plant and equipment in Business Solutions this quarter was a result of higher investments in our data centres in the fourth quarter of 2015 relative to 2016.
Media
The decrease in additions to property, plant and equipment in Media this quarter was a result of higher investments incurred in the fourth quarter of 2015 relative to 2016 for conventional television, digital assets, and at TSC.
Corporate
The decrease in additions to property, plant and equipment in Corporate this quarter was a result of higher investments incurred in the fourth quarter of 2015 relative to 2016 in relation to premise improvements at our various offices, as well as higher information technology investments.
Capital intensity
Capital intensity decreased this quarter as a result of lower additions to property, plant and equipment in all our segments as discussed above, partially offset by higher revenue.
Review of Consolidated Performance
This section discusses our consolidated net income and other expenses that do not form part of the segment discussions above.
Three months ended December 31 Twelve months ended December 31
------------------------------ -------------------------------
(In millions of dollars) 2016 2015 % Chg 2016 2015 % Chg
----------------------- ---- ---- ----- ---- ---- -----
Adjusted operating profit 1 1,259 1,226 3 5,092 5,032 1
Deduct (add):
Stock-based compensation 16 16 - 61 55 11
Depreciation and amortization 555 580 (4) 2,276 2,277 -
Impairment of assets and related
onerous contract charges 484 - n/m 484 - n/m
Restructuring, acquisition and other 34 23 48 160 111 44
Finance costs 188 192 (2) 761 774 (2)
Other (income) expense (2) (4) 4 n/m 191 (4) n/m
Income tax (recovery) expense (2) (5) 112 n/m 324 477 (32)
-------------------------------- --- --- --- --- --- ---
Net (loss) income (2) (9) 299 n/m 835 1,342 (38)
==================== === === === === ===== ===
1 Adjusted operating profit is a
non-GAAP measure and should not
be considered a substitute or
alternative for GAAP measures. It
is not a defined term under IFRS
and does not have a standard
meaning, so may not be a reliable
way to compare us to other
companies. See "Non-GAAP
Measures" for information about
this measure, including how we
calculate it.
2 As a result of the IFRS
Interpretations Committee's
agenda decision relating to IAS
12 Income Taxes, certain amounts
have been retrospectively
amended. See "Accounting
Changes" for more information.
Stock-based compensation
Our stock-based compensation, which includes stock options (with stock appreciation rights), restricted share units, and deferred share units, is generally driven by:
-- the vesting of stock options and share units; and
-- changes in the market price of RCI Class B shares; offset by
-- the impact of certain equity derivative instruments designed to hedge a
portion of the stock price appreciation risk for our stock-based
compensation programs. See "Financial Risk Management" for more
information about equity derivatives.
Three months ended Twelve months ended
December 31 December 31
------------------- --------------------
(In
millions
of
dollars) 2016 2015 2016 2015
--------- ---- ---- ---- ----
Impact of
vesting 19 14 70 57
Impact of
change in
price (22) 14 24 20
Equity
derivatives,
net of
interest
receipt 19 (12) (33) (22)
------------- --- --- --- ---
Total
stock-
based
compensation 16 16 61 55
============= === === === ===
Depreciation and amortization
Three months ended December 31 Twelve months ended December 31
------------------------------ -------------------------------
(In millions of
dollars) 2016 2015 % Chg 2016 2015 % Chg
--------------- ---- ---- ----- ---- ---- -----
Depreciation 538 541 (1) 2,183 2,117 3
Amortization 17 39 (56) 93 160 (42)
------------ --- --- --- --- --- ---
Total
depreciation and
amortization 555 580 (4) 2,276 2,277 -
================= === === === ===== ===== ===
Total depreciation and amortization decreased this quarter as a result of the effect of ceasing amortization on certain brand name assets in 2016.
Impairment of assets and related onerous contract charges
During the quarter, we recorded a total charge of $484 million for asset impairment and onerous contracts related to our decision to discontinue developing our IPTV product as a result of our decision to develop a long-term relationship with Comcast and deploy their X1 IP-based video platform. See "Strategic Update" for more information. The onerous contracts charges primarily relate to the remaining contractual liabilities for the development of our IPTV product based on our best estimate of the expected future costs.
Restructuring, acquisition and other
This quarter, we incurred $34 million (2015 - $23 million) in restructuring, acquisition and other expenses. The costs this quarter were primarily a result of severance costs associated with the targeted restructuring of our employee base and costs related to integrating certain businesses.
Finance costs
Three months ended December 31 Twelve months ended December 31
------------------------------ -------------------------------
(In millions of
dollars) 2016 2015 % Chg 2016 2015 % Chg
--------------- ---- ---- ----- ---- ---- -----
Interest on
borrowings 1 185 190 (3) 758 761 -
Interest on
post-
employment
benefits
liability 2 3 (33) 9 11 (18)
Loss on
repayment of
long-term debt - - - - 7 (100)
Loss on foreign
exchange 32 2 n/m 13 11 18
Change in fair
value of
derivatives (34) (1) n/m (16) 3 n/m
Capitalized
interest (3) (5) (40) (18) (29) (38)
Other 6 3 100 15 10 50
----- --- --- --- --- --- ---
Total finance
costs 188 192 (2) 761 774 (2)
============= === === === === === ===
Interest on borrowings includes
interest on long-term debt and
on short-term borrowings
associated with our accounts
receivable securitization
1 program.
Interest on borrowings
Interest on borrowings decreased this quarter as a result of a decrease in the principal of our outstanding debt and lower interest rates on our bank credit facilities. See "Managing our Liquidity and Financial Resources" and "Financial Condition" for more information about our debt and related finance costs.
Income tax (recovery) expense (1)
Three months ended Twelve months ended
December 31 December 31
------------------- --------------------
(In millions of dollars, except tax
rates) 2016 2015 2016 2015
----------------------------------- ---- ---- ---- ----
Statutory income tax rate 26.6% 26.5% 26.6% 26.5%
(Loss) income before income tax
(recovery) expense (14) 411 1,159 1,819
------------------------------- --- --- ----- -----
Computed income tax (recovery)
expense (4) 109 308 482
Increase (decrease) in income tax (recovery)
expense resulting from:
Non-(taxable) deductible stock-based
compensation (2) 3 5 5
Non-deductible (taxable) portion of
equity losses 2 (2) 18 11
Income tax adjustment, legislative tax
change - - 3 6
Non-taxable gain on acquisition - - - (20)
Non-taxable portion of capital gain - - (7) -
Other items (1) 2 (3) (7)
----------- --- --- --- ---
Total income tax (recovery) expense (5) 112 324 477
----------------------------------- --- --- --- ---
Effective income tax rate 35.7% 27.3% 28.0% 26.2%
Cash income taxes paid (received) 81 (6) 295 184
================================ === === === ===
1 As a result of the IFRS Interpretations Committee's agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively
amended. See "Accounting Changes" for more information.
Cash income taxes paid increased this quarter as a result of applying non-capital losses from the Mobilicity transaction to offset our 2015 tax liability.
Net (loss) income (1)
Three months ended Twelve months ended
December 31 December 31
------------------- --------------------
(In
millions
of
dollars,
except
per
share
amounts) 2016 2015 % Chg 2016 2015 % Chg
-------- ---- ---- ----- ---- ---- -----
Net
(loss)
income (9) 299 n/m 835 1,342 (38)
Basic
(loss)
earnings
per
share ($0.02) $0.58 n/m $1.62 $2.61 (38)
Diluted
(loss)
earnings
per
share ($0.04) $0.58 n/m $1.62 $2.60 (38)
======== ====== ===== === ===== ===== ===
1 As a result of the IFRS
Interpretations Committee's
agenda decision relating to IAS
12 Income Taxes, certain amounts
have been retrospectively
amended. See "Accounting Changes"
for more information.
