Rogers Reports Second Quarter 2012 Financial and Operating Results

Second Quarter Revenue Grows to $3,106 Million, Adjusted Operating Profit Increases 3% to $1,276 Million, Adjusted Diluted EPS up 7%; Pre-Tax Free Cash Flow up 16% to $656 Million;

Postpaid Wireless Net Subscriber Additions of 87,000 and Network Margins of 48.2% Reflect Improved Postpaid Churn, Stabilizing Trend in Postpaid ARPU and Continued Realization of Cost Efficiencies;

Cable Total Service Units Down 4,000 in Seasonally Slow and Highly Competitive Quarter, While Margins of 47.8% Reflect Continued Revenue Growth and Successful Cost Management;

Media Revenue Growth of 1% Reflects Strong Growth in Sports Broadcasting and Entertainment Offset by Continued Softness in the Ad Market;

Cash Returned to Shareholders up 186% Including $557 Million of Dividends and Share Buybacks

TORONTO, July 24, 2012 /CNW/ - Rogers Communications Inc., one of Canada's leading diversified communications and media companies, today announced its unaudited consolidated financial and operating results for the three months and six months ended June 30, 2012, in accordance with International Financial Reporting Standards ("IFRS").

Financial highlights from continuing operations are as follows(1):

                                                   
            Three months ended June 30,     Six months ended June 30,
(In millions of dollars, except per share amounts)             2012       2011     % Chg       2012       2011     % Chg
                                                   
Operating revenue           $ 3,106     $ 3,097                 -     $ 6,049     $ 6,060                 -
Adjusted operating profit                  1,276            1,244                 3            2,370            2,411               (2)
Adjusted net income from continuing operations                     478               469                 2               838               897               (7)
Adjusted earnings per share           $ 0.92     $ 0.86                 7     $ 1.60     $ 1.63               (2)
Adjusted diluted earnings per share           $ 0.91     $ 0.85                 7     $ 1.59     $ 1.62               (2)

(1) This summary of our second quarter 2012 results should be read in conjunction with our Second Quarter 2012 MD&A, our Second Quarter 2012 Unaudited Interim Condensed Consolidated Financial Statements and Notes thereto, and our 2011 Annual Report all of which are incorporated by reference in this news release. The financial information presented herein has been prepared on the basis of International Financial Reporting Standards ("IFRS") for interim financial statements and is expressed in Canadian dollars.

"Our revenue and adjusted operating profit growth in the second quarter was highlighted by strong postpaid wireless smartphone sales and customer retention metrics, as well as exceptionally strong margins in both our wireless and cable businesses," said Nadir Mohamed, President and Chief Executive Officer of Rogers Communications Inc. "Despite highly competitive markets, we continued to leverage our technology leadership to deliver new and innovative products and services while at the same time taking decisive actions to drive operational efficiencies. Importantly, our continued generation of strong free cash flow enabled us to return a significant and growing amount of cash to our shareholders in the form of dividends and share buybacks."

Highlights of the second quarter of 2012 include the following: 

  • Consolidated quarterly revenue was up modestly, with Wireless network revenue growth of 1%, Cable Operations revenue growth of 1%, and Media revenue growth of 1%, offset by declines in RBS and Wireless equipment sales, versus the same quarter last year. Consolidated adjusted operating profit increased by 3% with a 5% increase at Wireless and a 2% increase at Cable Operations partially offset by a 13% decrease at Media.

  • Driven by strong 48% adjusted operating profit margins at both Wireless and Cable Operations, consolidated margins of 41% were up 90 basis points from the same period last year and up 390 basis points on a sequential basis from the first quarter 2012. Adjusted net income improved 2% from the same quarter last year, while adjusted diluted earnings per share of 91 cents were up 6 cents or 7% year over year.

  • Generated $656 million of consolidated pre-tax free cash flow in the quarter, defined as adjusted operating profit less PP&E expenditures and interest on long-term debt (net of capitalization), an increase of 16% compared to the second quarter of 2011 and reflecting the 3% increase in adjusted operating profit combined with a 12% decrease in the level of PP&E expenditures. Pre-tax free cash flow per share increased by 22% over the same period reflecting accretion from share buybacks which have decreased the base of outstanding shares.

  • Wireless data revenue grew by 13% and net postpaid subscriber additions totalled 87,000, helping drive wireless data revenue to now comprise 39% of Wireless network revenue compared to 35% in the same quarter last year. During the second quarter, Wireless activated 629,000 smartphones, of which approximately 36% were for subscribers new to Wireless. This resulted in subscribers with smartphones, who typically generate ARPU nearly twice that of voice only subscribers, representing 63% of the overall postpaid subscriber base as at June 30, 2012, up from 48% as at June 30, 2011.

  • Expanded Canada's first and largest Long Term Evolution ("LTE") 4G broadband wireless network to more Canadian cities including Calgary, Halifax and St. John's offering speeds that are between three and four times faster than previous technologies.  Rogers LTE network now reaches close to 35 percent of the Canadian population and its reach will increase to nearly 60 percent of the Canadian population by the end of the year.  Rogers currently offers the largest selection of LTE devices of any carrier in Canada.  In 2011, Rogers was first to launch LTE in Canada in Ottawa followed by Toronto, Montreal, Vancouver and surrounding areas.

  • Announced together with CIBC the launch of Canada's first mobile payment solution that allows Canadians to pay for purchases with their CIBC credit card at the checkout counter using an enabled Rogers smartphone at businesses across the country where contactless credit card payments are already accepted. Rogers has been at the forefront of laying the foundation and developing the ecosystem to allow mobile commerce to flourish and this is one of the first solutions of its kind anywhere in the world.

  • Introduced the new Rogers "FLEXtab" wireless hardware upgrade program giving customers even more flexibility to opt for an early wireless device upgrade by paying a prorated portion of the subsidy at any point after one month during their contract term.

