Rogers Communications Inc (RCI) 2002 Q3 法說會逐字稿

))Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Rogers Communication Inc. and Rogers Wireless Communication Inc. third quarter 2002 earnings release conference call. During the presentation, all participants will be in a listen-only mode. And afterwards we will conduct a question and answer session.

At that time, if you have a question, please press the one followed by the four on your telephone.

As a reminder, this conference is being recorded, Wednesday October the 16th, 2002.

I would now like to turn the conference over to Mr. Bruce Mann, Vice President, Investor Relations for Rogers Communications. Please go ahead, sir.

))Bruce Mann: Thanks, operator. Good morning everybody. Thanks for joining us. I'm here in Toronto this morning. As we've done in previous quarters, we'll spend the first portion of the call discussing and taking questions on Rogers Wireless, and then the second potion of the call, focusing on Rogers Communications.

We have Ted Rogers with us this morning to share some opening remarks. And in addition to Ted we have Nadir Mohamed, President and CEO of Rogers Wireless; John Gossling, Rogers Wireless CFO; Rob Bruce in charge of marketing; Bob Berner on the technology side. And then also with me from RCI is Alan Horne, our Chief Financial Officer, and Lorraine Daly, our treasurer.

The detailed third quarter releases for both Rogers Communications and Wireless were made available this morning. If you don't have a copy you can find them on the Rogers.com website. They're also posted on First call and PRNewswire. The releases include important cautionary safe-harbor language that will apply equally to any forward-looking statements in our discussion on the call this morning.

So what we're going to do is keep our comments brief so we can focus on your questions rather than summarizing the lengthy releases.

So with that, I'll turn the call over to Ted Rogers and then Nadir for some brief comments. Go ahead, Mr. Rogers.

))Edward Rogers: Good morning, everyone. As you know, we had a good quarter across Rogers. We delivered on what we said we would do - revenue growth of nearly 11 percent; operating profit of 16 percent; and all of the operating divisions contributing to the growth.

The businesses are on track to continue our progress - do I have this right? - our progress through the fourth quarter of the year and into 2003. And we have maintained a very strong liquidity position of available funds of 2.2 billion at the end of the quarter to fully execute our business plans.

Cable continued its trend of solid sales performance driving good levels of high speed Internet and digital cable subscriber additions in the quarter, while at the same time, doing an excellent job of servicing and maintaining its stable base of 2.3 million basic cable subscribers.

While cable accelerated its sales and marketing spending over the past two quarters to drive the awareness around digital cable and the strong sales momentum, we are fully focused on improving our core cable margins. And John and his team are fully engaged in this task, and certainly have my confidence on the great job they're doing.

Wireless continued to deliver improvements across all key operating metrics, putting up terrific subscriber revenue, churn and operating profit growth. The work of Nadir and his strong team is clearly reflected in the results of this and recent quarters.

Media's performance in this top media market reflects the strength of their category-leading brands. Their results reflect how quickly Tony Viner and his team have been able to adjust their cost structures during times of market softness. The acquisition of SportsNet and our new radio stations over the past year has furthered strengthened media's positions in the market.

I think we were all impressed when on very short notice the Rogers media team launched Omni 2, our new Ontario broadcast television station in a record five months after receiving license approval. Omni is not just an extremely valuable broadcast TV license that we were awarded, but also a fantastic value creation opportunity by being able to combine and leverage the infrastructure of our existing multi cultural television operation CFMT.

As I said in the last quarter, at both cable and wireless we capex - the capex cycle peaked in 2001. Our cable plant is now one of the most advanced in North America. And our GSM-GPRS overlay is complete at wireless.

On both the capital and expense sides, we are actively engaged in reviewing every cost in the business as we finalize our 2003 and forward plants. Across the company we are committed to demonstrating disciplined capital spending which, when combined with our continued operating income growth, will enable us to maintain the financial flexibility that I laid out back in 1998 as an objective over the next five years as being so important for this company to obtain and maintain.

So overall I think the operating companies delivered a respectable quarter in the face of a tough economy. We've got a solid funding and liquidity position. We've got terrific leadership teams with plenty of bench strength and a fantastic set of very strategic assets with tremendous growth potential in front of them.