Adjusted net income
We calculate adjusted net income from adjusted operating profit as follows:
Three months ended December 31 Twelve months ended December 31
------------------------------ -------------------------------
(In millions of
dollars, except per
share amounts) 2016 2015 % Chg 2016 2015 % Chg
-------------------- ---- ---- ----- ---- ---- -----
Adjusted operating
profit 1 1,259 1,226 3 5,092 5,032 1
Deduct:
Depreciation and amortization 555 580 (4) 2,276 2,277 -
Finance costs 2 188 192 (2) 761 767 (1)
Other (income) expense 3,4 (4) 4 n/m 40 (2) n/m
Income tax expense 4,5 138 119 16 534 511 5
---------------------- --- --- --- --- --- ---
Adjusted net income 1,4 382 331 15 1,481 1,479 -
----------------------- --- --- --- ----- ----- ---
Adjusted basic earnings
per share 1,4 $0.74 $0.64 16 $2.88 $2.87 -
Adjusted diluted
earnings per share 1,4 $0.74 $0.64 16 $2.86 $2.86 -
======================= ===== ===== === ===== ===== ===
1 Adjusted operating profit,
adjusted net income, and adjusted
basic and diluted earnings per
share are non-GAAP measures and
should not be considered
substitutes or alternatives for
GAAP measures. These are not
defined terms under IFRS and do
not have standard meanings, so
may not be a reliable way to
compare us to other companies.
See "Non-GAAP Measures" for
information about these measures,
including how we calculate them.
2 Finance costs exclude a $7 million
loss on repayment of long-term
debt for the twelve months ended
December 31, 2015.
3 Other expense for the twelve
months ended December 31, 2016
excludes an $11 million net loss
on divestitures pertaining to
investments and a $140 million
loss on the wind down of our
shomi joint venture. Other income
for the twelve months ended
December 31, 2015 excludes a $74
million gain on acquisition of
Mobilicity and a $72 million loss
related to our share of an
obligation to purchase at fair
value the non-controlling
interest in one of our joint
ventures.
4 As a result of the IFRS
Interpretations Committee's
agenda decision relating to IAS
12 Income Taxes, certain amounts
have been retrospectively
amended. See "Accounting Changes"
for more information.
5 Income tax expense excludes a $143
million recovery (2015 -$7
million recovery) for the quarter
and a $213 million recovery (2015
-$40 million recovery) for the
year to date related to the
income tax impact for adjusted
items. Income tax expense also
excludes expenses as a result of
legislative tax changes of $3
million (2015 -$6 million) for
the year to date.
Managing our Liquidity and Financial Resources
Operating, investing, and financing activities
Three months ended December Twelve months ended December
31 31
---------------------------- -----------------------------
(In millions of dollars) 2016 2015 2016 2015
----------------------- ---- ---- ---- ----
Cash provided by operating
activities before changes
in non-cash 1,276 1,264 4,994 5,004
working capital items,
income taxes paid, and
interest paid
Change in non-cash operating
working capital items (18) (187) 14 (302)
----------------------------- --- ---- --- ----
Cash provided by operating
activities before income
taxes paid 1,258 1,077 5,008 4,702
and interest paid
Income taxes (paid) received (81) 6 (295) (184)
Interest paid (124) (133) (756) (771)
------------- ---- ---- ---- ----
Cash provided by operating
activities 1,053 950 3,957 3,747
-------------------------- ----- --- ----- -----
Investing activities:
Additions to property, plant and
equipment (604) (773) (2,352) (2,440)
Additions to program rights (3) (27) (46) (64)
Changes in non-cash working
capital related to property,
plant and 44 167 (103) (116)
equipment and intangible assets
Acquisitions and other strategic
transactions, net of cash
acquired - (5) - (1,077)
Other 49 (32) 45 (70)
----- --- --- --- ---
Cash used in investing
activities (514) (670) (2,456) (3,767)
---------------------- ---- ---- ------ ------
Financing activities:
Net repayments on short-term
borrowings (250) (59) - (42)
Net (repayment) issuance of long-
term debt (57) 82 (538) 754
Net (payments) proceeds on
settlement of debt derivatives
and (28) (25) (45) 129
forward contracts
Transaction costs incurred (17) (9) (17) (9)
Dividends paid (247) (247) (988) (977)
Other - - 5 -
----- --- --- --- ---
Cash used in financing
activities (599) (258) (1,583) (145)
---------------------- ---- ---- ------ ----
Change in cash and cash
equivalents (60) 22 (82) (165)
(Bank advances) cash and
cash equivalents,
beginning of period (11) (11) 11 176
------------------------ --- --- --- ---
(Bank advances) cash and
cash equivalents, end of
period (71) 11 (71) 11
========================= === === === ===
Operating activities
The 11% increase in cash provided by operating activities this quarter was primarily a result of a lower net investment in non-cash working capital, partially offset by higher cash income taxes as a result of the timing of installment payments.
Investing activities
Additions to property, plant and equipment
We spent $604 million this quarter on additions to property, plant and equipment before changes in non-cash working capital items, which was lower than the same period in 2015. See "Additions to Property, Plant and Equipment" for more information.
Financing activities
Accounts receivable securitization
Below is a summary of the activity relating to our accounts receivable securitization program for the quarter and year to date:
Three months ended Twelve months ended
December 31 December 31
------------------- --------------------
(In millions of dollars) 2016 2015 2016 2015
----------------------- ---- ---- ---- ----
Short-term borrowings
Proceeds received on short-
term borrowings - 22 295 294
Repayment of short-term
borrowings (250) (81) (295) (336)
------------------------ ---- --- ---- ----
Net (repayments) proceeds
received on short-term
borrowings (250) (59) - (42)
========================= ==== === === ===
As at December 31, 2016, our total funding under the securitization program was $800 million (December 31, 2015 - $800 million).
In July 2016, we amended the terms of the accounts receivable securitization program to, among other things, extend the expiry date from January 1, 2018 to January 1, 2019.
Bank and letter of credit facilities
Below is a summary of the activity relating to our revolving and non-revolving bank credit facilities for the quarter and year to date:
Three months ended Twelve months ended
December 31, 2016 December 31, 2016
----------------- -----------------
Notional Exchange Notional Notional Exchange Notional
(In millions of
dollars,
except
exchange
rates) (US$) rate (Cdn$) (US$) rate (Cdn$)
--------------- ---- ---- ----- ---- ---- -----
Issuance of US
dollar long-
term debt 303 1.31 398 2,188 1.31 2,877
Issuance of
Canadian
dollar long-
term debt 325 1,140
------------- --- -----
Total long-
term debt
issued 723 4,017
----------- --- -----
Repayment of US
dollar long-
term debt (914) 1.34 (1,226) (2,038) 1.32 (2,686)
Repayment of
Canadian
dollar long-
term debt (225) (1,540)
------------- ---- ------
Total long-
term debt
repaid (1,451) (4,226)
=========== ====== ======
Three months ended Twelve months ended
December 31, 2015 December 31, 2015
----------------- -----------------
Notional Exchange Notional Notional Exchange Notional
(In millions of
dollars,
except
exchange
rates) (US$) rate (Cdn$) (US$) rate (Cdn$)
--------------- ---- ---- ----- ---- ---- -----
Issuance of
Canadian
dollar long-
term debt 1,190 6,025
Repayment of
Canadian
dollar long-
term debt (2,440) (5,525)
============= ====== ======
As at December 31, 2016, we had $301 million ($100 million and US$150 million) of borrowings outstanding under our revolving and non-revolving credit facilities (December 31, 2015 - $500 million). Certain funds were borrowed in US dollars to take advantage of a favourable interest rate spread; we have entered into debt derivatives related to these borrowings to convert all the interest and principal payment obligations to Canadian dollars. See "Financial Risk Management" for more information.
As at December 31, 2016, we had available liquidity under our bank credit facilities of $2.4 billion, as illustrated below. Each of these facilities is unsecured and guaranteed by RCCI and ranks equally with all of our senior notes and debentures.
As at As at
December 31
December 31
-----------
(In millions of dollars) 2016 2015
----------------------- ---- ----
Total revolving & non-
revolving credit and
letter of credit
facilities 2,860 3,567
Add (deduct):
Outstanding letters of credit (68) (68)
Borrowings (301) (500)
Bank advances (71) -
------------- --- ---
Available liquidity -
bank credit facilities 2,420 2,999
======================= ===== =====
Effective April 1, 2016, we amended our $2.5 billion revolving credit facility to, among other things, extend the maturity date from July 2019 to September 2020. At the same time, we also amended the $1.0 billion non-revolving credit facility to, among other things, extend the maturity date from April 2017 to April 2018. As a result of repayments made during the quarter, we reduced the amount of borrowings available under our non-revolving credit facility from $1.0 billion to $301 million.
Senior notes
The table below provides a summary of the issuance of our senior notes for the three months ended December 31, 2016 and 2015.
