Rogers Reports First Quarter 2011 Financial and Operating Results

First Quarter Revenue Increases 4% to $3.0 Billion, Adjusted Earnings Per Share up 13% to $0.76, $597 Million of Free Cash Flow Generated;

Wireless Adds 45,000 Net New Postpaid Subscribers, Adds Record Number of New Smartphone Customers, While Wireless Data Revenue Growth Strong at 30% and Margins at 49%;

Cable Operations Adjusted Operating Profit Increases 12% Driving Margins to 47% on Continued Subscriber Growth and Cost Efficiencies;

Media Revenue up by 17% as Revenue Increased In All of Media's Divisions;

$464 Million of Cash Returned to Rogers Shareholders in Dividends and Share Buybacks

TORONTO, April 26 /CNW/ - Rogers Communications Inc. today announced its consolidated financial and operating results for the three months ended March 31, 2011 and 2010, in accordance with the newly adopted International Financial Reporting Standards ("IFRS").

Financial highlights are as follows (1):

             
        Three months ended March 31,
(In millions of dollars, except per share amounts)       2011 2010 % Chg
             
Operating revenue
Adjusted operating profit
Adjusted net income
Adjusted basic and diluted earnings per share
      $        2,987
           1,160
              423
$          0.76
$        2,876
           1,159
              397
$          0.67
                  4
                   -
                  7
                13

(1)      This summary of our first quarter 2011 results should be read in conjunction with our first quarter 2011 MD&A, our first quarter 2011 Interim Unaudited Consolidated Financial Statements and Notes thereto, our 2010 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.

"The first quarter results represent a healthy start to 2011 for Rogers," said Nadir Mohamed, President and Chief Executive Officer of Rogers Communications Inc. "We've maintained solid top line growth rates as a result of continued investments in our customer relationships, networks and products supported by a sharp focus on wireless data and subscriber retention initiatives. While at the same time, our successful focus on managing costs has enabled continued strong margins and the generation of substantial free cash flow."

Highlights of the first quarter of 2011 include the following:

  • Generated consolidated quarterly revenue growth of 4%, with Wireless network revenue growth of 3%, Cable Operations revenue growth of 3%, and Media revenue growth of 17%, versus the same quarter last year. While Cable Operations adjusted operating profit increased by 12%, this was offset by a 5% decline at Wireless primarily reflecting costs associated with the significant year-over-year increase in smartphone activations and a decline at Media due to increased sports programming costs.

  • Wireless data revenue growth accelerated to 30% and net postpaid subscriber additions totalled 45,000, helping drive wireless data revenue to now comprise 34% of Wireless network revenue.  During the quarter, Wireless activated and upgraded 534,000 additional smartphones, of which approximately 36% were for subscribers new to Wireless, compared to 348,000 in the prior year quarter. This represents the largest single quarterly addition of new smartphone subscribers. This resulted in subscribers with smartphones, who typically generate ARPU nearly twice that of voice only subscribers, representing 45% of the overall postpaid subscriber base as at March 31, 2011, up from 33% as at March 31, 2010.

  • Wireless launched Canada's first business-class Wi-Fi voice service for smartphones to help business customers save time and money.  The service allows businesses to place mobile calls from their smartphones over their office Wi-Fi network that do not count towards monthly voice plan minutes.

  • Wireless announced the geographic expansion of its next generation high-speed wireless network by 150 times to cover 96 per cent of the Manitoba population, bringing download speeds of up to 21 megabits per second and even greater device selection.

  • Cable deployed its highly popular SpeedBoost technology for high-speed Internet subscribers which detects when there's available bandwidth on the network and automatically delivers a temporary burst of speed for the first 10 MB of a download or stream which loads content faster and delivers a superior online experience.

  • Rogers closed the acquisition of Atria Networks, one of Ontario's largest fibre-optic networks, which augments Rogers Business Solutions' enterprise offerings by further enhancing its ability to deliver on-net data centric services within and adjacent to Cable's footprint.

  • Rogers Sportsnet and Tennis Canada announced a multi-year agreement to broadcast the Rogers Cup that will also allow Sportsnet to broadcast over 20 top tier ATP World Tour Tournaments.  Sportsnet also announced a multi-year agreement to broadcast highly popular Ultimate Fighting Championship (UFC) events in Canada.

  • Generated $597 million of consolidated free cash flow in the quarter, defined as adjusted operating profit less PP&E expenditures, interest on long-term debt and cash income taxes, down modestly from $619 million in the first quarter of 2010 reflecting steady levels of adjusted operating profit being offset by a moderately increased level of PP&E expenditures. Free cash flow per share increased by 3% over the same period reflecting accretion from share buybacks which have decreased the base of outstanding shares.