  • Rogers announced an alliance with Axeda Corporation that will accelerate the deployment and reduce the complexity around the development of machine-to-machine ("M2M") solutions in Canada by providing businesses and developers access to the Axeda Platform to build and deploy enterprise M2M applications.  Rogers also announced the formation of an alliance with international mobile operators KPN, NTT Docomo, SingTel, Telefónica, Telstra and Vimpelcom to cooperate on global M2M business initiatives supporting a single, global platform that multinational customers can leverage to enable connected devices in multiple countries to better manage operations and reduce costs. Rogers is Canada's M2M leader, committed to providing the enterprise tools and platforms that enable rapid delivery of next-generation M2M connectivity cross various industries and market segments.

  • Rogers Business Solutions announced the availability of SIP Trunking, a new IP-based voice solution for enterprises designed to complement its fibre-based Internet and WAN connectivity services.  By merging voice services with a business's data network, SIP Trunking solutions dynamically allocate bandwidth as needed to support voice and/or data needs depending upon capacity requirements during peak hours, and also provides a platform for next gen IP-based video, mobile and productivity applications and services.

  • Rogers Media launched Citytv Saskatchewan following its acquisition of Saskatchewan Communications Network, marking the first step in Citytv's recent geographic expansion towards a national footprint. Once regulatory approval for Media's pending acquisition of Métro14 Montréal is received, it will enable the further expansion of Citytv into the key Quebec market. Media also announced that Citytv and Jim Pattison Broadcast Group signed long-term affiliate agreements that will deliver Citytv programming to audiences on all three of Pattison's television stations in Western Canada. With these acquisitions and agreements, Citytv's reach will increase by more than 20% to over 80% of Canadian households.

  • Made significant progress towards the completion of Rogers' 37.5% investment in Maple Leaf Sports & Entertainment ("MLSE") having gained the necessary sports league and Competition Bureau clearances. This investment in MLSE advances Rogers' strategy to deliver highly sought-after content anywhere, anytime, on any platform across its broadband and wireless networks and its media assets, while strengthening the value of its Sportsnet brand. Pending approval by the CRTC, the transaction is currently expected to close during the third quarter of 2012.

  • Issued $1.1 billion of debt securities at among the lowest coupon rates ever attained in the Canadian market for similar terms. The offering consisted of $500 million of 3.0% Senior Notes due 2017 and $600 million of 4.0% Senior Notes due 2022.  The net proceeds from the offering were used to repay amounts outstanding under Rogers' bank credit facility and for general corporate purposes which may include, among other things, funding all or a portion of Rogers' investment in a 37.5% ownership interest in MLSE.

  • Repurchased 9.6 million RCI Class B Non-Voting shares during the quarter for $350 million under our $1.0 billion share buyback authorization, and paid dividends on our common shares of $207 million, in total returning $557 million of cash to shareholders, a $362 million increase from second quarter of 2011.

This earnings release, which is current as of July 23, 2012, is a summary of our second quarter 2012 results, and should be read in conjunction with our Second Quarter 2012 MD&A and our Second Quarter 2012 Unaudited Interim Condensed Consolidated Financial Statements and Notes thereto, our 2011 Annual MD&A and our 2011 Audited Annual Consolidated Financial Statements and notes thereto, and our other recent filings with securities regulatory authorities available on SEDAR at sedar.com.

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.

During the quarter, we completed the closure of our Video operations. As a result, the Cable segment no longer includes the results of our Video business and the results of that business are now treated as discontinued operations for accounting and reporting purposes. Current and prior period results of the Cable segment, presented below, have been restated to reflect this change. The Cable segment currently includes Cable Operations and Rogers Business Solutions and previously included the Video segment as well.

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" and "the Company" refer to Rogers Communications Inc. and our subsidiaries, "Wireless", "Cable" and "Media".

SUMMARIZED CONSOLIDATED FINANCIAL RESULTS

                                               
        Three months ended June 30,     Six months ended June 30,
(In millions of dollars, except per share amounts)         2012       2011     % Chg       2012       2011     % Chg
                                               
Operating revenue                                              
  Wireless       $ 1,765     $ 1,759             -     $ 3,471     $ 3,480                  -
  Cable                                              
    Cable Operations                 843               832                 1            1,668            1,645                 1
    RBS                   90               100     (10)               177               216     (18)
                  933               932              -            1,845            1,861         (1)
  Media                 440               437                 1               794               776                 2
  Corporate items and eliminations          (32)       (31)                 3                (61)        (57)                 7
Total operating revenue              3,106            3,097              -            6,049            6,060                  -
                                               
Adjusted operating profit (loss)                                              
  Wireless                 796               761                 5            1,533            1,551        (1)
  Cable                                              
    Cable Operations                 403               397                 2               781               779                  -
    RBS                   22                 21                 5                 40                 47     (15)
                  425               418                 2               821               826                (1)
  Media                   79                 91       (13)                 65                 81      (20)
  Corporate items and eliminations          (24)       (26)                 8         (49)        (47)                 4
Adjusted operating profit              1,276            1,244                 3            2,370            2,411          (2)
Stock-based compensation recovery (expense)                   12        (41)     n/m                   6         (49)     n/m
Settlement of pension obligations                      -        (11)     n/m                    -         (11)     n/m
Integration, restructuring and acquisition expenses          (33)         (17)               94       (75)       (21)     n/m
Operating profit              1,255            1,175                 7            2,301            2,330         (1)
Other income and expense, net         (842)       (762)               10       (1,564)       (1,572)         (1)
Net income from continuing operations       $ 413     $ 413                  -     $ 737     $ 758      (3)
Loss from discontinued operations         (13)                 (3)     n/m         (32)       (13)             146
Net income       $ 400     $ 410          (2)     $ 705     $ 745        (5)
                                               
Basic earnings per share - continuing operations       $ 0.79     $ 0.76                 4     $ 1.41     $ 1.38                 2
Diluted earnings per share - continuing operations       $ 0.77     $ 0.75                 3     $ 1.38     $ 1.37                 1
                                               
Basic earnings per share       $ 0.77     $ 0.75                 3     $ 1.35     $ 1.35                  -
Diluted earnings per share       $ 0.75     $ 0.74                 1     $ 1.32     $ 1.34         (1)
                                               
As adjusted:                                              
  Net income from continuing operations       $ 478     $ 469                 2     $ 838     $ 897          (7)
  Basic earnings per share - continuing operations       $ 0.92     $ 0.86                 7     $ 1.60     $ 1.63          (2)
  Diluted earnings per share - continuing operations       $ 0.91     $ 0.85                 7     $ 1.59     $ 1.62         (2)
                                               
