Rogers Communications, Inc. Q2 FY2024 earnings call

• Rogers delivered strong financial and operating results for 10 consecutive quarters. Wireless had 162,000 mobile phone net additions, 1% ARPU growth, and 65% margins.
• Network leadership was reaffirmed by Umlaut and Opensignal, recognizing Rogers as Canada's most reliable 5G network and fastest/most reliable Internet.
• Cable is focused on returning to modest growth in Q4, with revenue down 2% but adjusted EBITDA up 9% and margins at 57%.
• Internet added 26,000 net new subscribers, driving growth through enterprise, MDUs, TPIA, and 5G home Internet.
• Media top line grew 7%, with adjusted EBITDA breakeven, expecting profitability in the second half driven by the Toronto Blue Jays and Sportsnet.
• Consolidated total service revenue increased 1%, adjusted EBITDA up 6%, free cash flow reached $666 million, down $80 million in capital expenditures.
• Balance sheet had $4.3 billion of available liquidity, weighted average interest rate 4.7%, and target to reduce leverage to 4.2 times by year-end.

Wireless: Service revenue grew 4% year-over-year with adjusted EBITDA up 6%. It had 162,000 mobile phone net additions, including 112,000 postpaid and 50,000 prepaid. ARPU increased 1%, and margins were at 65%. Cable: Revenue decreased 2% but adjusted EBITDA rose 9% with margins expanding to 57%. Internet: Added 26,000 net new subscribers. Media: Top line grew 7% with adjusted EBITDA breakeven, expecting profitability in the second half.

• Reaffirmed 2024 guidance.
• Target to reduce leverage to 4.2 times by year-end.
• Free cash flow expected in the range of $2.9 billion to $3.1 billion.
• Capital expenditures were $1 billion in Q2, down 7% from the prior year, with focus on reducing leverage through asset sales and free cash flow.

• Competitive market conditions impacting revenue and margins.
• Seasonality in prepaid subscribers potentially affecting churn.
• Delays in asset sales due to market softness.
• Ongoing pricing pressures and competitive dynamics in wireless and cable segments.

Q: About wireless ARPU and drivers, especially speed, service quality, etc.

A: Network reliability, distribution network, Disney Plus, convenient financing, and bundling are driving factors.

Q: On cable programming costs, how to bring down?

A: Going direct to studios, cutting middleman, and sourcing popular programming at lower margins.

Q: Prepaid uptick and seasonality?

A: Chatr brand was successful, pre-to-post migration is strong, and no expected net negative in future quarters.

Q: Wireless churn and ARPU trends?

A: Churn is elevated in the flanker category, but Rogers brand is improving churn with 5G and unlimited plans.

Q: Cable margin expansion and initiatives?

A: Integration progress, ERP systems, vendor negotiations, fiber backhaul, and media content cost optimization are underway.

Q: TPIA and fixed wireless access?

A: Both are offered with different use cases; TPIA is better for multi-user homes, while fixed wireless is suitable for mobile needs.

Q: Wireless revenue growth and cost rationalization?

A: 4% revenue growth in a competitive market, with AI and digital transactions expected to drive cost reductions.

Q: Cable revenue decline and satellite impact?

A: Satellite drives most of the revenue decline in cable, and video losses are likely seasonal.