  • Refinanced higher cost 2012 debt maturities with the March 2011 issuance of $1,450 million of 5.34% Senior Notes due 2021 and $400 million of 6.56% Senior Notes due 2041.

  • Increased our annualized dividend rate by 11% to $1.42 per share in February 2011, and immediately declared a quarterly dividend of $0.355 a share on each of our outstanding shares at the new, higher rate.

  • Announced a share buyback authorization of up to $1.5 billion of Rogers' Class B Non-Voting shares on the open market over the coming year. Under this renewed buyback authorization, we repurchased 9 million RCI Class B Non-Voting shares for $285 million during the quarter.

This earnings release, which is current as of April 26, 2011, is a summary of our first quarter 2011 results and should be read in conjunction with our first quarter 2011 MD&A, our first quarter 2011 Interim Unaudited Consolidated Financial Statements and Notes thereto, our 2010 Annual MD&A and our 2010 Annual Audited Consolidated Financial Statements and Notes thereto and other recent securities filings available on rogers.com or sedar.com.

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 unless otherwise stated.

The amounts in this earnings release, our MD&A and our interim financial statements for the three months ended March 31, 2010 have been restated to reflect our adoption of IFRS, with effect from January 1, 2010. Periods prior to January 1, 2010 have not been restated and are prepared in accordance with Canadian GAAP. Please refer to Note 3 of our First Quarter 2011 Interim Unaudited Consolidated Financial Statements for a summary of the differences between our financial statements previously prepared under Canadian GAAP and to those under IFRS for the three months ended March 31, 2010 and for the year ended December 31, 2010.

Concurrent with the impact of the transition to IFRS, we made certain changes to our reportable segments. Commencing January 1, 2011, the results of the former Rogers Retail segment are reported as follows: the results of the Video retailing portion are now presented as a separate operating sub-segment under the Cable segment, and the portions related to retail distribution of cable and wireless products and services are now included in the results of operations of Cable Operations and Wireless, respectively. In addition, certain intercompany transactions between the Company's Rogers Business Solutions ("RBS") segment and other operating segments, which were previously recorded as revenue in RBS and operating expenses in the other operating segments, are now recorded as cost recoveries in RBS beginning January 1, 2011. While there is no change to the consolidated results of the Company or to the adjusted operating profit of RBS, as a result of this second change, the reported revenue of RBS is lower as intercompany sales are no longer included. Comparative figures for 2010 have been reclassified to conform to the current year's presentation of both changes discussed above.

As this earnings release includes forward-looking statements and assumptions, readers should carefully review the sections 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 March 31,
(In millions of dollars, except per share amounts)       2011 2010 % Chg
               
Operating revenue            
 
 
Wireless
Cable
      $        1,721
 
$        1,662
 
                  4
 


  Cable Operations
RBS
Video
                    813
              116
                24
              790
              111
                41
                  3
                  5
              (41)
                        953               942                   1
 
 
Media
Corporate items and eliminations
                    339
              (26)
              290
              (18)
                17
                44
Total                  2,987            2,876                   4
               
Adjusted operating profit (loss)            
 
 
Wireless
Cable
                    790
 
              829
 
                (5)
 


  Cable Operations
RBS
Video
                    382
                26
                (7)
              340
                  8
                (2)
                12
n/m
n/m
                        401               346                16
 
 
Media
Corporate items and eliminations
                    (10)
              (21)
                  5
              (21)
n/m
                   -
Adjusted operating profit                  1,160            1,159                    -
Stock-based compensation expense                       (8)               (26)               (69)
Integration, restructuring and acquisition expenses                     (11)                 (2) n/m
Other items, net                          -               (15) n/m
Operating profit                  1,141            1,116                   2
Other income and expense, net                     806               748                   8
Net income       $           335 $           368                 (9)
               
Basic and diluted earnings per share       $          0.60 $          0.62                 (3)
               
As adjusted:            
 
   
Net income
Basic and diluted earnings per share
      $           423
$          0.76
$           397
$          0.67
                  7
                13
               
Additions to PP&E            
 
 
Wireless
Cable
      $           218
 
$           199
 
                10
 


  Cable Operations
RBS
Video
                    150
                11
                   -
              118
                  6
                  1
                27
                83
n/m
                        161               125                 29
 
 
Media
Corporate
                        8
                  8
                  4
                37
              100
              (78)
Total       $           395 $           365                   8
             

SEGMENT REVIEW

WIRELESS

Summarized Wireless Financial Results

               
          Three months ended March 31,
(In millions of dollars, except margin)       2011 2010 % Chg
               
Operating revenue            
 
 
Postpaid
Prepaid



$        1,544
                71
$        1,504
                66
                  3
                  8
 