Additions to property, plant and equipment ("PP&E")                                              
  Wireless       $ 215     $ 298     (28)     $ 438     $ 516     (15)
  Cable                                              
    Cable Operations                 199               177               12               387               327               18
    RBS                   15                 18     (17)                 30                 29                 3
                   214               195               10               417               356               17
  Media                   11                 12         (8)                 21                 20                 5
  Corporate                   18                 15               20                 31                 23               35
Total additions to PP&E       $ 458     $ 520       (12)     $ 907     $ 915         (1)
                                               

SEGMENT REVIEW

WIRELESS

Summarized Wireless Financial Results

                                               
          Three months ended June 30,     Six months ended June 30,
(In millions of dollars, except margin)         2012       2011     % Chg       2012       2011     % Chg
                                               
Operating revenue                                              
  Network revenue       $ 1,652     $ 1,638               1     $ 3,264     $ 3,253               -
  Equipment sales               113             121             (7)             207             227             (9)
Total operating revenue            1,765          1,759               -          3,471          3,480               -
                                               
Operating expenses before the undernoted                                              
  Cost of equipment sales               324             339             (4)             648             641               1
  Other operating expenses               645             659             (2)          1,290          1,288               -
               969             998             (3)          1,938          1,929               -
Adjusted operating profit               796             761               5          1,533          1,551             (1)
Stock-based compensation recovery (expense)                   2               (7)     n/m                 -               (8)     n/m
Settlement of pension obligations                   -               (2)     n/m                 -               (2)     n/m
Integration, restructuring and acquisition expenses               (16)               (8)           100             (34)               (8)     n/m
Operating profit       $ 782     $ 744               5     $ 1,499     $ 1,533             (2)
                                               
Adjusted operating profit margin as                                              
 % of network revenue         48.2%       46.5%             47.0%       47.7%      
                                               
Additions to PP&E       $ 215     $ 298           (28)     $ 438     $ 516           (15)
                                               
Data revenue included in network revenue       $ 649     $ 572             13     $ 1,276     $ 1,114             15
                       

Summarized Wireless Subscriber Results

                                                   
(Subscriber statistics in thousands,         Three months ended June 30,     Six months ended June 30,
except ARPU, churn and usage)          2012       2011       Chg       2012       2011       Chg
                                                   
Postpaid                                                  
  Gross additions               350             376             (26)             684             692               (8)
  Net additions                 87             108             (21)             134             153             (19)
  Total postpaid retail subscribers            7,708          7,458             250          7,708          7,458             250
  Monthly churn         1.15%       1.21%       (0.06%)       1.20%       1.22%       (0.02%)
  Average monthly revenue per user ("ARPU")       $ 68.46     $ 70.07     $ (1.61)     $ 67.92     $ 70.12     $ (2.20)
                                                   
Prepaid                                                   
  Gross additions               156             215             (59)             310             396             (86)
  Net additions (losses)               (46)               27             (73)           (118)               17           (135)
  Total prepaid retail subscribers            1,643          1,669             (26)          1,643          1,669             (26)
  Monthly churn         4.04%       3.82%       0.22%       4.18%       3.84%       0.34%
  ARPU       $ 15.91     $ 16.14     $ (0.23)     $ 15.43     $ 15.22     $ 0.21
                                                   
Blended ARPU       $ 59.10     $ 60.26     $ (1.16)     $ 58.36     $ 60.07     $ (1.71)
Blended average monthly minutes of usage               491             475               16             466             463                 3
                                                   

Wireless Subscribers and Network Revenue

For the three months ended June 30, 2012, Wireless activated and upgraded approximately 629,000 smartphones, compared to approximately 591,000 in the second quarter of 2011. This is one of the highest numbers of smartphone activations in any quarter in Rogers' history. The smartphones activated were predominantly iPhone, BlackBerry and Android devices, of which approximately 36% were for subscribers new to Wireless during the quarter. The overall addition of smartphones increased the percentage of subscribers with smartphones to 63% of Wireless' total postpaid subscriber base at June 30, 2012, compared to 48% as at June 30, 2011. These subscribers generally commit to new multi-year term contracts, typically generate ARPU nearly twice that of voice only subscribers and churn at lower rates than voice only subscribers.

The year-over-year decrease in prepaid subscriber net additions for the quarter primarily reflects a combination of seasonal prepaid deactivation trends and an increase in the level of churn associated with heightened competitive intensity, particularly at the lower end of the wireless market where the prepaid product is most penetrated.

Wireless network revenue increased by 1% for the three months ended June 30, 2012 and was up modestly for the six months ended June 30, 2012, and reflects the continued growth of Wireless' postpaid subscriber base and the increased adoption and usage of wireless data services.

For the three months and six months ended June 30, 2012, wireless data revenue increased by approximately 13% and 15% from the corresponding period of 2011 to $649 million and $1,276 million, respectively. This growth in wireless data revenue reflects the continued penetration and growing usage of smartphones, tablet devices and wireless laptops, which drive increased usage of e-mail, wireless Internet access, text messaging and other wireless data services. The slowing of the wireless data revenue growth rate from previous quarters primarily reflects a growing portion of new subscribers choosing new entry level data pricing plans, reductions in data roaming revenue related to outbound wireless data roaming value packages that were recently introduced, combined with the heightened level of competitive intensity. For the three and six months ended June 30, 2012, wireless data revenue represented approximately 39% of total network revenue, compared to approximately 35% and 34%, respectively, in the corresponding periods of 2011.

The year-over-year blended ARPU decrease of 1.9% reflects the decline in wireless voice revenues, partially offset by the growth in wireless data revenue. Driving this decline was an 8.4% decrease in the wireless voice component of blended ARPU, which was primarily due to the heightened level of competitive intensity in the wireless voice services market, and was partially offset by a 10.2% increase in wireless data ARPU.

Wireless Equipment Sales

The decrease in revenue from equipment sales for the three months and six months ended June 30, 2012, including activation fees and net of equipment subsidies, versus the corresponding periods of 2011, primarily reflects lower postpaid gross additions versus the prior year.