But now, over to Nadir Mohamed.

))Nadir Mohamed: Thank you, Ted, and good morning, everyone.

In the third quarter we remained absolutely focused on our core objective of profitable growth - delivering our fourth consecutive quarter of double-digit operating income growth. As well this quarter we were again successful in significantly shifting the mix of our load to towards higher revenue post-paid customers. We finished the quarter with our wireless voice subscriber base up 14 percent year over year. We added over 71,000 post-paid net additions in the third quarter of this year, up 29 percent over last year. Post-paid subscriber additions represented 78 percent of our total growth additions, and 81 percent of our total net additions. We finished the quarter with 17,000 net pre-paid adds, for a total of 89,000 net adds.

Our focus remains on this high value post-paid segment. And we expect the strong post-paid mix to continue to continue throughout the balance of the year with relatively lower pre-paid numbers continuing.

Our year over year network revenue growth of 13.3 percent is our strongest performance in two years. We were successful in holding post-paid (RPU) at the $58 level year over year, while pre-paid (RPU) increased 13 percent on higher yields from the product. The strength in (RPU) is driven by the aggressive changes we put in place earlier in this year to increase our revenue profile.

On a customer base management front, we continue to stabilize churn with post-paid churn for the quarter down to 2.03 percent from 2.2 percent last year. Prepaid churn was 2.02 percent, down 43 percent year over year.

On the acquisition front, the blended cost of acquisition was $365 per gross add excluding retention costs. This was up primarily due to the higher per subscriber acquisition costs associated with the significant improvement year over year in post-paid additions.

On the operating side, while still supporting the double-digit subscriber growth year over year, we were able to hold our operating expense growth to 6 percent, or 8.5 percent excluding the impact of the reduction in contribution expense. So net-net, operating income for the quarter increased by 31 percent, bringing our year to date growth in operating income to almost 27 percent. Given this success, we are increasing operating profit guidance to 490 to 510 million from the 450 to 480 million guidance level that we set at the start of the year.

Our capital expenditure of 126 million this quarter is below last year's capex in Q3, 150 million, reflecting the completion of our GSM-GPRS roll-out earlier this year. Our network investment the in the fourth quarter will include spending to meet capacity requirements for our GSM network based on the success we're having loading customers on this new network.

On the financing side, our plans call for our existing bank credit facility of $700 million to meet our financing needs over our planning horizon, and to free cash flow. And at the end of Q3 we had access to approximately $649 million in additional funds under this facility. And as you saw in our release, we utilized the proceeds from unwinding a portion of our in the money foreign currency swaps to opportunistically buy back approximately 33.9 million face value of debt in the open market at significant discounts.

To summarize, the priorities I outlined for the year of driving profitable growth through optimizing our customer mix, reducing churn, aggressively kick starting SMS and data products remains unchanged. And we expect to continue executing on our targets consistently as we go forward.

With that, I'll turn it over to Bruce.

))Bruce Mann: Thanks, Nadir. Operator, we're ready to take questions on Roger Wireless from the participants. But would you please take a moment to explain how you'll like to conduct the polling process.

And then also I'd just like to quickly remind people that we'll cover cable, media and RCI corporate on the second portion of the call, so we'd appreciate if you could focus the questions during the first part on Rogers Wireless.

Go ahead.

))Operator: Thank you.

Ladies and gentlemen, if you'd like to register a question for today's question and answer session, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you'd like to withdraw your registration, please press the one followed by the three. If you are using a speakerphone, please lift your handset before entering your request.

One moment, please, for the first question.

Our first question comes from John Henderson from Scotia Capital. Please proceed with your question.

)) John Henderson: Yes. Thanks very much. It's a great quarter, Nadir and team.

I'm wondering if you can help us a little bit with subscriber losses or defections from (Microcel) and roaming revenue losses from (Clearnet) to the extent they might have occurred in the quarter. And then just finally on churn, if you can say whether or not you expect a sub 2 percent level in the - that we reached in the - in the 1990s.

))Nadir Mohamed: Just - there's obviously a few parts to that question, so I'll try and do justice to all of the parts.