 
Network revenue
Equipment sales



           1,615
              106
           1,570
                92
                  3
                15
Total operating revenue                  1,721            1,662                   4
               
Operating expenses before the undernoted            
 
 
Cost of equipment sales
Other operating expenses
                    302
              629
              237
              596
                27
                  6
                        931               833                 12
Adjusted operating profit                     790               829                 (5)
Stock-based compensation expense                       (1)                 (5)               (80)
Integration, restructuring and acquisition expenses                          -                 (1) n/m
Other items, net                          -               (10) n/m
Operating profit       $           789 $           813                 (3)
               
Adjusted operating profit margin as % of network revenue       48.9% 52.8%                 (7)
               
Additions to PP&E       $           218 $           199                 10
               
Data revenue included in network revenue       $           542 $           416                 30
             
             

Summarized Wireless Subscriber Results

               
          Three months ended March 31,
(Subscriber statistics in thousands, except ARPU, churn and usage)       2011 2010 Chg
               
Postpaid            
 
 
 
 
 
Gross additions
Net additions
Total postpaid retail subscribers
Monthly churn
Average monthly revenue per user ("ARPU")
                    316
                45
           7,370
1.23%
$        70.18
              278
                47
           7,026
1.10%
$        71.62
               38
                (2)
              344
0.13%
$        (1.44)
               
Prepaid            
 
 
 
 
 
Gross additions
Net losses
Total prepaid retail subscribers
Monthly churn
ARPU
                    181
              (10)
           1,642
3.85%
$        14.32
              128
              (34)
           1,481
3.59%
$        14.70
                53
                24
              161
0.26%
$        (0.38)
               
Total            
 
 
 
 
Gross additions
Net additions
Total postpaid and prepaid retail subscribers
Monthly churn
                    497
                35
           9,012
1.71%
              406
                13
           8,507
1.54%
                91
                22
              505
0.17%
               
Blended ARPU       $        59.91 $        61.59 $        (1.68)
Blended average monthly minutes of usage                     450               476               (26)
             

Wireless Subscribers and Network Revenue

The year-over-year increase in total net subscriber additions for the quarter reflects relatively steady level of postpaid net additions combined with incremental prepaid sales activity from Wireless' launch of its urban zone-based unlimited voice and text service, chatr.

The increase in network revenue for the three months ended March 31, 2011, compared to the corresponding period of 2010, was driven predominantly by the continued growth of Wireless' postpaid subscriber base and the continued adoption of wireless data services.

For the three months ended March 31, 2011, wireless data revenue increased by approximately 30% from the corresponding period of 2010, to $542 million. This growth in wireless data revenue reflects the continued penetration and growing usage of smartphone and wireless laptop devices which are driving increased usage of e-mail, wireless Internet access, text messaging and other wireless data services. For the three months ended March 31, 2011, data revenue represented approximately 34% of total network revenue, compared to approximately 26% in the corresponding period of 2010.

For the three months ended March 31, 2011, Wireless activated and upgraded approximately 534,000 smartphones, compared to approximately 348,000 smartphones in the first quarter of 2010. These smartphones were predominately iPhone, BlackBerry and Android devices, of which approximately 36% were for subscribers new to Wireless, during the three months ended March 31, 2011. This resulted in subscribers with smartphones representing 45% of the overall postpaid subscriber base as at March 31, 2011, compared to 33% as at March 31, 2010. These subscribers generally commit to new multi-year-term contracts, and typically generate ARPU nearly twice that of voice only subscribers. This is the largest number of new smartphone customer additions that Wireless has ever reported in a quarter.

Year-over-year blended ARPU decreased by 2.7%, which reflects declines in roaming, long-distance, out-of-plan usage and network access fee revenues, offset by higher wireless data and feature revenues. These decreases are primarily due to the creation of voice and data roaming value plans for frequent travelers over the past year and general competitive intensity.

Wireless Equipment Sales

The year-over-year increase for the three months ended March 31, 2011 in revenue from equipment sales, including activation fees and net of equipment subsidies, versus the corresponding period of 2010, reflects an increase in the number of smartphone activations.


Wireless Operating Expenses

               
          Three months ended March 31,
(In millions of dollars)       2011 2010 % Chg
               
Operating expenses            
 
 
Cost of equipment sales
Other operating expenses
      $           302
              629
$           237
              596
                27
                  6
Operating expenses before the undernoted                     931               833                 12
Stock-based compensation expense                  1                   5               (80)
Integration, restructuring and acquisition expenses                          -                   1 n/m
Other items, net                          -                 10 n/m
Total operating expenses        $           932 $           849                 10
             

The $65 million increase in cost of equipment sales for the three months ended March 31, 2011, compared to the corresponding period of 2010, was primarily the result of an increase in gross additions versus the prior period and a continued increase in the mix of smartphones for both new and upgrading subscribers. This was the single largest factor driving the year-over-year increase in expenses, and Wireless views these costs as net present value positive investments in the acquisition and retention of higher ARPU, in that they reflect lower churning customers who are on term contracts.