Wireless Operating Expenses

                                               
        Three months ended June 30,     Six months ended June 30,
(In millions of dollars)         2012       2011     % Chg       2012       2011     % Chg
                                               
Operating expenses                                              
  Cost of equipment sales       $ 324     $ 339               (4)     $ 648     $ 641                1
  Other operating expenses                645              659               (2)           1,290           1,288                 -
Operating expenses before the undernoted                969              998               (3)           1,938           1,929                 -
Stock-based compensation expense (recovery)                   (2)                  7     n/m                   -                  8     n/m
Settlement of pension obligations                     -                  2     n/m                   -                  2     n/m
Integration, restructuring and acquisition expenses                  16                  8            100                34                  8     n/m
Total operating expenses        $ 983     $ 1,015               (3)     $ 1,972     $ 1,947                1

The decrease in cost of equipment sales for the three months ended June 30, 2012, compared to the corresponding period of 2011, was the result of a modestly lower number of gross additions. The slight increase in cost of equipment sales for the six months ended June 30, 2012, compared to the corresponding period of 2011, was primarily as a result of an increased number of smartphone sales to new customers and upgrades for existing customers, offset by a modestly lower number of gross additions. During the six months ended June 30, 2012, we activated and upgraded 30% more iPhones and 13% more smartphones overall than in the same period last year.

Total retention spending, including subsidies on handset upgrades, was $200 million and $408 million, respectively, in the three and six months ended June 30, 2012, compared to $196 million and $382 million in the corresponding periods of 2011. The modest increase for the three month period primarily reflects a higher mix of more expensive smartphones by existing subscribers than during the prior year period.

The year-over-year decrease in other operating expenses for the three months ended June 30, 2012, excluding retention spending discussed above, was driven by cost of service and efficiency gains resulting from cost management initiatives across various functions. Wireless continues to focus on implementing a program of cost management and productivity improvement initiatives.

Wireless Adjusted Operating Profit

The 5% year-over-year increase in adjusted operating profit and the 48.2% adjusted operating profit margin on network revenue (which excludes equipment sales revenue) for the three months ended June 30, 2012 primarily reflects the modest growth of network revenue in the period coupled with cost management and efficiency improvements as discussed above.

Wireless Additions to PP&E

Wireless additions to PP&E are classified into the following categories:

                                                   
            Three months ended June 30,     Six months ended June 30,
(In millions of dollars)             2012       2011     % Chg       2012       2011     % Chg
                                                   
Additions to PP&E                                                  
  Capacity           $ 114     $ 155            (26)     $ 259     $ 283              (8)
  Quality                      30                59            (49)                66                93            (29)
  Network - other                      13                16            (19)                15                27            (44)
  Information technology and other                      58                68            (15)                98              113            (13)
Total additions to PP&E           $ 215     $ 298            (28)     $ 438     $ 516            (15)
                                                   

Wireless PP&E additions can be categorized as spending on network capacity, such as radio channel additions, network core improvements and network enhancing features, including the continued deployment of our LTE and HSPA+ networks. Quality-related additions to PP&E are associated with upgrades to the network to enable higher throughput speeds in addition to improved network access associated activities, such as site build programs and network sectorization work. Quality also includes test and monitoring equipment and operating support system activities. Investments in Network - other are associated with network reliability and renewal initiatives, infrastructure upgrades and new product platforms. Information technology and other wireless specific system initiatives include billing and back-office system upgrades, and other facilities and equipment spending.

Wireless PP&E additions decreased for the three and six months ended June 30, 2012, due to timing of spend on HSPA capacity initiatives and LTE services which launched in Calgary, Halifax and St. John's during the first quarter with plans to bring LTE services to the top 28 markets by the end of the year. LTE investments for the six months have increased slightly over the prior year. Quality investments for the three months and six months ended June 30, 2012 were lower due timing of spend on projects as well as lower cell site activities. The development work occurring in the prior year on the Rogers One Number service contributed to the lower spend in the Network - other category this quarter.  Information technology investments in the quarter were lower compared to the previous year due to timing of spending on our customer billing systems and platforms for new services.

CABLE

Summarized Cable Financial Results

                                               
        Three months ended June 30,     Six months ended June 30,
(In millions of dollars, except margin)         2012       2011     % Chg       2012       2011     % Chg
                                               
Operating revenue                                              
  Cable Operations       $ 843     $ 832                1     $ 1,668     $ 1,645                1
  RBS                  90              100             (10)              177              216             (18)
Total operating revenue                933              932                 -           1,845           1,861               (1)
                                               
Adjusted operating profit before the undernoted                                              
  Cable Operations                403              397                2              781              779                 -
  RBS                  22                21                5                40                47             (15)
Adjusted operating profit                425              418                2              821              826               (1)
Stock-based compensation recovery (expense)                    2                 (5)     n/m                  1                 (6)     n/m
Settlement of pension obligations                     -                (5)     n/m                   -                 (5)     n/m
Integration, restructuring and acquisition expenses          (10)                 (8)              25               (26)                 (9)            189
Operating profit       $ 417     $ 400                4     $ 796     $ 806               (1)
                                               
Adjusted operating profit margin                                              
  Cable Operations         47.8%       47.7%             46.8%       47.4%      
  RBS         24.4%       21.0%             22.6%       21.8%      
                                               
Additions to PP&E                                              
  Cable Operations       $ 199     $ 177              12     $ 387     $ 327              18
  RBS                  15                18             (17)                30                29                3
Total additions to PP&E       $ 214     $ 195              10     $ 417     $ 356              17
                                               

The following segment discussions provide a detailed discussion of the Cable operating results.