(In millions of dollars, except interest rates and discounts)
Date Issued Principal Due date Interest rate Discount/ Total gross Transaction
amount premium at proceeds (1) costs and
issuance (Cdn$) discounts (2)
(Cdn$)
--- -----
2016 issuances
November 4, 2016 US 500 2026 2.900% 98.354% 671 17
2015 issuances
December 8, 2015 US 700 2025 3.625% 99.252% 937
December 8, 2015 US 300 2044 5.000% 101.700% 401
---------------- --- --- ---- ----- ------- ---
Total for 2015 1,338 13
============== ===== ===
1 Gross proceeds before
transaction costs and
discounts.
2 Transaction costs and
discounts are included as
deferred transaction costs
and discounts in the
carrying value of the long-
term debt, and recognized
in net income using the
effective interest method.
Concurrent with the 2016 and 2015 issuances, we entered into debt derivatives to hedge the foreign currency risk associated with the principal and interest components of the US dollar-denominated senior notes.
The tables below provide a summary of the repayment of our senior notes for the three and twelve months ended December 31, 2016 and 2015.
Three months ended Twelve months ended
December 31, 2016 December 31, 2016
----------------- -----------------
(In
millions
of
dollars) Notional Notional Notional Notional
amount (US$) amount (Cdn$) amount (US$) amount (Cdn$)
Maturity
date
--------
May
26,
2016 - - - 1,000
==== === === === =====
Three months ended Twelve months ended
December 31, 2015 December 31, 2015
----------------- -----------------
(In
millions
of
dollars) Notional Notional Notional Notional
amount (US$) amount (Cdn$) amount (US$) amount (Cdn$)
Maturity
date
--------
March
15,
2015 - - 550 702
March
15,
2015 - - 280 357
----- --- --- --- ---
Total - - 830 1,059
===== === === === =====
Dividends
The table below shows when dividends were declared and paid on both classes of our shares.
Declaration
date Record date Payment date Dividend per Dividends paid
share (dollars) (in millions of dollars)
--- -------------- -----------------------
January
27,
2016 March 13, 2016 April 1, 2016 0.48 247
April
18,
2016 June 12, 2016 July 4, 2016 0.48 247
August
11,
2016 September 11, 2016 October 3, 2016 0.48 247
October
20,
2016 December 12, 2016 January 3, 2017 0.48 247
January
28,
2015 March 13, 2015 April 1, 2015 0.48 248
April
21,
2015 June 12, 2015 July 2, 2015 0.48 247
August
13,
2015 September 11, 2015 October 1, 2015 0.48 247
October
22,
2015 December 11, 2015 January 4, 2016 0.48 247
======= ================= =============== ==== ===
Free cash flow
Three months ended December 31 Twelve months ended December 31
------------------------------ -------------------------------
(In millions of
dollars) 2016 2015 % Chg 2016 2015 % Chg
--------------- ---- ---- ----- ---- ---- -----
Adjusted operating
profit (1) 1,259 1,226 3 5,092 5,032 1
Deduct (add):
Additions to property, plant
and equipment (2) 604 773 (22) 2,352 2,440 (4)
Interest on borrowings, net
of capitalized interest 182 185 (2) 740 732 1
Cash income taxes (3) 81 (6) n/m 295 184 60
-------------------- --- --- --- --- --- ---
Free cash flow (1) 392 274 43 1,705 1,676 2
================= === === === ===== ===== ===
1 Adjusted operating profit and
free cash flow are non-GAAP
measures and should not be
considered substitutes or
alternatives for GAAP
measures. These are not
defined terms under IFRS and
do not have standard meanings,
so may not be a reliable way
to compare us to other
companies. See "Non-GAAP
Measures" for information
about these measures,
including how we calculate
them.
2 Additions to property, plant
and equipment do not include
expenditures for spectrum
licences.
3 Cash income taxes are net of
refunds received.
The 43% increase in free cash flow this quarter was a result of higher adjusted operating profit and lower additions to property, plant and equipment, partially offset by higher cash income taxes as a result of applying non-capital losses from the Mobilicity transaction during the same period in 2015.
Financial Condition
As at As at
December 31 December 31
----------- -----------
(In millions of dollars) 2016 2015
----------------------- ---- ----
Cash and cash equivalents - 11
Bank credit facilities 2,420 3,000
Accounts receivable
securitization program 250 250
----------------------- --- ---
Total available liquidity 2,670 3,261
========================= ===== =====
In addition to the sources of available liquidity noted above, we held $1,047 million of marketable securities in publicly traded companies as at December 31, 2016 (December 31, 2015 - $966 million).
Our borrowings had a weighted average cost of financing of 4.72% as at December 31, 2016 (December 31, 2015 - 4.82%) and a weighted average term to maturity of 10.6 years (December 31, 2015 - 10.8 years). This comparative decline in our weighted average interest rate reflects the combined effects of:
-- the issuance of senior notes in November 2016 at comparatively lower
interest rates; and
-- the repayment of senior notes in May 2016 that were issued at
comparatively higher interest rates.
As at December 31, 2016, the credit ratings on RCI's outstanding senior notes and debentures were as follows:
-- Moody's Ratings Services: Baa1 with a stable outlook (unchanged in the
quarter);
-- Standard and Poor's Ratings Services: BBB+ with a stable outlook
(unchanged in the quarter); and
-- Fitch Ratings: BBB+ with a stable outlook (unchanged in the quarter).
Financial Risk Management
This section should be read in conjunction with "Financial Risk Management" in our 2015 Annual MD&A. We use derivative instruments to manage financial risks related to our business activities. We only use derivatives to manage risk and not for speculative purposes. We also manage our exposure to both fixed and fluctuating interest rates and had fixed the interest rate on 91.2% of our outstanding debt, including short-term borrowings, as at December 31, 2016 (December 31, 2015 - 90.3%).
Debt derivatives
We entered into the following new debt derivatives during the three and twelve months ended December 31, 2016 and 2015 in conjunction with the issuance of our senior notes:
(In millions of dollars, except for coupon and interest rates)
US$ Hedging effect
--- --------------
Effective date Principal/notional Maturity date Coupon rate Fixed hedged Cdn$ Equivalent Cdn$
amount (US$) interest rate (1)
--- ----------- ----------------
2016 issuances
November 4, 2016 500 2026 2.900% 2.834% 671
2015 issuances
December 8, 2015 700 2025 3.625% 3.566% 937
December 8, 2015 300 2044 5.000% 5.145% 401
---------------- --- ---- ----- ----- ---
Total for 2015 1,000 1,338
============== ===== =====
(1) Converting from a
fixed US$ coupon rate to
a weighted average Cdn$
fixed rate.
During the quarter, we entered into debt derivatives related to our credit facility borrowings as a result of a favourable interest rate spread obtained from borrowing funds in US dollars. We used these derivatives to offset the foreign exchange and interest rate risk on our US dollar-denominated credit facility borrowings. As a result of the short-term nature of these debt derivatives related to our credit facility borrowings, we have not designated them as hedges for accounting purposes.
This quarter and year to date, we entered into and settled debt derivatives related to our credit facility borrowings as follows:
Three months ended Twelve months ended
December 31, 2016 December 31, 2016
----------------- -----------------
(In millions
of dollars,
except
exchange
rates) Notional Exchange Notional Notional Exchange Notional
rate (Cdn$) rate (Cdn$)
(US$) (US$)
--- ---- ----
Debt
derivatives
entered 1,947 1.33 2,583 8,683 1.31 11,360
Debt
derivatives
settled 2,558 1.32 3,385 8,533 1.31 11,159
Net cash
received 25 8
========= === ===
We did not enter into any debt derivatives related to our credit facility borrowings during the three and twelve months ended December 31, 2015. See "Mark-to-market value" for more information about our debt derivatives.
Bond forwards
We did not enter into any new bond forwards this quarter.
On November 4, 2016, we exercised a $500 million notional bond forward due January 4, 2017 in relation to the issuance of the US$500 million senior notes due 2026 and paid $53 million to settle the derivative. The amount paid represents the fair value of the bond forward at the time of settlement and will be recycled into finance costs from the hedging reserve using the effective interest rate method over the life of the US$500 million senior notes due 2026.
See "Mark-to-market value" for more information about our bond forwards.
Expenditure derivatives
As at December 31, 2016, our outstanding expenditure derivatives had terms to maturity ranging from January 2017 to December 2018 at an average exchange rate of $1.32/US$ (December 31, 2015 - January 2016 to December 2017 at an average exchange rate of $1.24/US$). Our outstanding expenditure derivatives maturing in 2017 are hedged at an average exchange rate of $1.33/US$.