The year-over-year increase in other operating expenses for the three months ended March 31, 2011, excluding retention spending discussed below, was driven by increased spending on advertising and promotion costs for new marketing campaigns, higher data activations, and higher sales costs associated with both volumes and mix, which were offset by savings resulting from cost reduction initiatives and scale efficiencies across various functions.

Total retention spending, including subsidies on handset upgrades, was $183 million in the three months ended March 31, 2011, compared to $150 million in the corresponding period of 2010. The significant increase is a result of a higher mix of smartphone upgrades by existing subscribers, versus the corresponding period in 2010.

Wireless Adjusted Operating Profit

The 5% year-over-year decrease in adjusted operating profit and the 48.9% adjusted operating profit margin on network revenue (which excludes equipment sales revenue) for the three months ended March 31, 2011 primarily reflect the increase in the total operating expenses discussed above, driven heavily by the high level of smartphone activations and upgrades and related level of subsidy spending, partially offset by the increase in network revenue.


Wireless Additions to PP&E

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

                             
                        Three months ended March 31,
(In millions of dollars)                     2011 2010 % Chg
                             
Additions to PP&E                          
 
 
 
 
Capacity
Quality
Network - other
Information technology and other
                    $           128
                34
                11
                45
$           128
                43
                  6
                22
                   -
              (21)
                83
              105
Total additions to PP&E                     $           218 $           199                 10
                           

Wireless PP&E additions for the three months ended March 31, 2011 reflect spending on network capacity, such as radio channel additions, network core improvements and network enhancing features, including the continued deployment of our HSPA+ network. 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. Moreover, Quality 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.

The increase in Wireless PP&E additions for the three months ending March 31, 2011 is largely due to the increase in Information technology and other which was driven primarily by Wireless' share of an enterprise data warehouse project and a new enterprise-wide billing system.


CABLE

Summarized Cable Financial Results

               
          Three months ended March 31,
(In millions of dollars, except margin)       2011 2010 % Chg
               
Operating revenue            
 
 
 
Cable Operations
RBS
Video
      $           813
              116
                24
$           790
              111
                41
                  3
                  5
              (41)
Total operating revenue                     953               942                   1
               
Adjusted operating profit (loss) before the undernoted            
 
 
 
Cable Operations
RBS
Video
                    382
                26
                (7)
              340
                  8
                (2)
                12
n/m
n/m
Adjusted operating profit                     401               346                 16
Stock-based compensation expense                       (1)                 (3)               (67)
Integration, restructuring and acquisition expenses                       (8)                 (1) n/m
Other items, net                          -                 (5) n/m
Operating profit       $           392 $           337                 16
               
Adjusted operating profit (loss) margin            
 
 
 
Cable Operations
RBS
Video
      47.0%
22.4%
(29.2%)
43.0%
7.2%
(4.9%)
 
 
 
               
Additions to PP&E            
 
 
 
Cable Operations
RBS
Video
      $           150
                11
                   -
$           118
                  6
                  1
                27
                83
n/m
Total additions to PP&E       $           161 $           125                 29
             

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


CABLE OPERATIONS 

Summarized Financial Results

                   
              Three months ended March 31,
(In millions of dollars, except margin)           2011 2010 % Chg
                   
Operating revenue                
 
 
 
Cable Television
Internet
Home Phone
          $           468
              224
              121
$           458
              204
              128
$               2
                10
                (5)
Total Cable Operations operating revenue                         813               790                   3
                   
Operating expenses before the undernoted                
 
 
Cost of equipment sales
Other operating expenses
                            6
              425
                14
              436
              (57)
                (3)
                            431               450                 (4)
Adjusted operating profit                   382               340                 12
Stock-based compensation expense                   (1)                 (3)               (67)
Other items, net                     -                 (7) n/m
Operating profit           $           381 $           330 $             15
                   
Adjusted operating profit margin           47.0% 43.0%  
                 

Summarized Subscriber Results

               
          Three months ended March 31,
(Subscriber statistics in thousands)       2011 2010 Chg
               
Cable homes passed                  3,734            3,646                 88
               
Television            
 
 
Net additions (losses)
Total television subscribers
                      (8)
           2,303
                  1
           2,296
                (9)
                  7
               
 Digital cable            
  
  
 Households, net additions
 Total digital cable households
                        5
           1,743
                26
           1,689
              (21)
                54
               
