Rogers Communications(RCI) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2022, total service revenue increased by 3%, and adjusted EBITDA decreased by 1%. Excluding customer credits, service revenue was up 7% and adjusted EBITDA was up 8% [34][42][43] - Wireless service revenue rose by 3% as reported, but increased by 9% year-over-year when excluding credits. Adjusted EBITDA for wireless was down 1% but up 7% excluding credits [24][29] - Cable revenue and adjusted EBITDA were down 4% and 10% respectively on an as-reported basis, but both were up 2% year-over-year when excluding customer credits [30][34] Business Line Data and Key Metrics Changes - Wireless business saw postpaid phone net subscriber additions of 164,000, with total mobile phone net adds of 221,000, up 30,000 from last year. Year-to-date total net wireless additions reached 448,000, up 137% from last year [10][25] - In the media segment, revenue grew by 12%, driven by strong attendance at sports events and increased advertising revenues [33] - Cable segment experienced a decline in subscriber growth due to aggressive promotional activities from competitors, with 6,000 retail Internet net customer additions and positive video net additions of 7,000 [32][30] Market Data and Key Metrics Changes - The Canadian wireless market remains competitive, with Rogers capturing approximately one-third of the sector's mobile phone net adds, totaling around 666,000 for the quarter [27] - Roaming revenues increased by 130% compared to the pre-pandemic third quarter of 2019, reflecting a recovery in global travel [28] - Postpaid mobile phone churn was reported at 0.97%, slightly up from 0.85% a year ago, but remained under 1% [27] Company Strategy and Development Direction - The company is focused on enhancing network resiliency and customer experience, with a capital expenditure of $872 million in Q3, up 18% year-over-year, marking a record quarter for capital investment [18][35] - The ongoing acquisition of Shaw is expected to enhance competition and consumer choice, with management expressing confidence in the regulatory process [8][20] - The company aims to maintain its full-year guidance despite the impact of customer credits, indicating strong operational execution [18][42] Management's Comments on Operating Environment and Future Outlook - Management noted that inflationary pressures have not materially impacted the business, and they continue to monitor the economic environment closely [42][92] - For Q4, the company anticipates growth in service revenue and adjusted EBITDA across all business segments, with wireless expected to see mid-to-high single-digit growth [43][44] - Management expressed optimism about the ongoing demand for unlimited plans and the overall strength of the wireless market [10][58] Other Important Information - The company reported free cash flow of $279 million, down from $507 million the previous year, primarily due to higher capital expenditures and interest on borrowings [36] - The debt leverage ratio at quarter-end was 3.2x, down from 3.4x at the end of 2021, indicating a solid financial position [38] Q&A Session Summary Question: Concerns about promotional activity in wireless and its impact on revenue and EBITDA - Management indicated that the difference in revenue and EBITDA growth is due to timing and lapping strong prior year results, not necessarily indicative of increased promotional spending [48][49] Question: Trends in wireless market growth and potential impacts from the outage - Management noted that immigration is a significant driver of growth, and the impact of the outage was isolated, with churn returning to normal levels [57][60] Question: Insights on Internet net add performance and competitive intensity - Management acknowledged the impact of the outage and competitive market conditions on net adds, but expects stronger results moving forward [75][78] Question: Outlook on ARPU and roaming revenues - Management expressed confidence in ARPU growth driven by increased usage and roaming revenues, which are above pre-pandemic levels [126] Question: Updates on DOCSIS 4.0 and network upgrades - Management stated that the rollout of DOCSIS 4.0 will occur when the technology is proven, with ongoing investments in fiber and cable infrastructure [106][108]