But starting with the issue of subs, our focus clearly has been on post-paid and you've seen that in the numbers throughout. To the extent that you're seeing the success that we haven't seen what (Microcel) is going to release, so I think it would be premature for me to comment on how they're doing. What we've got in market works for us in terms of growth rates that we're focused on which is post-paid.

As far as the specific issue of any targets, targeted offers to (Microcel), first off, our offers tend to be unique to different segments that we're going after. And they are definitely rooted in making sure that our shareholder values increase, and it's not about doing something at the expense of our shareholder value. So we don't tweak these things to respond to any one specific player.

The second thing, on roaming - and specifically the reference to (Telex/Clearnet) roaming - clearly with they deal made last year, we would have expected the roaming revenues to start eroding. We're seeing some of it, but not the extent that -- not a material extent. We - by the way, going forward, no question that we'll start -- we'll start seeing more erosion in that particular category.

))John Henderson: Churn. Do you see that getting back to sub 2 percent levels?

))Nadir Mohamed: Yes. I think all along if you remember, where we - first two quarters of the year we were at sub 1.9 or just below 1.9. I think I was asked way back in Q1 what I thought the year would look like, and I've been pretty consistent saying it'd be tough to hit the 2 percent level. And what's good is now we've had three quarters where we've either been just below the 2 percent, or in this quarter just light slightly above - by the way, significantly lower than last year same quarter, 2.2.

))John Henderson: Yes.

))Nadir Mohamed: So I think Q4 tends to be a higher churn quarter, but we're clearly targeting a 2 percent range for the full year.

))John Henderson: Thank you.

))Operator: Our next question comes from David Lambert from TD Newcrest. Please proceed with your question.

))David Lambert: Good morning. I have questions about the liquidity portion in your (MDNA). I was wondering why you guys paid back a bank debt of 86 million when clearly you seem to be motivated to be buying back public debt in the market at the discount.

And are there restrict tours restrictions on your bank credit facility that prevents you from using it to buy back public debt?

))(Bruce Mann): Alan, if I can get you to lead off and Lorraine? With ...

))Alan Horn: Sure. On the repayment of the bank debt, was just (kind of) through the generation of funds in the quarter, so (I would) say just the normal circulation of the funds.

I think in terms of the debt buy back it was done on an opportunistic basis. We used the proceeds from the unwinding of an FX - an interest rate swap on it - to buy whack back the debt at obviously very - as Nadir said - very attractive prices.

I think we'll continue to look to situations where we can do that on an opportunistic basic basis. But one of the things that is important to us is to maintain access and for access to liquidity particularly in these current times.

))David Lambert: OK. Are there restrictions on your bank credit facility for using it to buy back public debt?

))Alan Horn: Sorry. No, there are no restrictions in our banking facilities on...

))David Lambert: OK. Just one more on this liquidity section.

You had a reduction of 51 million in your working capital. Is there a specific event that caused that $51 million - that cash windfall?

)) John Gossling: David, John. No. It's not really a cash windfall. That's the effect of interest accruing, and the semiannual payments come in Q2 and Q4. So it's really an increase in accrual that's happening. And we are managing our working capital on the asset side - both receivables and inventory levels have come down slightly from Q2.

But I wouldn't want to believe it was necessarily cash generation. It's just non-cash interest that will become cash interest in Q4.

))David Lambert: OK. All right. Thank you.

))Operator: Our next question comes from Rob Goff Credit Suisse First Bank (sic). Please proceed with your question.

Mr. Goff, your line is open. Please proceed with your question.

))Rob Goff: Thank you very much. Good morning. It's hard to believe, but we're nearing the Christmas period. Can you give us any preliminary channel feedback in terms of what the expected tone or nature of competition will be in the critical selling period?

))Nadir Mohamed: Rob, the simple answer is no. I suspect there's more than you listening in on this call. But let me kind of get back to something that I referred to my opening remarks.

There's no question in my mind we're going to continue exactly on the path that we have. Very disciplined - focus on profitable growth, focus on post-paid. So you certainly get a sense of what our stance is going to be.

))Rob Goff: OK. And sort of related, could you talk about the (RPU) outlook - and that was one of the exceptional areas on the quarter - and the impact there of the per-minute billing change?