Below is a summary of the activity relating to our expenditure derivatives for the quarter and year to date.
Three months ended Twelve months ended
December 31, 2016 December 31, 2016
----------------- -----------------
(In millions of
dollars, except
exchange rates) Notional Exchange Notional Notional Exchange Notional
(US$) rate (Cdn$) (US$) rate (Cdn$)
--- ---- ---- ----- ---- ---- -----
Expenditure
derivatives
entered 240 1.32 316 990 1.33 1,318
Expenditure
derivatives
settled 210 1.21 255 840 1.22 1,025
============ === ==== === === ==== =====
Three months ended Twelve months ended
December 31, 2015 December 31, 2015
----------------- -----------------
(In millions of
dollars, except
exchange rates) Notional Exchange Notional Notional Exchange Notional
(US$) rate (Cdn$) (US$) rate (Cdn$)
--- ---- ---- ----- ---- ---- -----
Expenditure
derivatives
entered 300 1.30 390 990 1.28 1,266
Expenditure
derivatives
settled 225 1.12 252 810 1.11 902
============ === ==== === === ==== ===
See "Mark-to-market value" for more information about our expenditure derivatives.
Equity derivatives
As at December 31, 2016, we had equity derivatives for 5.4 million (December 31, 2015 - 5.7 million) RCI Class B shares with a weighted average price of $50.30 (December 31, 2015 - $50.37).
In August 2016, we settled 0.3 million equity derivatives at a weighted average price of $58.16 as a result of a reduction in the number of share-based compensation units outstanding.
In April 2016, we executed extension agreements for each of our equity derivative contracts under substantially the same terms and conditions with revised expiry dates to April 2017 (from April 2016).
See "Mark-to-market value" for more information about our equity derivatives.
Mark-to-market value
We record our derivatives using an estimated credit-adjusted, mark-to-market valuation, calculated in accordance with IFRS.
As at December 31, 2016
-----------------------
(In millions of dollars, except exchange rates) Notional Exchange Notional Fair value
amount rate amount (Cdn$)
(US$) (Cdn$)
=== ==== =====
Debt derivatives accounted for as cash flow hedges:
As assets 5,200 1.0401 5,409 1,751
As liabilities 1,500 1.3388 2,008 (68)
Short-term debt derivatives not accounted for as hedges:
As liabilities 150 1.3407 201 -
-------------- --- ------ --- ---
Net mark-to-market debt derivative asset 1,683
---------------------------------------- -----
Bond forwards accounted for as cash flow hedges:
As liabilities 900 (51)
Expenditure derivatives accounted for as cash flow hedges:
As assets 990 1.2967 1,284 40
As liabilities 300 1.4129 424 (21)
-------------- --- ------ --- ---
Net mark-to-market expenditure derivative asset 19
----------------------------------------------- ---
Equity derivatives not accounted for as hedges:
As assets 270 8
--------- --- ---
Net mark-to-market asset 1,659
======================== =====
As at December 31, 2015
-----------------------
(In millions of dollars, except exchange rates) Notional Exchange Notional Fair value
amount rate amount (Cdn$)
(US$) (Cdn$)
--- ---- -----
Debt derivatives accounted for as cash flow hedges:
As assets 5,900 1.0755 6,345 2,032
As liabilities 300 1.3367 401 (4)
-------------- --- ------ --- ---
Net mark-to-market debt derivative asset 2,028
---------------------------------------- -----
Bond forwards accounted for as cash flow hedges:
As liabilities - - 1,400 (91)
Expenditure derivatives accounted for as cash flow hedges:
As assets 1,140 1.2410 1,415 158
Equity derivatives not accounted for as hedges:
As liabilities - - 286 (15)
-------------- --- --- --- ---
Net mark-to-market asset 2,080
======================== =====
Adjusted net debt and adjusted net debt / adjusted operating profit
We use adjusted net debt and adjusted net debt / adjusted operating profit to conduct valuation-related analysis and make capital structure-related decisions. Adjusted net debt includes long-term debt, net debt derivative assets or liabilities, short-term borrowings, and cash and cash equivalents or bank advances.
As at As at
December 31
December 31
-----------
(In millions of dollars,
except ratios) 2016 2015
------------------------ ---- ----
Long-term debt (1) 16,197 16,981
Net debt derivative assets
valued without any
adjustment for credit risk (1,740) (2,180)
Short-term borrowings 800 800
Bank advances (cash and cash
equivalents) 71 (11)
---------------------------- --- ---
Adjusted net debt (2) 15,328 15,590
-------------------- ------ ------
Adjusted net debt /adjusted
operating profit 2,3 3.0 3.1
=========================== === ===
1 Includes current and long-term
portion of long-term debt before
deferred transaction costs and
discounts. See "Reconciliation of
adjusted net debt" in the section
"Non-GAAP Measures" for the
calculation of this amount.
2 Adjusted net debt and adjusted net
debt /adjusted operating profit
are non-GAAP measures and should
not be considered substitutes or
alternatives for GAAP measures.
These are not defined terms under
IFRS and do not have standard
meanings, so may not be a reliable
way to compare us to other
companies. See "Non-GAAP
Measures" for information about
these measures, including how we
calculate them.
3 Adjusted net debt /adjusted
operating profit is measured using
adjusted operating profit for the
last twelve consecutive months.
In addition to the cash and cash equivalents as at December 31, 2016 and December 31, 2015 noted above, we held $1,047 million of marketable securities in publicly traded companies (December 31, 2015 - $966 million).
Our adjusted net debt decreased by $0.3 billion from December 31, 2015 primarily as a result of a decrease in our outstanding long-term debt, partially offset by a reduction in the fair value of our net debt derivative asset.
Outstanding common shares
As at As at
December 31
December 31
-----------
2016 2015
---- ----
Common shares outstanding
1
Class A Voting 112,411,992 112,438,692
Class B Non-Voting 402,396,133 402,307,976
------------------ ----------- -----------
Total common shares 514,808,125 514,746,668
------------------- ----------- -----------
Options to purchase Class
B Non-Voting shares
Outstanding options 3,732,524 4,873,940
Outstanding options exercisable 1,770,784 2,457,005
=============================== ========= =========
1 Holders of our Class B Non-
Voting shares are entitled to
receive notice of and to
attend shareholder meetings;
however, they are not entitled
to vote at these meetings
except as required by law or
stipulated by stock exchanges.
If an offer is made to
purchase outstanding Class A
Voting shares, there is no
requirement under applicable
law or our constating
documents that an offer be
made for the outstanding Class
B Non-Voting shares, and
there is no other protection
available to shareholders
under our constating
documents. If an offer is made
to purchase both classes of
shares, the offer for the
Class A Voting shares may be
made on different terms than
the offer for the Class B Non-
Voting shares.
Accounting Changes
We adopted the following amendments to accounting standards that were effective for our interim and annual consolidated financial statements commencing January 1, 2016. These changes did not have a material impact on our financial results.
-- Amendments to IAS 16, Property, Plant and Equipment and IAS 38,
Intangible Assets
-- Amendments to IFRS 11, Joint Arrangements
In addition, following the November 2016 publication of the IFRS Interpretations Committee's agenda decision addressing the expected manner of recovery of intangible assets with indefinite useful lives for the purposes of measuring deferred tax, we have retrospectively changed our related accounting policy. The IFRS Interpretations Committee observed that in applying International Accounting Standard 12, an entity determines its expected manner of recovery of the carrying amount of the intangible asset with an indefinite useful life, and reflects the tax consequences that follow from that expected manner of recovery. Previously, we measured deferred taxes on temporary differences arising from the portion of indefinite-life intangible assets with no initial associated underlying tax basis using a capital gains tax rate based upon the notion that recovery would result solely from sales of the assets. Consequently, we have adopted an accounting policy to measure deferred taxes on temporary differences arising from indefinite-life intangible assets based upon the tax consequences that follow from the expected manner of recovery of the assets.
This accounting policy has been applied in preparing this earnings release as at and for the year ended December 31, 2016 and the comparative information presented as at and for the three and twelve months ended December 31, 2015. The adjustment to previously reported amounts as a result of the change in the accounting policy are stated below.