CABLE OPERATIONS

Summarized Financial Results

                                               
        Three months ended June 30,     Six months ended June 30,
(In millions of dollars, except margin)         2012       2011     % Chg       2012       2011     % Chg
                                               
Operating revenue                                              
  Cable Television       $ 478     $ 480                  -     $ 946     $ 948                  -
  Internet                 245               232                 6               486               456                 7
  Home Phone                 120               120                  -               236               241                (2)
Total Cable Operations operating revenue                 843               832                 1            1,668            1,645                 1
                                               
Operating expenses before the undernoted                                              
  Cost of equipment sales                     6                   6                  -                   9                 12              (25)
  Other operating expenses                 434               429                 1               878               854                 3
                  440               435                 1               887               866                 2
Adjusted operating profit                 403               397                 2               781               779                  -
Stock-based compensation recovery (expense)                     2                  (5)     n/m                   1                  (6)     n/m
Settlement of pension obligations                      -                  (4)     n/m                    -                  (4)     n/m
Integration, restructuring and acquisition expenses                    (9)                  (3)             200                (23)                  (3)     n/m
Operating profit       $ 396     $ 385                 3     $ 759     $ 766                (1)
                                               
Adjusted operating profit margin         47.8%       47.7%             46.8%       47.4%      
                                               

Summarized Subscriber Results

                                             
            Three months ended June 30,       Six months ended June 30,
(Subscriber statistics in thousands)           2012     2011     Chg       2012     2011     Chg
                                             
Cable homes passed               3,777         3,737              40           3,777         3,737              40
                                             
Television                                            
  Net losses                   (21)               (9)             (12)               (42)             (17)             (25)
  Total television subscribers               2,255         2,294             (39)           2,255         2,294             (39)
                                             
  Digital cable                                            
     Households, net additions                      1                2               (1)                   -                7               (7)
     Total digital cable households               1,777         1,745              32           1,777         1,745              32
                                             
Cable high-speed Internet                                            
  Net additions                      9              11               (2)                22              19                3
  Total cable high-speed Internet subscribers               1,815         1,729              86           1,815         1,729              86
                                             
Cable telephony lines                                            
  Net additions and migrations                      8              14               (6)                  9              21             (12)
  Total cable telephony lines               1,061         1,028              33           1,061         1,028              33
                                             
Total cable service units                                            
  Net additions (losses)                     (4)              16             (20)               (11)              23             (34)
  Total cable service units               5,131         5,051              80           5,131         5,051              80
                                             
Circuit-switched lines                                            
  Net losses and migrations to cable telephony                                            
    platform                       -               (5)                5                   -             (11)              11
  Total circuit-switched lines                       -                3               (3)                   -                3               (3)
                                             

Cable Television Revenue

Cable Television revenue was relatively flat for the three and six months ended June 30, 2012, compared to the corresponding periods of 2011, reflecting pricing changes made in March 2012, together with a continued increase in penetration of our digital cable product offerings and greater usage of on-demand services. These increases were offset by the impact of promotional and retention pricing activity associated with heightened competitive activity principally related to the widened availability of aggressively priced IPTV offerings as well as basic cable subscriber losses.

Our digital cable subscriber base grew by 2% for the three months ended June 30, 2012, and represented 79% of our total television subscriber base as at June 30, 2012, compared to 76% as at June 30, 2011. Increased demand from subscribers for the larger selection of digital content, video on-demand, HDTV and personal video recorder ("PVR") equipment continues to contribute to the growth in the digital subscriber base and Cable Television revenue.

In the first quarter of 2012, Cable began an initiative to convert many of the remaining analog cable customer outlets onto its digital cable platform during 2012 and 2013.  This migration will enable the reclamation of significant amounts of network capacity as well as reduce network operating and maintenance costs going forward. The migration will entail incremental PP&E and operating costs as each of the remaining analog homes are fitted with digital converters and various analog filtering equipment is removed.

Cable Internet Revenue

The year-over-year increase in Internet revenue for the three and six months ended June 30, 2012 reflects the increase in the Internet subscriber base, combined with Internet service pricing changes made over the previous twelve months. Also impacting the increase is a general movement by subscribers towards higher end tiers and the timing of promotional programs, partially offset by the impact of promotional and retention pricing activity associated with heightened competitive activity.

With the high-speed Internet customer-base at approximately 1.8 million subscribers, Internet penetration is approximately 48% of the homes passed by our cable networks and 80% of our television subscriber base, as at June 30, 2012.

Home Phone Revenue

The relatively flat Home Phone revenues for the three and six months ended June 30, 2012, reflect declines in revenue associated with exiting the legacy circuit-switched telephony base that Cable divested last year, partially offset by the increase in the cable telephony Home Phone customer base.

Excluding the impact of exiting the circuit-switched telephony business that Cable divested in the fourth quarter of 2011, the year-over-year revenue growth for Home Phone for the three and six months ended June 30, 2012 would have been 3% and 2%, respectively. For the three and six months ended June 30, 2011 the revenue associated with the divested residential circuit-switched telephony business totalled approximately $4 million and $10 million, respectively.

Cable telephony Home Phone lines in service grew 3% from June 30, 2011 to June 30, 2012 and now represent 28% of the homes passed by our cable networks and 47% of television subscribers.

Cable Operations Operating Expenses

Cable Operations' operating expenses slightly increased for the three and six months ended June 30, 2012, compared to the corresponding period of 2011, due to incremental retention costs and costs associated with its analog to digital conversion, partially offset by cost management and productivity improvement initiatives across various functions. Cable Operations continues to focus on cost management and productivity improvement initiatives.

Cable Operations Adjusted Operating Profit

The modest year-over-year increase in adjusted operating profit for the three and six months ended June 30, 2012 was primarily the result of the revenue and cost changes described above, with the associated adjusted operating profit margin of 47.8% and 46.8% for the three and six months ended June 30, 2012, respectively, compared to 47.7% and 47.4% in the corresponding periods of 2011.