))Nadir Mohamed: Yes. Just generally on (RPU) we've been fairly successful, though as you know this quarter we're holding at flat on post-paid. And if you kind of look back at what's happened here, there's a couple of big drivers on that. One is clearly the mix of customers we're getting more on the post-paid, more on the higher value customers. We've also made some pricing changes that have helped us in keeping that (RPU) up at the level it's being. So, you know, continues - if you look forward, if we continue to hit those kind of underlying drivers, then it speaks well to the stability of (RPU) going forward.

As far as the per-minute change, frankly it's fairly early to have said that that would have any material impact on Q3 or Q4. But to be very specific, we have gone to per-minute on consumer. And, Rob, maybe you can speak to the business and corporate side timing.

))Robert Bruce (?): Yes. I think it's fair to bring that up.

We've said on the previous call that we expected that the impact of per-minute would be about a dollar per customer affected. In June, we made the move on consumer. We've just triggered the move on our GSM - or rather our GBM customers, our general business market customers. And we'll be moving on corporate at the first of November.

So there was some more complexity with implementing those changes in the business market but those will all be made as of November 1.

))Rob Goff: Thank you very much.

))Operator: Our next question comes from Paul Pew from Griffiths McBurney. Please proceed with your question.

))Paul Pew: Thanks, very much.

My question is on capex. It's admirable that you're guiding to the low end of the capex range. But at 30 percent revenue it still appears to be high in the current financial environment. Can you discuss your planning on the capex cycle - why the budget hasn't been trimmed below previous guidance?

And I know you're not through the planning process for fiscal year 2003 yet, but can you just give us a sense of the order of magnitude? In comparison to your current budget of 550 to 600 in '02, where would we expect to see '03 numbers come in on the capex side?

))Nadir Mohamed: Paul, just to -- before we get into any specifics on this year, in terms of 2003 guidance obviously we're still in our business planning budgeting mode so we're not ready to give any specific guidance on that other than to say clearly, as we stated before, we've completed the GSM-GPRS roll-out. And so the - basically the high period, if you will, of capex is behind us. And you can see it improving as we go forward. Beyond that I think it's pretty much too early to talk numbers.

In terms of Q4, capex. First off, yes, we are guiding to the low end so I want to make sure everybody understands that. And having said that, if you look at the seasonality, Q4 will include an investment to basically handle the capacity requirements on GSM-GPRS. Our loadings on that network - on our new network - have been very strong. We continue to see that - or we see that continuing in the next quarter. So we're going to have to accomodate for that. And that's reflected in our guidance in terms of the low end.

))Paul Pew: Is there any chance that you could get to free cash flow in 2003 given the current environment that we're in, both from a financial perspective and also your operating environment?

))Unidentified Company Representative: Paul, I'll give you full marks for persistence, anyway. But given my previous answer on capex it's pretty hard for me to comment on free cash flow which would at least, I assume, include a (view of) capital.

))Paul Pew: Right. Thanks.

))Operator: Our next question comes from John Grandy from Yorkton Securities. Please proceed with your question.

))John Grandy: Thank you. I had all the same questions as Paul Pew. So I'll have to think of another one.

I wonder if you would care to give us your sense, Nadir, as to whether you have been increasing your market share in this quarter or whether you think it's your market share of the industry growth is similar to what it has been the first half of the year?

))Nadir Mohamed: John, pretty hard or me to say given we haven't heard the other three and - the other three results. And I don't - you know, I wouldn't want to prejudge what their results are. The one thing that I want to keep emphasizing is, you know, we set our game plan way back when late last year. And that's where we're executing to. And what we're encouraged by is the good growth that we're having on post-paid. And to me that's really the share of the market that we want to see more often.

As far as the specifics of Q3, we'll just have to wait for the other guys to release.

))John Grandy: OK. If I could have a brief follow-up.

Can you give us an indication of what sort of increment to (RPU) you're seeing at this date from the GPRS based services?

))Nadir Mohamed: Yes.

Early days, I think in the last call that we talked about the higher usage and somewhat higher (RPU) profile off these customers. I think the reality is as we get more and more customers on this network, it will tend to take on a more representative profile of our existing base.

There's no question there's some higher usage in our GSM-GPRS base. And what will be interesting over time to see is how much data usage gets driven out of that customer base. It's still fairly early on that front.