Adjustments to Consolidated Statements of Income for the year ended December 31, 2015
(In millions of dollars, except per share amounts) Previously reported Adjustments Amended for the year ended
for the year ended December 31, 2015
December 31, 2015
--- -----------------
Other (income) expense (32) 28 (4)
Income tax expense 466 11 477
Net income 1,381 (39) 1,342
Earnings per share
Basic $2.68 ($0.07) $2.61
Diluted $2.67 ($0.07) $2.60
======= ===== ====== =====
Adjustments to Consolidated Statements of Income for the quarter ended March 31, 2016
(In millions of dollars, except per share amounts) Previously reported Adjustments Amended for the quarter ended
for the quarter ended March 31, 2016
March 31, 2016
--- --------------
Income tax expense 61 18 79
Net income 248 (18) 230
Earnings per share
Basic $0.48 ($0.03) $0.45
Diluted $0.48 ($0.04) $0.44
======= ===== ====== =====
Adjustments to the Consolidated Statements of Financial Position as at January 1, 2015
(In millions of
dollars) Previously reported as at Adjustments Amended as at
January 1, 2015 January 1, 2015
--- --------------- ---------------
Goodwill 1 3,883 14 3,897
Total assets (1) 26,522 14 26,536
Deferred tax
liabilities 1,769 84 1,853
Shareholders' equity 5,481 (70) 5,411
Total liabilities
and shareholders'
equity 26,522 14 26,536
================== ====== === ======
(1) The adjustment relating
to total assets and
goodwill was recognized
entirely within our Media
reportable segment.
Adjustments to the Consolidated Statements of Financial Position as at December 31, 2015
(In millions of
dollars) Previously reported as at Adjustments as at Adjustments Amended as at
December 31, 2015 January 1, 2015 for the year ended December 31, 2015
December 31, 2015
--- -----------------
Goodwill 1 3,891 14 - 3,905
Total assets (1) 29,175 14 - 29,189
Deferred tax
liabilities 1,943 84 39 2,066
Shareholders'
equity 5,745 (70) (39) 5,636
Total liabilities
and
shareholders'
equity 29,175 14 - 29,189
================= ====== === === ======
(1) The adjustment relating
to total assets and
goodwill was recognized
entirely within our Media
reportable segment.
Key Performance Indicators
We measure the success of our strategy using a number of key performance indicators that are defined and discussed in our 2015 Annual MD&A and this earnings release. We believe these key performance indicators allow us to appropriately measure our performance against our operating strategy as well as against the results of our peers and competitors. The following key performance indicators are not measurements in accordance with IFRS and should not be considered an alternative to net income or any other measure of performance under IFRS. They include:
-- Subscriber counts;
-- Subscriber churn;
-- Postpaid average revenue per account (ARPA);
-- Blended average revenue per user (ARPU);
-- Capital intensity; and
-- Total service revenue.
Total service revenue
Commencing in the fourth quarter of 2016, we began disclosing total service revenue as one of our key performance indicators. We use total service revenue to measure our core business performance from the provision of services to our customers separate from revenue from the sale of equipment we have acquired from device manufacturers and resold. Included in this metric is our retail revenue from TSC and the Toronto Blue Jays, which are also core to our business. We calculate total service revenue by subtracting equipment revenue in Wireless, Cable, Business Solutions, and Corporate from total revenue.
Three months ended December Twelve months ended December
31 31
---------------------------- -----------------------------
(In millions of
dollars) 2016 2015 2016 2015
--------------- ---- ---- ---- ----
Total revenue 3,510 3,452 13,702 13,414
Deduct:
Wireless equipment revenue 200 234 658 749
Cable equipment revenue 1 2 6 8
Business Solutions
equipment revenue 2 1 6 4
Corporate equipment
revenue 1 1 5 4
-------------------- --- --- --- ---
Total service
revenue 3,306 3,214 13,027 12,649
============= ===== ===== ====== ======
Non-GAAP Measures
We use the following non-GAAP measures. These are reviewed regularly by management and our Board in assessing our performance and making decisions regarding the ongoing operations of our business and its ability to generate cash flows. Some or all of these measures may also be used by investors, lending institutions, and credit rating agencies as indicators of our operating performance, of our ability to incur and service debt, and as measurements to value companies in the telecommunications sector. These are not recognized measures under GAAP and do not have standard meanings under IFRS, so may not be reliable ways to compare us to other companies.
Most
Non-GAAP measure Why we use it How we calculate it comparable IFRS financial
measure
--- -------
Adjusted To evaluate the performance of
our businesses, Adjusted operating profit: Net income
and when making decisions about
the ongoing
operating profit operations of the business and
our ability to Net income
generate cash flows.
add (deduct)
income tax expense (recovery), other
expense
(income), finance costs,
restructuring, acquisition
Adjusted and other, depreciation and
amortization,
stock-based compensation, and
impairment of
operating profit assets and related onerous contract
charges.
margin
Adjusted operating profit margin:
Adjusted operating profit
divided by
revenue (service revenue for
Wireless).
--- -----------------------------
We believe that certain investors
and analysts
use adjusted operating profit to
measure our
ability to service debt and to
meet other
payment obligations.
We also use it as one component
in determining
short-term incentive
compensation for all
management employees.
--- ---------------------
Adjusted net To assess the performance of our
businesses Adjusted net income: Net income
before the effects of the noted
items, because
income they affect the comparability of
our financial Net income
results and could potentially
distort the analysis
of trends in business
performance. Excluding add (deduct) Basic and
these items does not imply that
they are
Adjusted basic non-recurring. stock-based compensation,
restructuring, diluted
acquisition and other, impairment of
assets
and diluted and related onerous contract
charges, loss (gain) earnings per
on sale or wind down of investments,
(gain) on
earnings per acquisitions, loss on non-
controlling interest share
purchase obligations, loss on
repayment of
share long-term debt, and income tax
adjustments
on these items, including
adjustments as a
result of legislative changes.
Adjusted basic and diluted earnings
per share:
Adjusted net income
divided by
basic and diluted weighted average
shares
outstanding.
--- ------------
Free cash flow To show how much cash we have
available to Adjusted operating profit Cash provided
repay debt and reinvest in our
company, which is
an important indicator of our
financial strength deduct by operating
and performance.
additions to property, plant and
equipment net activities
of proceeds on disposition, interest
on
borrowings net of capitalized
interest, and
cash income taxes.
--- ------------------
We believe that some investors
and analysts
use free cash flow to value a
business and its
underlying assets.
--- ------------------
Adjusted net To conduct valuation-related
analysis and make Total long-term debt Long-term debt
decisions about capital
structure.
debt add (deduct)
current portion of long-term debt,
deferred
transaction costs and discounts, net
debt
derivative (assets) liabilities,
credit risk
adjustment related to net debt
derivatives,
bank advances (cash and cash
equivalents),
and short-term borrowings.
--- --------------------------
We believe this helps investors
and analysts
analyze our enterprise and equity
value and
assess our leverage.
--- --------------------
Adjusted net To conduct valuation-related
analysis and make Adjusted net debt (defined above) Long-term debt
decisions about capital
structure.
debt / adjusted divided by divided by net
operating profit 12-month trailing adjusted operating
profit income
(defined above).
--- ----------------
We believe this helps investors
and analysts
analyze our enterprise and equity
value and
assess our leverage.
--- --------------------
Reconciliation of adjusted operating profit
Three months ended December Twelve months ended December
31 31
---------------------------- -----------------------------
(In millions of dollars) 2016 2015 2016 2015
----------------------- ---- ---- ---- ----
Net (loss) income (1) (9) 299 835 1,342
Add (deduct):
Income tax (recovery) expense (1) (5) 112 324 477
Other (income) expense (1) (4) 4 191 (4)
Finance costs 188 192 761 774
Restructuring, acquisition and
other 34 23 160 111
Depreciation and amortization 555 580 2,276 2,277
Impairment of assets and related
onerous contract charges 484 - 484 -
Stock-based compensation 16 16 61 55
------------------------ --- --- --- ---
Adjusted operating profit 1,259 1,226 5,092 5,032
========================= ===== ===== ===== =====
1 As a result of the IFRS
Interpretations Committee's
agenda decision relating to IAS
12 Income Taxes, certain amounts
have been retrospectively
amended. See "Accounting Changes"
for more information.