ROGERS BUSINESS SOLUTIONS

Summarized Financial Results

                                                   
            Three months ended June 30,     Six months ended June 30,
(In millions of dollars, except margin)             2012       2011     % Chg       2012       2011     % Chg
                                                     
Operating revenue           $ 90     $ 100            (10)     $ 177     $ 216            (18)
                                                     
Operating expenses before the undernoted                      68                79            (14)              137              169            (19)
Adjusted operating profit                      22                21                5                40                47            (15)
Settlement of pension obligations                         -                (1)     n/m                   -                (1)     n/m
Integration, restructuring and acquisition expenses                      (1)                (5)            (80)                (3)                (6)            (50)
Operating profit           $ 21     $ 15              40     $ 37     $ 40              (8)
                                                     
Adjusted operating profit margin             24.4%       21.0%             22.6%       21.8%      
                                                   

RBS Revenue

The decrease in RBS revenue for the three and six months ended June 30, 2012 primarily reflects the planned decline in certain categories of the lower margin legacy business, partially offset by the growth in next generation IP and other on-net services. RBS' focus is primarily on IP-based services and increasingly on leveraging higher margin on-net and near-net revenue opportunities, utilizing both the acquired Atria and Blink networks and Cable's existing network facilities to expand offerings to the medium-sized enterprise, public sector and carrier markets. Revenue from the lower margin off-net legacy business, which includes long-distance, local and certain legacy data services, continues to decline and was down 32% for the quarter compared to the second quarter of 2011. In comparison, revenue from the higher margin next generation business was up 22% for the quarter and now represents approximately 44% of total RBS revenues.

RBS Operating Expenses

The decrease in operating expenses for the three and six months ended June 30, 2012, compared to the corresponding periods of 2011, reflects the planned decrease in legacy services related costs due to lower volumes and subscriber levels and permanent cost reductions resulting from a 2011 restructuring of the employee base, partially offset by increases in sales and marketing expenses related to next generation IP and other on-net services.

RBS Adjusted Operating Profit

The year-over-year increase in adjusted operating profit for the three months ended June 30, 2012 reflects declines in revenue due to RBS' planned exit of the lower margin legacy business to focus on growing its on-net next generation data revenue. The year-over-year decrease in adjusted operating profit for the six months ended June 30, 2012 reflects declines in revenue due to RBS' planned exit of the lower margin legacy business, offset by cost efficiencies which resulted in the increase in RBS' adjusted operating profit margin to 22.6% from 21.8%.

VIDEO

As of June 2012, Rogers' retail stores no longer rent or sell videos and games at any of its locations which now focus exclusively on sales and service relating to wireless and cable products. The second quarter of 2012 was its last period for operations of the Video sub-segment of the Cable segment, with the remnants of that business now treated as discontinued operations for accounting and reporting purposes.

Cable Additions to PP&E

Cable additions to PP&E are classified into the following categories:

                                                   
              Three months ended June 30,     Six months ended June 30,
(In millions of dollars)             2012       2011     % Chg       2012       2011     % Chg
                                                     
Additions to PP&E                                                  
  Customer premise equipment           $ 69     $ 35               97     $ 146     $ 81               80
  Scalable infrastructure                       65                 65                  -               119               125                (5)
  Line extensions                       12                 11                 9                 24                 20               20
  Upgrades and rebuild                         1                   3              (67)                   1                   4              (75)
  Support capital                       52                 63              (17)                 97                 97                  -
Total Cable Operations                     199               177               12               387               327               18
RBS                       15                 18              (17)                 30                 29                 3
Total additions to PP&E           $ 214     $ 195               10     $ 417     $ 356               17
                                                   

The Cable Operations segment categorizes its PP&E expenditures according to a standardized set of reporting categories that were developed and agreed to by the U.S. cable television industry and that facilitate comparisons of additions to PP&E between different cable companies. Under these industry definitions, Cable Operations additions to PP&E are classified into the following five categories:

  • Customer premise equipment ("CPE"), which includes the equipment for digital set-top terminals, Internet modems and associated installation costs;
  • Scalable infrastructure, which includes non-CPE costs to meet business growth and to provide service enhancements;
  • Line extensions, which includes network costs to enter new service areas;
  • Upgrades and rebuild, which includes the costs to modify or replace existing coaxial cable, fibre-optic equipment and network electronics; and
  • Support capital, which includes the costs associated with the purchase, replacement or enhancement of non-network assets.

Additions to Cable Operations PP&E include continued investments in the cable network to enhance the customer experience through increased speed and performance of our Internet service and capacity enhancements to our digital network to allow for incremental HD and on-demand services to be added.

The increase in Cable Operations PP&E additions for the three and six months ended June 30, 2012, compared to the corresponding periods of 2011, was largely driven by increased CPE attributable to higher volumes and associated rate for DOCSIS 3 gateways, higher volumes of set top boxes related to Nextbox 2.0 and our analog to digital subscriber migration activities. Network investments in scalable infrastructure and line extensions was relatively flat for the three months ended June 30, 2012 and were focused on adding capacity and improving our data and video service platforms. Support capital investments decreased during the quarter due to timing of spend on projects related to platforms for new services and customer billing systems and was at the same investment level as in the prior year.

The change in RBS PP&E additions for the three and six months ended June 30, 2012, compared to the corresponding period of 2011, resulted from the timing of expenditures on customer specific network expansions and support capital.

MEDIA

Summarized Media Financial Results

                                               
        Three months ended June 30,     Six months ended June 30,
(In millions of dollars, except margin)         2012       2011     % Chg       2012       2011     % Chg
                                               
Operating revenue       $ 440     $ 437                1     $ 794     $ 776                2
                                               
Operating expenses before the undernoted                361              346                4              729              695                5
Adjusted operating profit                  79                91            (13)                65                81            (20)
Stock-based compensation recovery (expense)                    1                (5)     n/m                   -                (7)     n/m
Settlement of pension obligations                     -                (3)     n/m                   -                (3)     n/m
Integration, restructuring and acquisition expenses                  (7)                (1)     n/m              (13)                (4)     n/m
Operating profit       $ 73     $ 82              11     $ 52     $ 67            (22)
                                               
Adjusted operating profit margin         18.0%       20.8%             8.2%       10.4%      
                                               
Additions to PP&E       $ 11     $ 12              (8)     $ 21     $ 20                5
                                               

Media Revenue

The increase in Media's revenue for the three and six months ended June 30, 2012 compared to the corresponding periods of 2011 was the result of strong growth in the Sports Entertainment division's baseball ticketing and merchandising revenue combined with increased subscriber fees and advertising sales generated from Sportsnet. The second quarter ended June 30, 2012 experienced a continued weakening of the ad market from the levels seen earlier in the year, which suppressed growth at the other Media divisions.

