Rogers Communications Reports First Quarter 2013 Results
Revenues Up 3% with Continued Growth at Wireless and Cable; Adjusted Operating Profit Grows 8% and Diluted Earnings Per Share Up 18% Reflecting Top Line Growth and Continued Efficiency Improvements
TORONTO - Rogers Communications Inc., announced its unaudited consolidated financial and operating results for the first quarter ended March 31, 2013, in accordance with International Financial Reporting Standards ("IFRS").
"The record first quarter levels of both revenue and adjusted operating profit which Rogers reported represents a solid start to 2013," said Nadir Mohamed, President and Chief Executive Officer of Rogers Communications Inc. "The positive operating trends which we achieved during 2012 are carrying into the new year as evidenced by the continued improvements in ARPU, data and Internet revenue, churn and margin profiles which we reported for the first quarter of 2013. This balanced growth across subscribers, revenue, margins and earnings reflects the combination of our superior asset mix, innovative product offerings, and successful ongoing efficiency gains, further supporting the 10% dividend increase we announced earlier in the quarter."
Highlights of the first quarter of 2013 include the following:
Top Line Growth Continued
Consolidated revenue growth of 3% was driven by Wireless network revenue growth of 4% and Cable revenue growth of 4%, partially offset by declines at Media, compared to the same quarter last year.
Wireless data revenue grew by 22% which helped drive a 3.5% increase in blended ARPU. Wireless data revenue now comprises 45% of Wireless network revenue. Wireless activated and upgraded 673,000 smartphones, of which approximately 33% were for subscribers new to Wireless. This resulted in subscribers with smartphones now representing 71% of the overall postpaid subscribers. Wireless also recorded a continued reduction in postpaid churn.
Continued Cost Efficiency Gains Drive Profit Growth and Margin Expansion
Consolidated adjusted operating profit increased year over year by 8%, primarily driven by a 4% increase at Wireless, 13% increase at Cable, and 28% increase at RBS.
Consolidated margins of 38.9% were up 170 basis points year over year, supported by strong adjusted operating profit margins of 45.5% and 49.8% at Wireless and Cable, respectively, reflecting revenue growth combined with solid execution on our cost management objectives. Adjusted net income improved 15% from the same quarter last year and adjusted diluted earnings per share of $0.80 were up 18%.
Continued to Enhance our Leading Networks to Monetize Rapid Data Growth
Continued to expand Canada's first and fastest wireless Long Term Evolution ("LTE") 4G broadband network that now covers approximately 60% of the Canadian population, while continuing to offer the largest selection of LTE devices of any carrier in Canada. LTE is a next generation wireless technology that enables unparalleled connectivity, capable of speeds that are between three and four times faster than HSPA+ with peak potential download rates of up to 150 Megabits per second.
Announced agreements with Shaw Communications ("Shaw") securing an option to purchase Shaw's Advanced Wireless Service ("AWS") spectrum holdings in 2014, and to acquire Shaw's cable system in Hamilton, Ontario, while Shaw will acquire Rogers' one-third interest in specialty channel TVtropolis. We recently received regulatory approval on the purchase of Shaw's cable system and other transactions are pending regulatory approval.
Rogers became the first carrier in North America and one of the first in the world to offer international LTE roaming to customers. In partnership with one of Hong Kong's leading mobile service providers, Rogers has launched LTE roaming for its customers travelling to Hong Kong. Rogers will be launching LTE roaming in a number of additional countries throughout 2013.
Customer Experience Further Enriched
Announced the certification of mobile payment service suretap for the Android and BlackBerry 10 operating systems. Rogers suretap service enables smartphones to securely perform electronic payments and is accepted at tens of thousands of contactless terminals across Canada.
Together with our machine-to-machine ("M2M") global alliance partners, Rogers demonstrated a single worldwide SIM card via a web-based platform designed to simplify multinational M2M solutions for global customers. Comprised of eight leading mobile operators, the alliance is bringing technology to market that will simplify the process of global M2M deployments and eliminate complexity for multinational companies with worldwide deployments of connected devices.