Reconciliation of adjusted operating profit margin
Three months ended December Twelve months ended December
31 31
---------------------------- -----------------------------
(In millions of
dollars, except
percentages) 2016 2015 2016 2015
---------------- ---- ---- ---- ----
Adjusted operating
profit margin:
Adjusted operating profit 1,259 1,226 5,092 5,032
Divided by: total revenue 3,510 3,452 13,702 13,414
------------------------- ----- ----- ------ ------
Adjusted operating
profit margin 35.9% 35.5% 37.2% 37.5%
================== ==== ==== ==== ====
Reconciliation of adjusted net income
Three months ended December Twelve months ended December
31 31
---------------------------- -----------------------------
(In millions of dollars) 2016 2015 2016 2015
----------------------- ---- ---- ---- ----
Net (loss) income (1) (9) 299 835 1,342
Add (deduct):
Stock-based compensation 16 16 61 55
Restructuring, acquisition and
other 34 23 160 111
Loss on repayment of long-term debt - - - 7
Net loss on divestitures pertaining
to investments - - 11 -
Gain on acquisition of Mobilicity
(1) - - - (74)
Loss on non-controlling interest
purchase obligation - - - 72
Loss on wind down of shomi - - 140 -
Impairment of assets and related
onerous contract charges 484 - 484 -
Income tax impact of above items (143) (7) (213) (40)
Income tax adjustment, legislative
tax change - - 3 6
----------------------------------- --- --- --- ---
Adjusted net income (1) 382 331 1,481 1,479
====================== === === ===== =====
1 As a result of the IFRS
Interpretations Committee's
agenda decision relating to IAS
12 Income Taxes, certain amounts
have been retrospectively
amended. See "Accounting Changes"
for more information.
Reconciliation of adjusted earnings per share
(In millions of dollars, except Three months ended December Twelve months ended December
per share amounts; number 31 31
of shares outstanding in
millions)
------------------------
2016 2015 2016 2015
---- ---- ---- ----
Adjusted basic earnings per
share:
Adjusted net
income (1) 382 331 1,481 1,479
Divided by:
Weighted average number of
shares outstanding 515 515 515 515
--------------------------- --- --- --- ---
Adjusted basic earnings per
share $0.74 $0.64 $2.88 $2.87
--------------------------- ----- ----- ----- -----
Adjusted diluted earnings per
share:
Adjusted net
income (1) 382 331 1,481 1,479
Divided by:
Diluted weighted average
number of shares outstanding 517 517 517 517
----------------------------- --- --- --- ---
Adjusted diluted earnings per
share (1) $0.74 $0.64 $2.86 $2.86
============================= ===== ===== ===== =====
1 As a result of the IFRS
Interpretations Committee's
agenda decision relating to IAS
12 Income Taxes, certain amounts
have been retrospectively
amended. See "Accounting Changes"
for more information.
Reconciliation of free cash flow
Three months ended December Twelve months ended December
31 31
---------------------------- -----------------------------
(In millions of dollars) 2016 2015 2016 2015
----------------------- ---- ---- ---- ----
Cash provided by operating
activities 1,053 950 3,957 3,747
Add (deduct):
Additions to property, plant and
equipment (604) (773) (2,352) (2,440)
Interest on borrowings, net of
capitalized interest (182) (185) (740) (732)
Restructuring, acquisition and
other 34 23 160 111
Interest paid 124 133 756 771
Change in non-cash working capital 18 187 (14) 302
Other adjustments (51) (61) (62) (83)
----------------- --- --- --- ---
Free cash flow 392 274 1,705 1,676
============== === === ===== =====
Reconciliation of adjusted net debt and adjusted net debt / adjusted operating profit
As at As at
December 31
December 31
-----------
(In millions of dollars) 2016 2015
----------------------- ---- ----
Current portion of long-
term debt 750 1,000
Long-term debt 15,330 15,870
Deferred transaction
costs and discounts 117 111
-------------------- --- ---
16,197 16,981
Add (deduct):
Net debt derivative assets (1,683) (2,028)
Credit risk adjustment related
to net debt derivative assets (57) (152)
Short-term borrowings 800 800
Bank advances (cash and cash
equivalents) 71 (11)
----------------------------- --- ---
Adjusted net debt 15,328 15,590
================= ====== ======
As at As at
December 31
December 31
-----------
(In millions of dollars,
except ratios) 2016 2015
------------------------ ---- ----
Adjusted net debt /
adjusted operating
profit
Adjusted net debt 15,328 15,590
Divided by: trailing 12-month
adjusted operating profit 5,092 5,032
------------------------------ ----- -----
Adjusted net debt /
adjusted operating
profit 3.0 3.1
=================== === ===
Other Information
Consolidated financial results - quarterly summary
The table below shows our consolidated results for the past eight quarters.
2016 2015
---- ----
(In millions of dollars,
except per share amounts) Full Year Q4 Q3 Q2 Q1 Full Year Q4 Q3 Q2 Q1
-------------------------- --------- --- --- --- --- --------- --- --- --- ---
Revenue
Wireless 7,916 2,058 2,037 1,931 1,890 7,651 1,981 1,973 1,903 1,794
Cable 3,449 858 865 870 856 3,465 855 871 869 870
Business Solutions 384 96 95 97 96 377 95 94 94 94
Media 2,146 550 533 615 448 2,079 560 473 582 464
Corporate items and intercompany
eliminations (193) (52) (38) (58) (45) (158) (39) (27) (45) (47)
--------------------------------- ---- --- --- --- --- ---- --- --- --- ---
Total revenue 13,702 3,510 3,492 3,455 3,245 13,414 3,452 3,384 3,403 3,175
------------- ------ ----- ----- ----- ----- ------ ----- ----- ----- -----
Adjusted operating profit
(loss)
Wireless 3,285 792 884 846 763 3,239 754 879 841 765
Cable 1,674 435 431 415 393 1,658 426 416 414 402
Business Solutions 123 30 31 31 31 116 30 31 27 28
Media 169 49 79 90 (49) 172 56 58 90 (32)
Corporate items and intercompany
eliminations (159) (47) (40) (35) (37) (153) (40) (39) (35) (39)
--------------------------------- ---- --- --- --- --- ---- --- --- --- ---
Adjusted operating profit
1 5,092 1,259 1,385 1,347 1,101 5,032 1,226 1,345 1,337 1,124
------------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Deduct (add):
Stock-based compensation 61 16 18 15 12 55 16 13 14 12
Depreciation and amortization 2,276 555 575 572 574 2,277 580 576 562 559
Impairment of assets and related
onerous contract charges 484 484 - - - - - - - -
Restructuring, acquisition and
other 160 34 55 27 44 111 23 37 42 9
Finance costs 761 188 188 189 196 774 192 190 182 210
Other expense (income) (2) 191 (4) 220 9 (34) (4) 4 (31) 26 (3)
------------------------- --- --- --- --- --- --- --- --- --- ---
Net income (loss) before
income tax expense
(recovery) (2) 1,159 (14) 329 535 309 1,819 411 560 511 337
Income tax expense (recovery) (2) 324 (5) 109 141 79 477 112 135 148 82
--------------------------------- --- --- --- --- --- --- --- --- --- ---
Net income (loss) (2) 835 (9) 220 394 230 1,342 299 425 363 255
-------------------- --- --- --- --- --- ----- --- --- --- ---
Earnings (loss) per share
(2):
Basic $1.62 ($0.02) $0.43 $0.77 $0.45 $2.61 $0.58 $0.83 $0.70 $0.50
Diluted $1.62 ($0.04) $0.43 $0.76 $0.44 $2.60 $0.58 $0.82 $0.70 $0.48
Net income (loss) (2) 835 (9) 220 394 230 1,342 299 425 363 255
Add (deduct):
Stock-based compensation 61 16 18 15 12 55 16 13 14 12
Restructuring, acquisition and
other 160 34 55 27 44 111 23 37 42 9
Gain on acquisition of Mobilicity
(2) - - - - - (74) - (74) - -
Loss on non-controlling interest
purchase obligation - - - - - 72 - 72 - -
Loss on repayment of long-term
debt - - - - - 7 - - - 7
Loss on wind down of shomi 140 - 140 - - - - - - -
Net loss (gain) on divestitures
pertaining to investments 11 - 50 - (39) - - - - -
Impairment of assets and related
onerous contract charges 484 484 - - - - - - - -
Income tax impact of above items
(2) (213) (143) (56) (9) (5) (40) (7) (12) (13) (8)
Income tax adjustment,
legislative tax change 3 - - - 3 6 - - 6 -
----------------------- --- --- --- --- --- --- --- --- --- ---
Adjusted net income 1,2 1,481 382 427 427 245 1,479 331 461 412 275
----------------------- ----- --- --- --- --- ----- --- --- --- ---
Adjusted earnings per
share 1,2:
Basic $2.88 $0.74 $0.83 $0.83 $0.48 $2.87 $0.64 $0.90 $0.80 $0.53
Diluted $2.86 $0.74 $0.83 $0.83 $0.47 $2.86 $0.64 $0.89 $0.80 $0.53
Additions to property,
plant and equipment 2,352 604 549 647 552 2,440 773 571 621 475
Cash provided by operating
activities 3,957 1,053 1,185 1,121 598 3,747 950 1,456 1,114 227
Free cash flow (1) 1,705 392 598 495 220 1,676 274 660 476 266
Total service revenue 3 13,027 3,306 3,328 3,308 3,085 12,649 3,214 3,183 3,204 3,048
======================= ====== ===== ===== ===== ===== ====== ===== ===== ===== =====
1 Adjusted operating profit,
adjusted net income, adjusted
basic and diluted earnings per
share, and free cash flow are
non-GAAP measures and should not
be considered substitutes or
alternatives for GAAP measures.