))John Grandy: OK. Thanks.

))Operator: Our next question comes from Greg MacDonald from National Bank Financial. Please proceed with your question.

)) Greg MacDonald: Thanks. Good morning, guys. A question for Nadir on wireless margins.

I can appreciate the fact that your higher consumer mix has always meant that your margins are going to be at the low end relative to other companies in the sector. Having said that, you've made some pretty good progress on the productivity success. And I wonder if you could talk to us a little bit about what you think the opportunity is in the next couple of years. Sometimes when we look historically - I don't want to say it's easy - but companies can make gains in a short period. And then we see stabilization or potentially even a decrease again in the margins.

Where do you see margins in the longer term? What's the potential opportunity with this particular business for target margins, let's say, two or three years out?

))Nadir Mohamed: Again, a great question, because obviously we've delivered some pretty strong operating earnings growth in the last two quarters. I think important, though, I'll make a distinction. You made reference to productivity. There's two sides of it. Certainly there's been some pretty focused cost containment. But probably the important thing to note is that the revenue growth is a big driver of value. And between revenue/(RPU) and churn, you probably have two of the largest levers for what would be margin and growth going forward.

So I think, one, you've got to acknowledge that when we set our game plan, we talked about changing the mix of customers. And that meant not only post-paid, but to your point, getting more of the business market.

I think in the early part of the year I made reference that we weren't making inroads as much as we'd like on the business side. We have been seeing stronger results in the business front over the last quarter and a bit. So that's encouraging. I think that speaks well to going forward.

The key on revenue will also be pricing stability. Frankly in the last little while in the wireless market certainly relative to previous years, it's been more stable than I've seen it. And I think that's good news. A lot of what I speak to in terms of going forward will rest on disciplined marketing from all of the players in this business.

So you kind of look at the revenue side as being key on churn. You've seen us improve churn significantly year over year. I think 2 percent was a good target going forward. Obviously, as we improve our mix of customers it becomes more achievable to look at lower than 2 percent churn rates, particularly as we get higher business customers. But those are the key things.

On the cost side, we continue to try and drive down hardware subsidies - you know, working with manufacturers, looking at every other piece of the business in terms of opex. But I think generally speaking, COA, tough to see it declining given the mix that we have. Distribution costs I think at a point that we are not going to see significant reductions within each discipline. The key in distribution will be changing the mix.

So those are some of the drivers going forward. Obviously we're encouraged with the margin improvement. And we just have to keep working on the drivers to make sure that continues.

)) Greg MacDonald: OK. Helpful. Thanks.

))Operator: Our next question comes from Glen Campbell from Merrill Lynch. Please proceed with your question.

)) Glen Campbell: Yes. Thanks very much. I have two questions. The first is on your non-marketing expenses.

If my calculations are right, they dropped $4 million between second quarter and third quarter. Could you talk about what's going on there and whether we might expect further improvements in the next few quarters?

))Nadir Mohamed: Glen, can you help us with the specific number that you're looking at?

))Glen Campbell: I'm thinking the network and administration expenses - everything other than COA. It looks like they were down sequentially.

))John Gossling: Yes, Glen. It's John Gossling. I'm just struggling to rectify your numbers. But, you know, certainly we have seen some improvements both on the contributions and in our roaming costs. Those are sort of the big drivers of declines that - you know, there's some pluses and minuses - all relatively small numbers when you look at it sequentially. Nothing really jumps out. It's sort of a little bit here, and a little bit there up and down. But the big drivers are contribution and roaming costs.

))Glen Campbell: I'm just looking Q2 to Q3, so...

))John Gossling: ... I'm looking at [inaudible] as well.

))Glen Campbell: There's nothing of a onetime nature is there?

))John Gossling: No. There's no one-time credits at all. It's all sort of just ongoing stuff.

)) Glen Campbell: OK. My second question was on the possibility of acquiring (Microcel's) customer base. Nadir, you've been pretty dismissive of that in the past. I mean, for a lot of us it looks like a compelling opportunity if it can be done on the right terms.

Could you talk about, you know, what the complexities might be in moving over their customer base, if you could acquire it on the right terms? And why this wouldn't be a good acquisition?