Launched Rogers Smart Home Monitoring, an innovative, robust home security and home automation control system, to residents of Ontario's Golden Horseshoe and in Atlantic Canada. Rogers Smart Home Monitoring allows customers to easily control and automate their home security, lights, cameras, thermostats and appliances, and to remotely monitor their home through their smartphone, tablet device or computer.
Media Focus on Sports and Local Content
Media and the Buffalo Bills announced a renewed five-year partnership that will continue to deliver a first-class sports experience to Canadian NFL fans. The agreement, which begins in 2013 and runs through 2017, will see the Buffalo Bills play a total of six games in Toronto, further underscoring Rogers' commitment to producing and delivering premium sports content and experiences for fans.
Sportsnet announced a 10-year partnership extension with the Vancouver Canucks through the 2022/2023 NHL season, continuing a 14-year network tradition as the regional television broadcaster of Canucks hockey. The new agreement features a comprehensive suite of multimedia rights including television, online and mobile, delivering up to 60 regular season Vancouver Canucks games each season. Sportsnet is also the official regional television broadcast rights holder for the Toronto Maple Leafs, Calgary Flames, Edmonton Oilers, and Ottawa Senators.
Completed the purchase of the CJNT-TV Montreal ("Metro14 Montreal") and re-launched the station as City Montreal in this key Quebec market. The purchase of this broadcast license, along with other acquisitions and agreements put in place during 2012, has increased City's reach by more than 20% to over 80% of Canadian households.
Balance Sheet Strength Further Reinforced with Continued Healthy Cash Flow Generation, Increased Liquidity and Lower Cost of Borrowing
Generated $543 million of consolidated pre-tax free cash flow in the quarter, an increase of 11% compared to the first quarter of 2012, reflecting increased adjusted operating profit, which was partially offset by an increased level of PP&E expenditures. Pre-tax free cash flow per share increased by 14% over the same period last year.
Issued U.S.$1.0 billion of investment grade debt securities consisting of U.S.$500 million of 3.0% Senior Notes due 2023 and U.S.$500 million of 4.5% Senior Notes due 2043. The net proceeds from the issuance of the debt securities were approximately U.S.$985 million (Cdn. $1,015 million) which is expected to be used for general corporate purposes.
Rogers has reduced its overall average cost of debt capital to 5.77% at March 31, 2013 from 6.12% at March 31, 2012.
Cash Returned to Shareholders Grows with Announcement of Further Dividend Increase
Increased our annualized dividend rate by 10% to $1.74 per share in February 2013, and immediately declared a quarterly dividend of $0.435 a share on each of our outstanding shares at the new, higher rate. In addition, Rogers announced a share buyback authorization of up to $500 million of Rogers' Class B Non-Voting shares over the coming year.
Announcement of CEO Succession
Announced that President and Chief Executive Officer, Nadir Mohamed, has decided to retire in January 2014. He will continue to lead the company during 2013 and work with Rogers' Board of Directors to ensure a seamless and orderly transition. The Board has appointed a search committee, retained an executive search firm and begun an international search for a successor to Mr. Mohamed.
This earnings release, which is current as of April 22, 2013, is a summary of our first quarter 2013 results, and should be read in conjunction with our first quarter 2013 MD&A and our first quarter 2013 Unaudited Interim Condensed Consolidated Financial Statements and Notes thereto, our 2012 Annual MD&A and our 2012 Audited Annual Consolidated Financial Statements and Notes thereto, and our other recent filings with securities regulatory authorities which are available on SEDAR at sedar.com or EDGAR at sec.gov.
The financial information presented herein has been prepared on the basis of IFRS for interim financial statements and is expressed in Canadian dollars unless otherwise stated.
As this earnings release includes forward-looking statements and assumptions, readers should carefully review the section of this earnings release entitled "Caution Regarding Forward-Looking Statements, Risks and Assumptions".
In this earnings release, the terms "we", "us", "our", "Rogers", "Rogers Communications" and "the Company" refer to Rogers Communications Inc. and our subsidiaries: Wireless, Cable, Business Solutions ("RBS") and Media.