Media Operating Expenses

The increase in Media's operating expenses for the three and six months ended June 30, 2012, compared to the corresponding periods of 2011, is primarily due to an increase in planned programing related spending in the Television division and increased player related costs in the Sports Entertainment division. The Television spending is related to new channels including CityNews and FX Canada, as well as investments in new programming at Citytv coincident with the recent national expansion of its national footprint which enables the monetization of such programming costs over a much larger audience base in future periods, as well as the development of "Canada's Got Talent". Media was able to offset a portion of the impact of the softer than expected ad market during the quarter with cost management initiatives.

Media Adjusted Operating Profit

The decrease in Media's adjusted operating profit for the three and six months ended June 30, 2012, compared to the corresponding period of 2011, primarily reflects the revenue and expense changes discussed above.

Media Additions to PP&E

Media's PP&E additions during the three months ended June 30, 2012 decreased from the corresponding period in 2011 primarily due to a change in the nature of the planned projects. Media's PP&E additions for the six months ended June 30, 2012 increased from the corresponding period in 2011 primarily due to capital expenditures relating to infrastructure upgrades for Sportsnet and Sports Entertainment.

2012 FINANCIAL AND OPERATING GUIDANCE

We have no specific revisions to the 2012 annual consolidated guidance ranges which we provided on February 22, 2012. See the section entitled "Caution Regarding Forward-Looking Statements, Risks and Assumptions" below.

Rogers Communications Inc.
Unaudited Interim Condensed Consolidated Statements of Income
(In millions of Canadian dollars, except per share amounts)

                                                     
                Three months ended            Six months ended
                June 30,            June 30,
                2012           2011           2012           2011
                                                     
Operating revenue            $   3,106       $    3,097       $   6,049       $    6,060
                                                     
Operating expenses:                                                    
  Operating costs                 1,818           1,905           3,673           3,709
  Integration, restructuring and acquisition costs                 33           17           75           21
  Depreciation and amortization                466           444           929           862
                                                     
Operating income                789           731           1,372           1,468
                                                     
Finance costs                (159)           (166)           (319)           (434)
Other income, net                4           5           9           7
Share of the income of associates and joint ventures                                                    
  accounted for using the equity method, net of tax                3           -           6           3
                                                     
Income before income taxes from continuing operations                 637           570           1,068           1,044
                                                     
Income tax expense:                                                    
  Current                144           135           248           284
  Deferred                80           22           83           2
                224           157           331           286
Net income for the period from continuing operations                 413           413           737           758
Loss from discontinued operations, net of tax                 (13)           (3)           (32)           (13)
Net income            $   400       $   410       $   705       $   745
                                                     
Earnings per share - basic:                                                    
  Earnings per share from continuing operations            $   0.79       $   0.76       $   1.41       $   1.38
  Loss per share from discontinued operations                (0.02)           (0.01)           (0.06)           (0.03)
Earnings per share            $   0.77       $   0.75       $   1.35       $   1.35
                                                     
Earnings per share - diluted:                                                    
  Earnings per share from continuing operations            $   0.77       $   0.75       $   1.38       $   1.37
  Loss per share from discontinued operations                (0.02)           (0.01)           (0.06)           (0.03)
Earnings per share            $   0.75       $   0.74       $   1.32       $   1.34
                                                     
                                                     

Rogers Communications Inc.
Unaudited Interim Condensed Consolidated Statements of Financial Position
(In millions of Canadian dollars)

                               
                      June 30,       December 31,
                      2012       2011
                               
Assets                              
                               
Current assets:                              
  Cash and cash equivalents              $         603     $ -
  Accounts receivable                         1,365       1,574
  Other current assets                       527       322
  Current portion of derivative instruments                       15       16
                      2,510       1,912
                               
Property, plant and equipment                       9,163       9,114
Goodwill                       3,280       3,280
Intangible assets                       2,633       2,721
Investments                       1,052       1,107
Derivative instruments                       93       64
Other long-term assets                       133       134
Deferred tax assets                       38       30
            $         18,902     $ 18,362
                               
Liabilities and Shareholders' Equity                              
                               
Current liabilities:                              
  Bank advances              $         -     $ 57
  Accounts payable and accrued liabilities                       1,732       2,085
  Income tax payable                       135       -
  Current portion of provisions                       26       35
  Current portion of long-term debt                       356       -
  Current portion of derivative instruments                       136       37
  Unearned revenue                        343       335
                      2,728       2,549
                               
Provisions                       34       38
Long-term debt                        10,530       10,034
Derivative instruments                       382       503
Other long-term liabilities                       250       276
Deferred tax liabilities                       1,483       1,390
                      15,407       14,790
                               
Shareholders' equity                        3,495       3,572
            $         18,902     $ 18,362
                               
                               

Rogers Communications Inc.
Unaudited Interim Condensed Consolidated Statements of Cash Flows
(In millions of Canadian dollars)

                                                       
                Three months ended            Six months ended
                June 30,            June 30,
                2012             2011           2012           2011
                                                       
Cash provided by (used in):                                                      
                                                       
Operating activities                                                      
  Net income            $   400       $     410       $   705       $   745
  Adjustments to reconcile net income to                                                      
   net cash flows from operating activities:                                                      
    Depreciation and amortization                466             444            929           862
    Program rights amortization                27             19           49           42
    Finance costs                159             166           319           434
    Current income tax expense                140             134           238           279
    Deferred taxes                80             22           83           2
    Pension contributions, net of expense                (14)             (30)           (18)           (32)
    Settlement of pension obligations                -             11           -           11
    Stock-based compensation expense                                                      
     (recovery)                (12)             41           (6)           49
    Amortization of fair value decrement                                                      
     on long-term debt                -             1           1           1
    Share of the income of associates and                                                      
     joint ventures accounted for using the                                                      
     equity method, net of tax                (3)             -           (6)           (3)
    Other                (1)             5           (7)           9
                1,242             1,223           2,287           2,399
                                                       
  Change in non-cash operating working                                                      
   capital items                (53)             (213)           (253)           (446)
                1,189             1,010           2,034           1,953
  Interest paid                (87)             (87)           (332)           (309)
  Income taxes paid                (23)             (3)           (95)           (6)
                1,079             920           1,607           1,638
                                                       
