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Rogers Communications(RCI) - 2024 Q1 - Earnings Call Transcript
RCIRogers Communications(RCI)2024-04-24 16:01
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Financial Data and Key Metrics - Total service revenue grew by 31% and adjusted EBITDA increased by 34% in Q1 2024 [4] - Capital expenditures were 1.1billion,up191.1 billion, up 19% year-over-year, primarily invested in Wireless and Cable networks [4][15] - Free cash flow grew 58% year-over-year to 586 million [36] - The company reaffirmed its 2024 guidance, including service revenue growth of 8%-10%, adjusted EBITDA growth of 12%-15%, and free cash flow of 2.9−2.9-3.1 billion [17] Business Line Performance Wireless - Wireless service revenue grew 9% in Q1 2024, with 98,000 postpaid mobile phone net additions, up 3,000 year-over-year [11][25] - Postpaid mobile phone churn was 1.1%, up 31 basis points year-over-year but down from the prior quarter [12] - Mobile phone ARPU increased by over 1% year-over-year, with organic ARPU growth of nearly 3% after adjusting for Shaw Mobile customers [32] Cable - Cable revenue increased 93% year-over-year due to the Shaw acquisition, but organic revenue declined 3% due to promotional competition [13] - Retail Internet net additions were 26,000, almost double the prior year's 14,000 [34] - Cable margins improved by 140 basis points to 56%, supported by cost synergies [14] Media - Media revenue declined 5% year-over-year, and adjusted EBITDA decreased by 65million,impactedbyhigherpayrollcostsandastrongprior−yearcomparative[55]MarketandStrategicFocus−Thecompanyachieved65 million, impacted by higher payroll costs and a strong prior-year comparative [55] Market and Strategic Focus - The company achieved 1 billion in cost synergies from the Shaw merger one year ahead of schedule, with 600millionrealizedinthefirstyear[7][14]−Rogers5GHomeInternetwaslaunched,targetingareaspreviouslyunderserved,withearlysignsofconsumerinterest[6]−Thecompanyisleveragingnetworkslicingtechnologytoprioritizefirstrespondersandaccelerate5GHomeInternetexpansion[8]−RogersisfocusingonreturningCabletoorganicrevenuegrowthbyQ42024,drivenbymarketsharegainsandfixedwirelessaccess[33][85]ManagementCommentaryonEnvironmentandOutlook−Managementexpressedconfidenceinthecompany′ssustainedmomentum,havingdeliveredstrongresultsfornineconsecutivequarters[9]−Thecompetitiveenvironmentremainsintense,particularlyinWireless,butthecompanyisbalancingsubscribergrowthwithfinancialperformance[12][25]−Thecompanyiscommittedtoreducingitsdebtleverageratiobyapproximatelyhalfaturneachyear,supportedbyearningsgrowthandassetsales[57]OtherImportantInformation−Thecompanyhas600 million realized in the first year [7][14] - Rogers 5G Home Internet was launched, targeting areas previously underserved, with early signs of consumer interest [6] - The company is leveraging network slicing technology to prioritize first responders and accelerate 5G Home Internet expansion [8] - Rogers is focusing on returning Cable to organic revenue growth by Q4 2024, driven by market share gains and fixed wireless access [33][85] Management Commentary on Environment and Outlook - Management expressed confidence in the company's sustained momentum, having delivered strong results for nine consecutive quarters [9] - The competitive environment remains intense, particularly in Wireless, but the company is balancing subscriber growth with financial performance [12][25] - The company is committed to reducing its debt leverage ratio by approximately half a turn each year, supported by earnings growth and asset sales [57] Other Important Information - The company has 4.6 billion in available liquidity, with a weighted average interest rate on borrowings below 4.8% [16] - Rogers is exploring the sale of noncore assets, including real estate and data centers, to further reduce debt [81][82] - The company is investing in fiber infrastructure and network enhancements, including DOCSIS 4 technology, to support future growth [28][117] Q&A Summary Question: Internet net adds and competitive environment [18][40] - Internet net adds were driven by both in-footprint growth and fixed wireless access, with early success in markets where Rogers previously lacked wireline assets [41][42] - The company is focused on premium 5G services and the Rogers brand, which is driving ARPU growth despite competitive pressures [63] Question: Interest cost savings and ARPU performance [46][50] - Interest costs for 2024 are expected to be 100millionlowerthananticipatedduetodebtrefinancingandassetsales[47][48]−ARPUgrowthremainspositive,evenafteradjustingforsubscriberwrite−downs,reflectingthecompany′sfocusonpremiumservices[66]Question:Costsynergiesandmarginoutlook[67][68]−Thecompanyhasachieved100 million lower than anticipated due to debt refinancing and asset sales [47][48] - ARPU growth remains positive, even after adjusting for subscriber write-downs, reflecting the company's focus on premium services [66] Question: Cost synergies and margin outlook [67][68] - The company has achieved 1 billion in cost synergies ahead of schedule and continues to identify additional efficiency opportunities [68] - Cable margins are expected to improve further, potentially reaching 57%-58% as revenue growth returns [94] Question: Fixed wireless access opportunity [71] - Rogers sees significant potential in fixed wireless access, with network slicing technology enabling dedicated lanes for this service [73] Question: Cable revenue erosion and growth strategy [100][117] - Revenue erosion in Cable is primarily due to video declines, offset by Internet ARPU growth and market share gains [101][117] - The company is targeting a return to organic revenue growth in Cable by Q4 2024, driven by fixed wireless access and wholesale strategies [85] Question: Wireless churn and pricing strategy [104] - Churn remains elevated due to competitive intensity, but the company is managing acquisition costs to maintain industry-leading margins [105] Question: Data center sales and immigration impact [81][83] - Rogers is exploring the sale of its data center business, which is separate from its core operations [81] - Immigration continues to drive market growth, with new-to-Canada customers contributing significantly to subscriber additions [83]