))Nadir Mohamed: Well, Glen, I think there's a premise that you're working on. And the last thing I want to do is sort of fuel any speculation by talking about how we could move customers.

Let me kind of -- just because I know the question keeps coming up on (Micorcel), all I can do is repeat what I've said previously. And so let me just do that in the interest of getting on with this topic. And that is that, you know, we've always maintained it's pretty hard to see what value we can get from the - from a network perspective. We've already rolled out our GSM-GPRS network.

Clearly to your point, there's over a million customers. But the thing to remember is it does have a higher mix of pre-paid. Having said that, there's no question in my mind, if you talk to any one of the three large operators, we'd all say the same thing - and that is three players is a lot healthier than four. So we'll just have to wait and see.

Sometimes it's best to let nature take its course. And beyond that the last thing I want to do is fuel any kind of speculation one way or the other.

))Glen Campbell: OK. Thank you.

))Operator: Our next question comes from Dvai Ghose from CIBC. Please proceed with your question.

))Dvai Ghose: Thank you very much. Nadir, if I could follow-up from the last question, mainly because most of my questions have been answered already.

On the (Microcel) side, everyone has fixed their attention on the PCS subscriber base. But I'm wondering if you could give us some ideas as to whether you're still interested in the MCS license that they have the (Innicuk) brand name that they've used by never rolled out. You did compete against them for the license and lost. I'm wondering if you still have interest in looking at that.

))Nadir Mohamed: No - you know, do I - you know, with this topic, I think every time that we address any specific issue all we end up is fueling speculation one way or the other. And I'd just as soon not be in a position to kind of do that. I've always felt that it's bad enough that we're asked to comment on speculative issues. The last thing I want to do is actually create them.

))Dvai Ghose: Yes. No. That's fair enough. Maybe I can try another question very quickly then.

On the per-minute billing question, most people are focused on the (RPU) element. I'm wondering if you see a churn reduction element in that, given the fact that if a subscriber who is grandfathered on per-second billing has to move to another carrier he will lose that per-second billing.

Do you think that's a material factor for you in the industry?

))Nadir Mohamed: Well, I'll just get Rob to answer that.

))Robert Bruce (?): Yes, Dvai. There's no question that people who are on per-second rate plans are going to be less likely to churn, as they know if they churn they'll move to a per-minute rate plan. The other thing that it helps us with too is migrations from rate plan to rate plan.

))Dvai Ghose: Yes.

))Robert Bruce (?): So it works for us really in two ways.

))Dvai Ghose: Thanks very much.

))Operator: Our next question comes from Steve Flynn from Morgan Stanley. Please proceed with your question.

))Steve Flynn: Good morning. I have two questions.

The first question - with regard to the repurchase of the senior sub note, it looks like the proceeds for that repurchase came from the unwinding of currencies swap facilities. The question is, are some of your bonds not as hedged as they were before to movements in the Canadian dollar-U.S. dollar exchange rate? Because I know a number of your bonds were fully hedged, some were partially hedged.

Were some of those hedges removed to use the proceeds to buy back the 8.8 percent?

))Alan Horn: Basically, (this is Alan), all we did was we unwound the hedges and used the funds to do the repurchase, and then put on a new hedge at the current rate. And I think it's set out in the notes in the financial statements as well.

))Steve Flynn: OK.

))Alan Horn: So we're still in the same hedge position.

))Steve Flynn: Okay. And with regard to - if you ever wanted to use the revolver to repurchase securities, it would only be the (inaudible) senior secured notes that could be utilized - that you could utilize the revolver to repurchase?

))Lorraine Daly: No - this is Lorraine Daly. No. That's not true. We can buy back any debt. There are no restrictions at all.

))Steve Flynn: Oh. There's no restrictions. So you could buy back more of the sub notes if you wanted to?

))Nadir Mohamed: That's right.

))Lorraine Daly: If we chose to.

))Steve Flynn: OK. Thank you.

The second question is with regard to the CRTC contribution, I understand it's 1.4 percent of qualified revenues. Is that rate set? Is there any risk that that rate could change for this year?

And moving into 2003, when do you expect to hear what that rate will be for 2003? And is there any risk that that rate could be higher? Thank you.