Investing activities                                                      
  Additions to property, plant and                                                      
   equipment ("PP&E")                (458)             (520)           (907)           (915)
  Change in non-cash working capital                                                      
   items related to PP&E                (7)             (31)           (102)            (159)
  Acquisitions, net of cash and cash                                                      
   equivalents acquired                -             (28)           -           (532)
  Additions to program rights                (3)              -           (21)           (10)
  Other                (8)             (16)           (14)           (19)
                (476)             (595)           (1,044)           (1,635)
                                                       
Financing activities                                                      
  Issuance of long-term debt                1,500             395           2,090           3,410
  Repayment of long-term debt                (890)             (545)           (1,240)           (2,362)
  Premium on repayment of long-term debt                -             -                     (76)
  Payment on settlement of cross-currency                                                      
   interest rate exchange agreement and                                                      
   forward contracts                -             -                     (1,208)
  Proceeds on settlement of cross-currency                                                      
   interest rate exchange agreement and                                                      
   forward contracts                -             -                     878
  Transaction costs incurred                (9)              -           (9)           (10)
  Repurchase of Class B Non-Voting shares                (350)             -           (350)           (285)
  Dividends paid                (207)             (195)           (394)           (374)
                44             (345)           97           (27)
                                                       
Change in cash and cash equivalents                                                      
 (bank advances)                647             (20)           660           (24)
                                                       
Cash and cash equivalents (bank                                                      
 advances), beginning of period                (44)             (49)           (57)           (45)
                                                       
Cash and cash equivalents (bank                                                      
 advances), end of period            $   603       $      (69)       $   603       $   (69)
                                                       
The change in non-cash operating                                                      
 working capital items is as follows:                                                      
  (Increase)/Decrease in accounts                                                      
   receivable            $   (50)       $     (124)       $   200       $   (22)
  (Increase)/Decrease in other assets                (59)             (26)           (211)           (135)
  Increase/(Decrease) in accounts payable                                                      
   and accrued liabilities                61             (36)           (249)           (285)
  Increase/(Decrease) in unearned revenue                (5)             (27)           7           (4)
            $   (53)       $     (213)       $   (253)       $    (446)
                                                       

Caution Regarding Forward-Looking Statements, Risks and Assumptions

This earnings release includes "forward-looking information" within the meaning of applicable securities laws and assumptions concerning, among other things our business, its operations and its financial performance and condition approved by management on the date of this earnings release. This forward-looking information and these assumptions include, but are not limited to, statements with respect to our objectives and strategies to achieve those objectives, as well as statements with respect to our beliefs, plans, expectations, anticipations, estimates or intentions. This forward-looking information also includes, but is not limited to, guidance and forecasts relating to revenue, adjusted operating profit, property plant and equipment expenditures, cash income tax payments, free cash flow, dividend payments, expected growth in subscribers and the services to which they subscribe, the cost of acquiring subscribers and the deployment of new services, and all other statements that are not historical facts. The words "could", "expect", "may", "anticipate", "assume", "believe", "intend", "estimate", "plan", "project", "guidance", and similar expressions are intended to identify statements containing forward-looking information, although not all forward-looking statements include such words. Conclusions, forecasts and projections set out in forward-looking information are based on our current objectives and strategies and on estimates and other factors and expectations and assumptions, most of which are confidential and proprietary, that we believe to be reasonable at the time applied, but may prove to be incorrect, including, but not limited to: general economic and industry growth rates, currency exchange rates, product pricing levels and competitive intensity, subscriber growth, usage and churn rates, changes in government regulation, technology deployment, device availability, the timing of new product launches, content and equipment costs, the integration of acquisitions, industry structure and stability.

Except as otherwise indicated, this earnings release and our forward-looking statements 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 the statement containing the forward-looking information is made.

We caution that all forward-looking information, including any statement regarding our current objectives strategies and intentions and any factor, assumptions, estimate or expectation underlying the forward-looking information, is inherently subject to change and uncertainty and that actual results may differ materially from those expressed or implied by the forward-looking information. A number of risks, uncertainties and other factors could cause actual results and events to differ materially from those expressed or implied in the forward-looking information or could cause our current objectives, strategies and intentions to change, including but not limited to: new interpretations and new accounting standards from accounting standards bodies, economic conditions, technological change, the integration of acquisitions, unanticipated changes in content or equipment costs, changing conditions in the entertainment, information and communications industries, regulatory changes, litigation and tax matters, the level of competitive intensity and the emergence of new opportunities.

Many of these factors are beyond our control and current expectation 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 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, 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.

Before making any investment decisions and for a detailed discussion of the risks, uncertainties and environment associated with our business, fully review the sections of our second quarter MD&A entitled "Updates to Risks and Uncertainties" and "Government Regulation and Regulatory Developments", and also sections entitled "Risks and Uncertainties Affecting our Businesses" and "Government Regulation and Regulatory Developments" in our 2011 Annual MD&A. Our annual and quarterly reports can be found online at rogers.com, sedar.com and sec.gov or are available directly from Rogers.

About Rogers Communications Inc.

Rogers Communications is a diversified Canadian communications and media company. We are Canada's largest provider of wireless voice and data communications services and one of Canada's leading providers of cable television, high-speed Internet and telephony services. Through Rogers Media we are engaged in radio and television broadcasting, televised shopping, magazines and trade publications, sports entertainment, and digital media. We are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI). For further information about the Rogers group of companies, please visit rogers.com.

Quarterly Investment Community Conference Call

As previously announced by press release, a live webcast of our quarterly results teleconference with the investment community will be broadcast via the Internet at rogers.com/webcast beginning at 8:30 a.m. ET today, July 24, 2012. A rebroadcast of this teleconference will be available on the Events and Presentations page of Rogers' Investor Relations website rogers.com/investors for a period of at least two weeks following the teleconference. 

SOURCE: Rogers Communications Inc.

For further information:

Investment Community Contacts

Bruce M. Mann, 416.935.3532, bruce.mann@rci.rogers.com
Dan Coombes, 416.935.3550, dan.coombes@rci.rogers.com

Media Contact

Terrie Tweddle, 416.935.4727, terrie.tweddle@rci.rogers.com


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