These are not defined terms under
IFRS and do not have standard
meanings, so may not be a
reliable way to compare us to
other companies. See "Non-GAAP
Measures" for information about
these measures, including how we
calculate them.
2 As a result of the IFRS
Interpretations Committee's
agenda decision relating to IAS
12 Income Taxes, certain amounts
have been retrospectively
amended. See "Accounting Changes"
for more information.
3 As defined. See "Key Performance
Indicators".
Supplementary Information
Rogers Communications Inc.
Interim Condensed Consolidated Statements of Income
(In millions of Canadian dollars, except per share amounts, unaudited)
Three months ended Twelve months ended
December 31 December 31
----------- -----------
2016 2015 2016 2015
---- ---- ---- ----
Revenue 3,510 3,452 13,702 13,414
Operating expenses:
Operating costs 2,267 2,242 8,671 8,437
Depreciation and amortization 555 580 2,276 2,277
Impairment of assets and related 484 - 484 -
onerous contract charges
Restructuring, acquisition and
other 34 23 160 111
Finance costs 188 192 761 774
Other (income) expense (1) (4) 4 191 (4)
------------------------- --- --- --- ---
(Loss) income before income
tax (recovery) expense (1) (14) 411 1,159 1,819
Income tax (recovery) expense
(1) (5) 112 324 477
----------------------------- --- --- --- ---
Net (loss) income (1) (9) 299 835 1,342
-------------------- --- --- --- -----
(Loss) earnings per share (1):
Basic ($0.02) $0.58 $1.62 $2.61
Diluted ($0.04) $0.58 $1.62 $2.60
======= ====== ===== ===== =====
1 As a result of the IFRS
Interpretations Committee's
agenda decision relating to IAS
12 Income Taxes, certain amounts
have been retrospectively
amended. See "Accounting Changes"
for more information.
Rogers Communications Inc.
Interim Condensed Consolidated Statements of Financial Position
(In millions of Canadian dollars, unaudited)
As at As at
December 31 December 31
----------- -----------
2016 2015
---- ----
Assets
Current assets:
Cash and cash equivalents - 11
Accounts receivable 1,949 1,792
Inventories 315 318
Other current assets 215 303
Current portion of derivative
instruments 91 198
------------------------------ --- ---
Total current assets 2,570 2,622
Property, plant and equipment 10,749 10,997
Intangible assets 7,130 7,243
Investments 2,174 2,271
Derivative instruments 1,708 1,992
Other long-term assets 98 150
Deferred tax assets 8 9
Goodwill (1) 3,905 3,905
----------- ----- -----
Total assets (1) 28,342 29,189
--------------- ------ ------
Liabilities and shareholders' equity
Current liabilities:
Bank advances 71 -
Short-term borrowings 800 800
Accounts payable and accrued
liabilities 2,783 2,708
Income tax payable 186 96
Current portion of provisions 134 10
Unearned revenue 367 388
Current portion of long-term
debt 750 1,000
Current portion of derivative
instruments 22 15
------------------------------ --- ---
Total current liabilities 5,113 5,017
Provisions 33 50
Long-term debt 15,330 15,870
Derivative instruments 118 95
Other long-term liabilities 562 455
Deferred tax liabilities (1) 1,917 2,066
--------------------------- ----- -----
Total liabilities (1) 23,073 23,553
Shareholders' equity (1) 5,269 5,636
----------------------- ----- -----
Total liabilities and shareholders'
equity (1) 28,342 29,189
=================================== ====== ======
1 As a result of the IFRS
Interpretations Committee's
agenda decision relating to IAS
12 Income Taxes, certain amounts
have been retrospectively
amended. See "Accounting Changes"
for more information.
Rogers Communications Inc.
Interim Condensed Consolidated Statements of Cash Flows
(In millions of Canadian dollars, unaudited)
Three months ended December Twelve months ended December
31 31
---------------------------- -----------------------------
2016 2015 2016 2015
---- ---- ---- ----
Operating activities:
Net (loss) income
for the period
(1) (9) 299 835 1,342
Adjustments to
reconcile net
(loss) income to
cash provided by
operating
activities:
Depreciation and amortization 555 580 2,276 2,277
Program rights amortization 17 21 71 87
Finance costs 188 192 761 774
Income tax (recovery) expense (1) (5) 112 324 477
Stock-based compensation 16 16 61 55
Post-employment benefits
contributions, net of expense 28 31 (3) (16)
Net loss on divestitures pertaining
to investments - - 11 -
Loss on wind down of shomi - - 140 -
Impairment of assets and related
onerous contract charges 484 - 484 -
Gain on acquisition of Mobilicity
(1) - - - (74)
Other 2 13 34 82
----- --- --- --- ---
Cash provided by
operating
activities before
changes in non-
cash 1,276 1,264 4,994 5,004
working capital
items, income
taxes paid, and
interest paid
Change in non-
cash operating
working capital
items (18) (187) 14 (302)
--------------- --- ---- --- ----
Cash provided by
operating
activities before
income taxes paid 1,258 1,077 5,008 4,702
and interest paid
Income taxes
(paid) received (81) 6 (295) (184)
Interest paid (124) (133) (756) (771)
------------- ---- ---- ---- ----
Cash provided by operating activities 1,053 950 3,957 3,747
------------------------------------- ----- --- ----- -----
Investing activities:
Additions to
property, plant
and equipment (604) (773) (2,352) (2,440)
Additions to
program rights (3) (27) (46) (64)
Changes in non-
cash working
capital related
to property,
plant and 44 167 (103) (116)
equipment and
intangible assets
Acquisitions and
other strategic
transactions, net
of cash acquired - (5) - (1,077)
Other 49 (32) 45 (70)
----- --- --- --- ---
Cash used in investing activities (514) (670) (2,456) (3,767)
--------------------------------- ---- ---- ------ ------
Financing activities:
Net repayment on
short-term
borrowings (250) (59) - (42)
Net (repayment)
issuance of long-
term debt (57) 82 (538) 754
Net (payment)
proceeds on
settlement of
debt derivatives
and (28) (25) (45) 129
forward contracts
Transaction costs
incurred (17) (9) (17) (9)
Dividends paid (247) (247) (988) (977)
Other - - 5 -
----- --- --- --- ---
Cash used in financing activities (599) (258) (1,583) (145)
--------------------------------- ---- ---- ------ ----
Change in cash and cash equivalents (60) 22 (82) (165)
(Bank advances) cash and cash
equivalents, beginning of period (11) (11) 11 176
--------------------------------- --- --- --- ---
(Bank advances) cash and cash
equivalents, end of period (71) 11 (71) 11
============================= === === === ===
1 As a result of the IFRS
Interpretations Committee's
agenda decision relating to IAS
12 Income Taxes, certain amounts
have been retrospectively
amended. See "Accounting Changes"
for more information.