Cable high-speed Internet            
 
 
Net additions
Total cable high-speed Internet subscribers
                        8
           1,698
                17
           1,636
                (9)
                62
               
Cable telephony lines            
 
 
Net additions and migrations
Total cable telephony lines
                        7
           1,014
                22
              959
              (15)
                55
               
Total cable service units            
 
 
Net additions
Total cable service units
                        7
           5,015
                40
           4,891
              (33)
              124
               
Circuit-switched lines            
 
 
Net losses and migrations to cable telephony platform
Total circuit-switched lines
                      (6)
                28
              (16)
              108
                10
              (80)

Cable Television Revenue

The increase in Cable Television revenue for the three months ended March 31, 2011, compared to the corresponding period of 2010, reflects the continued increase in penetration of our digital cable product offerings and pricing changes. The slowdown in the year-over-year growth rate of Cable Television revenue from the fourth quarter of 2010 to the first quarter of 2011 partially reflects on-going targeted bundling and retention initiatives to transition portions of the subscriber base to term contracts and a lower number of subsidized digital box sales.

Cable continues to lead the Canadian cable industry in digital cable penetration. The digital cable subscriber base grew by 3% and represented 76% of television subscriber base as at March 31, 2011, compared to 74% as at March 31, 2010. 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.

Cable Internet Revenue

The year-over-year increase in Internet revenue for the three months ended March 31, 2011 primarily reflects the increase in the Internet subscriber base, combined with Internet services price changes made in July 2010 and the timing and mix of promotional programs.

With the high-speed Internet base at approximately 1.7 million subscribers, Internet penetration is approximately 45% of the homes passed by our cable networks and 74% of our television subscriber base, as at March 31, 2011.

Home Phone Revenue

Home Phone revenue for the three months ended March 31, 2011, reflects the year-over-year growth in the cable telephony customer base with a corresponding cable telephony revenue growth of approximately 5%, offset by the ongoing decline of the legacy circuit-switched telephony base. This decline of the legacy circuit-switched telephony base was 80,000 compared to the base as at March 31, 2010. During the three months ended March 31, 2011, approximately 12,000 circuit-switched lines were migrated, of which 9,000 were migrated to a third-party reseller, and the remaining 3,000 were migrated to RBS. The lower net additions of cable telephony lines in the three months ended March 31, 2011, versus the corresponding period of 2010, are the result of lower sales and increased competition.

Cable telephony lines in service grew 6% from March 31, 2010 to March 31, 2011. At March 31, 2011, cable telephony lines represented 27% of the homes passed by our cable networks and 44% of television subscribers.

Cable continues to focus principally on growing its on-net cable telephony line base. Therefore, it continues its strategy to de-emphasize the off-net circuit-switched telephony business where services cannot be provided fully over Rogers' own network facilities. During the third quarter of 2010, Cable announced that it was divesting most of the assets related to the remaining circuit-switched telephony operations. Under this arrangement, most of its co-location sites and related equipment were sold. In addition, the sale involved residential circuit-switched lines, with the customers served by these facilities being migrated to a third party reseller starting late in the third quarter of 2010 and continuing over the first half of 2011. Approximately 42,000 of these subscribers have been migrated, leaving approximately 28,000 lines which will be migrated during the second quarter of 2011. For the three months ended March 31, 2011 the revenue reported by Cable Operations associated with the residential circuit-switched telephony business being divested totalled approximately $7 million.

Excluding the impact of the declining circuit-switched telephony business that Cable is in the process of divesting, the year-over-year revenue growth for Home Phone and for Cable Operations overall for the three months ended March 31, 2011 would have been 5% and 5%, respectively.

Cable Operations Operating Expenses

The decrease in Cable Operations' operating expenses for the three months ended March 31, 2011, compared to the corresponding period of 2010, was primarily due to lower equipment sales and cost reduction and efficiency initiatives across various functions. Cable Operations continues to focus on implementing a program of permanent cost reduction and efficiency improvement initiatives to control the overall growth in operating expenses.

Cable Operations Adjusted Operating Profit

The year-over-year growth in adjusted operating profit was primarily the result of the revenue growth and cost changes described above. As a result, Cable Operations' adjusted operating profit margins increased to 47.0% for the three months ended March 31, 2011, compared to 43.0% in the corresponding period of 2010.


ROGERS BUSINESS SOLUTIONS

Summarized Financial Results

                 
             Three months ended March 31,
(In millions of dollars, except margin)           2011 2010 % Chg
                 
Operating revenue           $            116 $            111                    5
                 
Operating expenses before the undernoted                            90                103                (13)
Adjusted operating profit                            26                    8 n/m
Integration, restructuring and acquisition expenses                            (1)                  (1)                     -
Operating profit           $              25 $                7 n/m
                 
Adjusted operating profit margin           22.4% 7.2%  
                 

Summarized Subscriber Results

                             
                        Three months ended March 31,
(Subscriber statistics in thousands)                     2011 2010 Chg
                             
Local line equivalents                          
  Total local line equivalents                               143               162               (19)
                             
Broadband data circuits                          
  Total broadband data circuits                           53                 33                 20
                             

RBS Revenue

RBS revenues include external revenues only and any intercompany revenues are treated as cost recoveries in our current presentation.  Previously, intercompany revenues were included in RBS revenues.  Comparative futures for 2010 have been reclassified to conform to the current year's presentation.

The increase in RBS revenues primarily reflects the acquisition of Atria, partially offset by the ongoing decline in the legacy portions of the business. RBS is focused on leveraging on-net and near-net revenue opportunities utilizing both the acquired Atria network and Cable's existing network facilities to expand offerings to the medium-sized enterprise customer base. For the three months ended March 31, 2011, the acquisition of Atria contributed revenue of $20 million, principally in the areas of data and Internet, which was partially offset by a decline in long-distance revenue and a decline in local revenues, compared to the corresponding period of 2010.

RBS Operating Expenses

Operating expenses decreased for the three months ended March 31, 2011, compared to the corresponding period of 2010 and reflects the decrease in long-distance costs due to lower volumes and country mix, lower sales and marketing within the medium and large enterprise and carrier segments, and operating efficiencies with the integration of Blink and Atria.

RBS Adjusted Operating Profit

The year-over-year growth in adjusted operating profit reflects the acquisition of the higher margin Atria and Blink data businesses and the RBS focus on growing its on-net data revenue which has more than offset the declines in the lower margin voice business. Cost reductions and efficiency initiatives across various functions have also contributed to higher operating profit in the quarter. For the three months ended March 31, 2011, Atria contributed adjusted operating profit of $13 million. RBS adjusted operating profit margins increased to 22.4% for the three months ended March 31, 2011, compared to 7.2% in the corresponding period of 2010.

 

VIDEO

Summarized Financial Results 

                   
              Three months ended March 31,
(In millions of dollars, except margin)           2011 2010 % Chg
                   
Operating revenue           $             24 $             41               (41)
                   
Operating expenses before the undernoted                           31                 43               (28)
Adjusted operating loss                           (7)                 (2) n/m
Integration, restructuring and acquisition expenses                           (7)                    - n/m
Other items, net                              -                   2 n/m
Operating loss           $           (14) $                - n/m
                   
Adjusted operating loss margin           (29.2%) (4.9%)  

The results of the Video segment include our video and game sale and rental business. Previously, the Rogers Retail segment also included the retail distribution of cable and wireless products and services. The business related to retail distribution of cable and wireless products and services are now included in the results of operations of Cable Operations and Wireless, respectively. Comparative figures for 2010 have been reclassified to conform to the current year's presentation.

Video Revenue

The decrease in Video revenue for the three months ended March 31, 2011, compared to the corresponding period of 2010, was the result of a continued decline in video rental and sales activity much of which is associated with the closure of 74 low margin store locations.

Video Adjusted Operating Loss

The adjusted operating loss at Video increased for the three months ended March 31, 2011, compared to the corresponding period of 2010, reflecting the trends noted above.

Cable Additions to PP&E

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

                   
              Three months ended March 31,
(In millions of dollars)           2011 2010 % Chg
                   
Additions to PP&E                
 
 
 
 
 
Customer premise equipment
Scalable infrastructure
Line extensions
Upgrades and rebuild
Support capital
          $             46
                60
                  9
                  1
                34
$             46
                40
                  8
                  3
                21
                   -
                50
                13
              (67)
                62
Total Cable Operations                         150               118                 27
RBS                           11                   6                 83
Video                              -                   1 n/m
              $           161 $           125                 29

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, including many of the costs to date of the cable telephony initiative;
  • 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 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 for the three months ended March 31, 2011, compared to the corresponding period of 2010 resulted primarily from higher Scalable infrastructure and Support capital expenditures due to projects associated with increasing capacity on our Video platform and quality related investments on our Voice platform.

The increases in RBS PP&E additions for the three months ended March 31, 2011 reflect the timing of expenditures on customer networks and support capital.