Investments
As at As at
December 31
December 31
-----------
(In millions of
dollars) 2016 2015
--------------- ---- ----
Investments in:
Publicly traded companies 1,047 966
Private companies 169 212
----------------- --- ---
Investments,
available-for-sale 1,216 1,178
Investments,
associates and joint
ventures 958 1,093
--------------------- --- -----
Total investments 2,174 2,271
================= ===== =====
Long-Term Debt
Principal Interest As at As at
December 31 December 31
amount rate
------ ----
(In millions
of dollars,
except
interest
rates) Due date 2016 2015
------------ -------- ---- ----
Bank credit
facilities Floating 100 500
Bank credit
facilities US 150 Floating 201 -
Senior notes 2016 1,000 5.800% - 1,000
Senior notes 2017 500 3.000% 500 500
Senior notes 2017 250 Floating 250 250
Senior notes 2018 US 1,400 6.800% 1,880 1,938
Senior notes 2019 400 2.800% 400 400
Senior notes 2019 500 5.380% 500 500
Senior notes 2020 900 4.700% 900 900
Senior notes 2021 1,450 5.340% 1,450 1,450
Senior notes 2022 600 4.000% 600 600
Senior notes 2023 US 500 3.000% 671 692
Senior notes 2023 US 850 4.100% 1,141 1,176
Senior notes 2024 600 4.000% 600 600
Senior notes 2025 US 700 3.625% 940 969
Senior notes 2026 US 500 2.900% 671 -
Senior
debentures
(1) 2032 US 200 8.750% 269 277
Senior notes 2038 US 350 7.500% 470 484
Senior notes 2039 500 6.680% 500 500
Senior notes 2040 800 6.110% 800 800
Senior notes 2041 400 6.560% 400 400
Senior notes 2043 US 500 4.500% 671 692
Senior notes 2043 US 650 5.450% 873 900
Senior notes 2044 US 1,050 5.000% 1,410 1,453
------------ ---- --- ----- ----- ----- -----
16,197 16,981
Deferred
transaction
costs and
discounts (117) (111)
Less current
portion (750) (1,000)
------------ ---- ------
Total long-
term debt 15,330 15,870
=========== ====== ======
1 Senior debentures originally issued by
Rogers Cable Inc. which are unsecured
obligations of RCI and for which RCCI
was an unsecured guarantor as at
December 31, 2016 and for which
Rogers Communications Partnership was
an unsecured guarantor as at December
31, 2015.
About Forward-Looking Information
This earnings release includes "forward-looking information" and "forward-looking statements" within the meaning of applicable securities laws (collectively, "forward-looking information"), and assumptions about, among other things, our business, operations, and financial performance and condition approved by our management on the date of this earnings release. This forward-looking information and these assumptions include, but are not limited to, statements about our objectives and strategies to achieve those objectives, and about our beliefs, plans, expectations, anticipations, estimates, or intentions.
Forward-looking information
-- typically includes words like could, expect, may, anticipate, assume,
believe, intend, estimate, plan, project, guidance, outlook, target, and
similar expressions, although not all forward-looking information
includes them;
-- includes conclusions, forecasts, and projections that are based on our
current objectives and strategies and on estimates, expectations,
assumptions, and other factors, most of which are confidential and
proprietary and that we believe to have been reasonable at the time they
were applied but may prove to be incorrect; and
-- was approved by our management on the date of this earnings release.
Our forward-looking information includes forecasts and projections related to the following items, some of which are non-GAAP measures (see "Non-GAAP Measures"), among others:
-- revenue;
-- adjusted operating profit;
-- additions to property, plant and equipment;
-- cash income tax payments;
-- free cash flow;
-- dividend payments;
-- the growth of new products and services;
-- expected growth in subscribers and the services to which they subscribe;
-- the cost of acquiring and retaining subscribers and deployment of new
services;
-- continued cost reductions and efficiency improvements; and
-- all other statements that are not historical facts.
Specific forward-looking information included or incorporated in this document include, but is not limited to, our information and statements under "2017 Outlook" relating to our 2017 consolidated guidance on revenue, adjusted operating profit, additions to property, plant and equipment, and free cash flow. All other statements that are not historical facts are forward-looking statements.
We base our conclusions, forecasts, and projections on the following factors, among others:
-- general economic and industry growth rates;
-- currency exchange rates and interest rates;
-- product pricing levels and competitive intensity;
-- subscriber growth;
-- pricing, usage, and churn rates;
-- changes in government regulation;
-- technology deployment;
-- availability of devices;
-- timing of new product launches;
-- content and equipment costs;
-- the integration of acquisitions; and
-- industry structure and stability.
Except as otherwise indicated, this earnings release and our forward-looking information do not reflect the potential impact of any non-recurring or other special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations, or other transactions that may be considered or announced or may occur after the date on which the statement containing the forward-looking information is made.
Risks and uncertainties
Actual events and results can be substantially different from what is expressed or implied by forward-looking information as a result of risks, uncertainties, and other factors, many of which are beyond our control, including, but not limited to:
-- regulatory changes;
-- economic conditions;
-- unanticipated changes in content or equipment costs;
-- changing conditions in the entertainment, information, and
communications industries;
-- the integration of acquisitions;
-- litigation and tax matters;
-- technological changes;
-- the level of competitive intensity;
-- the emergence of new opportunities; and
-- new interpretations and new accounting standards from accounting
standards bodies.
These factors can also affect our objectives, strategies, and intentions. Many of these factors are beyond our control or our current expectations or knowledge. Should one or more of these risks, uncertainties, or other factors materialize, our objectives, strategies, or intentions change, or any other factors or assumptions underlying the forward-looking information prove incorrect, our actual results and our plans could vary significantly from what we currently foresee.
Accordingly, we warn investors to exercise caution when considering statements containing forward-looking information and caution them that it would be unreasonable to rely on such statements as creating legal rights regarding our future results or plans. We are under no obligation (and we expressly disclaim any such obligation) to update or alter any statements containing forward-looking information or the factors or assumptions underlying them, whether as a result of new information, future events, or otherwise, except as required by law. All of the forward-looking information in this earnings release is qualified by the cautionary statements herein.
Key assumptions underlying our 2017 guidance
Our 2017 guidance ranges under "2017 Outlook" are based on many assumptions including, but not limited to, the following material assumptions:
-- continued intense competition consistent with our experience during the
full-year 2016 in all segments in which we operate;
-- a substantial portion of our US dollar-denominated expenditures for 2017
is hedged at an average exchange rate of $1.33/US$;
-- key interest rates remain relatively stable throughout 2017;
-- no significant additional regulatory developments, shifts in economic
condition, or macro changes in the competitive environment affecting our
business activities. We note that regulatory decisions expected during
2017 could materially alter underlying assumptions around our 2017
Wireless, Cable, Business Solutions, and/or Media results in the current
and future years, the impacts of which are currently unknown and not
factored into our guidance;
-- the CRTC decision to require distributors to offer a basic entry-level
television package capped at $25 per month, as well as channels above
the basic tier on an "a la carte" basis and in smaller, reasonably
priced packages, is not expected to materially impact our Cable revenue;
-- the CRTC decision to significantly reduce interim rates for the capacity
charge tariff component of wholesale high-speed access service pending
approval of final rates is expected to have an impact on our Cable
revenue;
-- Wireless customers will continue to adopt, and upgrade to, higher-value
smartphones and a similar proportion of customers will remain on term
contracts;
-- overall wireless market penetration in Canada is expected to grow in
2017 at a similar rate as in 2016;
-- our relative market share in Wireless and Cable will not be negatively
impacted;
-- continued subscriber growth in Wireless and Cable Internet; moderating
net losses in Cable Television subscribers; and a relatively stable
Phone subscriber base;
-- in Business Solutions, continued declines in our legacy and off-net
business, and the continued execution of our plan to grow higher-margin
next generation IP- and cloud-based services;
-- in Media, continued growth in Sportsnet and declines in our traditional
media businesses, including our print publishing offerings; and
-- with respect to additions to property, plant and equipment:
-- we have rolled out LTE across the majority of our coverage area as well
as deployed newly-acquired 700 MHz and AWS-1 spectrum; and
-- we will make expenditures to prepare our network for our anticipated
rollout of the Comcast X1 IPTV platform in early 2018.
Before making an investment decision
Before making any investment decisions and for a detailed discussion of the risks, uncertainties, and environment associated with our business, fully review the sections in our 2015 Annual MD&A entitled "Regulation in Our Industry" and "Governance and Risk Management", as well as our various other filings with Canadian and US securities regulators, which can be found at sedar.com and sec.gov, respectively. Information on or connected to our website is not part of or incorporated into this earnings release.
SOURCE Rogers Communications Canada Inc. - English