MEDIA

Summarized Media Financial Results

                 
            Three months ended March 31,
(In millions of dollars, except margin)           2011 2010 % Chg
                 
Operating revenue           $           339 $           290                 17
                 
Operating expenses before the undernoted                         349               285                 22
Adjusted operating profit (loss)                         (10)                   5 n/m
Stock-based compensation expense                           (2)                 (4)               (50)
Integration, restructuring and acquisition expenses                           (3)                    - n/m
Operating profit (loss)           $           (15) $               1 n/m
                 
Adjusted operating profit (loss) margin           (2.9%) 1.7%  
                 
Additions to PP&E           $               8 $               4               100
                 

Media Revenue

The 17% increase in Media's revenue for the three months ended March 31, 2011, compared to the corresponding period of 2010, was mainly the result of new subscriber fees generated from Sportsnet ONE and increases in advertising sales. Overall, all divisions within Media experienced a growth in revenue for the three months ended March 31, 2011, compared to the corresponding period of 2010.

Media Operating Expenses

Media's operating expenses for the three months ended March 31, 2011 increased, compared to the corresponding period of 2010, due primarily to planned increases in Television programming costs, principally in the area of sports content. In the first quarter, Media broadcasts a seasonally high and growing amount of relatively expensive NHL and NBA programming. Those expenses moderate during the off-season quarters while subscriber fees stay relatively constant thus contributing to increasing margins in those quarters.

Media Adjusted Operating Profit (Loss)

The first quarter is historically the seasonally weakest margin quarter for Media. The decrease in Media's adjusted operating profit for the three months ended March 31, 2011, compared to the corresponding period of 2010, primarily reflects the revenue and expense changes discussed above. The acquisition of BV! Media contributed approximately $4 million of revenue and $2 million of expenses during the quarter.

Media Additions to PP&E

Media's PP&E additions during the three months ended March 31, 2011 increased from the corresponding period in 2010 due primarily to Television broadcast equipment additions related to the CRTC mandated digital transition and facilities upgrades at The Shopping Channel.

Other Media Developments

On January 31, 2011, we closed agreements to acquire BOUNCE (CHBN-FM) in Edmonton, Alberta and BOB-FM (CHST-FM) in London, Ontario.


2011 FINANCIAL AND OPERATING GUIDANCE

We have no specific revisions to the 2011 annual guidance ranges which we provided on February 16, 2011. See the section entitled "Caution Regarding Forward-Looking Statements, Risks and Assumptions" below.


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

                             








Three months ended
March 31,
                2011         2010
                             
Operating revenue              2,987       2,876
                             
Operating expenses:                          
  Operating costs  
Integration, restructuring and acquisition costs  
Depreciation and amortization 














1,835
11
418








1,758
2
406
                             
Operating income                723         710
                             
Finance costs  
Other income (expense), net 
Share of the income of associates and joint ventures
  accounted for using the equity method, net of tax 














(268)
2

3








(183)
(2)

4
                             
Income before income taxes                 460         529
                             
Income tax expense (recovery):                          
  Current 
Deferred 







145
(20)




114
47
                125         161
Net income for the period              335     $   368
                             
Earnings per share:                          
  Basic 
Diluted  







0.60
0.60


$

0.62
0.62
                             

Rogers Communications Inc.
Unaudited Interim Consolidated Balance Sheets
(In millions of dollars)

                                                       






         


March 31,
2011
    December 31,
2010
    January 1,
2010
                                                       
Assets                                                    
                                                       
Current assets:                                                    
  Cash and cash equivalents 
Accounts receivable 
Other current assets 
Current portion of derivative instruments  












         

















-
1,405
462
-
 








-
1,498
364
1
 








378
1,305
338
4
                                1,867         1,863         2,025
                                                       
Property, plant and equipment 
Goodwill 
Intangible assets 
Investments 
Derivative instruments  
Other long-term assets 
Deferred tax assets 






























         





























8,598
3,282
2,728
946
3
169
57






 











8,437
3,108
2,514
878
6
175
52






 











8,136
3,011
2,540
699
78
152
84
                              17,650       17,033       16,725
                                                       
Liabilities and Shareholders' Equity                                                    
                                                       
Current liabilities:                                                    
  Bank advances 
Accounts payable and accrued liabilities 
Income tax payable 
Current portion of provisions 
Current portion of long-term debt  
Current portion of derivative instruments  
Unearned revenue  
























         



































49
1,735
520
19
-
56
363
 

















45
2,133
376
21
-
67
329
 

















-
2,066
208
14
1
80
335
                                2,742         2,971         2,704
                                                       
Provisions 
Long-term debt  
Derivative instruments 
Other long-term liabilities 
Deferred tax liabilities 




















         



















62
9,726
642
216
567




 







62
8,654
840
229
517




 







58
8,396
1,004
177
230
                                13,955         13,273         12,569
                                                       
Shareholders' equity                                3,695         3,760         4,156
                                17,650       17,033       16,725
                                                       

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

                             







  Three months ended
March 31,
                2011           2010
                             
Cash provided by (used in):                            
                             
Operating activities:                            
  Net income 
Adjustments to reconcile net income
  to net cash flows from operating activities:







335





368
    Depreciation and amortization 
Program rights and Video rental amortization 
Finance costs 
Current income tax expense 
Deferred taxes 
Pension contributions, net of expense 
Stock-based compensation expense 
Amortization of fair value increment on long-term debt 
Share of the income of associates and joint ventures accounted
for using the equity method, net of tax 
Other 































































418
51
268
145
(20)
(2)
8
-

(3)
4













































406
49
183
114
47
(12)
26
(2)

(4)
4
                1,204           1,179
  Change in non-cash operating working capital items                (240)           (183)
                964           996
  Income taxes paid 
Interest paid 







(3)
(222)





(7)
(146)
                739           843
                             
Investing activities:                            
  Additions to property, plant and equipment ("PP&E") 
Change in non-cash working capital items related to PP&E 
Acquisitions, net of cash and cash equivalents acquired 
Additions to program rights 
Other 




























(395)
(128)
(504)
(31)
(3)




















(365)
(89)
(130)
(46)
8
                (1,061)           (622)
                             
Financing activities:                            
  Issuance of long-term debt
Repayment of long-term debt
Premium on repayment of long-term debt
Payment on settlement of cross-currency interest rate exchange
agreement and forward contacts
Proceeds on settlement of cross-currency interest rate exchange
agreement and forward contacts
Financing costs incurred
Repurchase of Class B Non-Voting shares
Proceeds received on exercise of stock options
Dividends paid
              3,015
(1,817)
(76)

(1,208)

878
(10)
(285)
-
(179)
          -
-
-

-

-
-
(302)
1
(175)
                  318            (476)
                                 
Decrease in cash and cash equivalents (bank advances)               (4)           (255)
                               
Cash and cash equivalents (bank advances), beginning of period               (45)           378
                               
Cash and cash equivalents (bank advances), end of period           $   (49)     $     123
                               
The change in non-cash operating working capital items is as follows:                            
  Decrease in accounts receivable
Increase in other assets
Decrease in accounts payable and accrued liabilities
Increase in income tax payable
Increase in unearned revenue
          $   102
(109)
(259)
3
23
    $     141
(118)
(225)
-
19
              $   240     $     (183)
                               

Caution Regarding Forward-Looking Statements, Risks and Assumptions

This earnings release includes forward-looking statements and assumptions concerning our business, its operations and its financial performance and condition approved by management on the date of this earnings release. These forward-looking statements and assumptions include, but are not limited to, statements with respect to our objectives and strategies to achieve those objectives, statements with respect to our beliefs, plans, expectations, anticipations, estimates or intentions, including guidance and forecasts relating to revenue, adjusted operating profit, PP&E expenditures, 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, the currently estimated financial impacts of converting to IFRS accounting standards, and all other statements that are not historical facts. Such forward-looking statements are based on current objectives, strategies, expectations and assumptions, most of which are confidential and proprietary, that we believe to be reasonable at the time including, but not limited to, general economic and industry growth rates, currency exchange rates, product pricing levels and competitive intensity, subscriber growth and usage 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, and current guidance from accounting standard bodies with respect to the conversion to IFRS accounting standards.

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 of the financial information contained herein.

We caution that all forward-looking information, including any statement regarding our current intentions, is inherently subject to change and uncertainty and that actual results may differ materially from the assumptions, estimates or expectations reflected in the forward-looking information. A number of factors could cause actual results to differ materially from those in the forward-looking statements or could cause our current objectives and strategies to change, including but not limited to new interpretations 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 which are beyond our control and current expectation or knowledge. Therefore, should one or more of these risks materialize, should our objectives or strategies change, or should any other factors underlying the forward-looking statements prove incorrect, actual results and our plans may vary significantly from what we currently foresee. Accordingly, we warn investors to exercise caution when considering any such forward-looking information herein and that it would be unreasonable to rely on such statements as creating any 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 forward-looking statements or assumptions whether as a result of new information, future events or otherwise, except as required by law.

Before making any investment decisions and for a detailed discussion of the risks, uncertainties and environment associated with our business, fully review the sections entitled "Risks and Uncertainties Affecting our Businesses" and "Government Regulation and Regulatory Developments" in our 2010 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 conference call with the investment community will be broadcast via the Internet at rogers.com/webcast beginning at 5:00 p.m. ET today, April 26, 2011. A rebroadcast of this teleconference will be available on the Webcast Archive page of the Investor Relations section of rogers.com for a period of at least two weeks following the conference call.

 

 

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 Contacts

Wireless, Cable and Corporate: Terrie Tweddle, 416.935.4727, terrie.tweddle@rci.rogers.com
Media and Regulatory: Jan Innes, 416.935.3525, jan.innes@rci.rogers.com


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