))Nadir Mohamed: Yes, Steve. It's Nadir. There's certainly nothing that I've heard that would have us see any measure of risk on that particular item for the year.

))Steve Flynn: And for 2003 do you expect it to remain stable?

))Nadir Mohamed: Yes. And as I said, really there hasn't been much movement in this area for a bit. And I think the last time that this particular item was put forward, certainly the indications were towards a 1.4 percent, and potentially even lower at the time, but they stuck with 1.4. So that would be my best guess.

))Steve Flynn: OK, great. Thank you.

))Operator: Our next question comes from Peter Rhamey from BMO Nesbitt Burns. Please proceed with your question.

)) Peter Rhamey: Good morning. Two questions.

First on pre-pad. You've made a terrific improvement in your percentage of pre-paid on net additions year on year. But on a sequential basis it's now 20 percent of your net additions versus, I guess, minus 12 percent which might have been an aberration last quarter.

I was wondering what's happening out in the marketplace that suddenly you saw a pickup on your pre paid product relative to other players just to give us some flavor?

And looking forward, Nadir, you've said that you'd want to see an improvement, but I'm just wondering if you could give us some sense of what your ideal percentage of mix is on the pre-paid side.

))Nadir Mohamed: Why don't we get Rob to start off with the view of the markets?

))Robert Bruce (?): Yes. There's really two things that have driven slightly higher pre-paid numbers up on a net basis in Q3.

Number one, as you probably saw the very significant declines we've seen in churn, down to 2.02. Some of the lowest levels we've seen on prepaid churn. We think that's driven by a number of things, but predominantly the fact that we've shifted to a no-subsidy model, so our costs for prepaid are higher to get in than anybody else's, and these customers tend to be churning less. And that's what the early indication is.

The second factor is, as GSM handset prices come down, we are able to move down to a $149 price point, which allowed us to capture a little bit more of the of the gross addition market share on the prepaid side. So those two factors were really what drove the difference.

))Peter Rhamey: Actually, you mentioned GSM. Do you have a number for GSM uptake during the quarter?

))Robert Bruce: Yes. We sold 105,000 GSM/GPRS phones in the quarter. And we had 33,000 migrations.

))Peter Rhamey: And 33,000 migrations.

And I wanted to continue on the GSM theme with regards to cap ex. You mentioned that you're going to be spending on GSM capacity, but presumably with that uptake on GSM handsets, most of your increased traffic now is coming on the GSM side, so if you can give me some insights - or all of us an insight into why spending on GSM isn't offset by a decline on expenditures on a (TDMA), and therefore your estimates are a little bit high on the guidance.

))Robert Bruce (?): Yes. Just to make sure that we're clear, in terms of investments, we have cap investment in TDMA. So we're not putting any more expenditures in that particular network at all. And that's been the case for a bit now. So all the investments tend to be now around capacity increases.

One of the opportunities we have is to look at forecasts going forward just to optimize our spend between the two networks. But again, that depends on the budgeting process and our view of loads next year, which we have not finalized.

))Peter Rhamey: But GSM per unit of capacity is more efficient for you than your TDMA network was. Is that not correct?

))Robert Berner: It's Bob Berner. On a cost basis for units of capacity, you're correct on a go-forward basis, which is one of the compelling reasons to have deployed GSM in the first place, in addition to the fact that it supports all the functionality in the handsets the customers want to buy.

))Peter Rhamey: Bob, do you have a sense of what that increase in efficiency is?

))Robert Berner: In terms of investment efficiency?

))Peter Rhamey: Yes.

))Robert Berner: John, I'm not sure that we quantify that number publicly. It is - it is slightly less expensive at this point in time, and we expect that delta to increase as we add more flow into GSM in the future.

))Peter Rhamey: OK. Great. Thank you.

))Bruce Mann (?): Operator, we'll probably have time for one more question on wireless.

))Operator: Our next question comes from Richard Talbot from RBC. Please proceed with your question.

))Richard Talbot: Thanks very much. Clearly, a nice sequential improvement in terms of gross margin. But at 30 - or at EBITDA margin. But at 30 percent, that would still be less than, let's say, a North American average for a developed wireless company in the 35-plus range.

Nadir, I wondered if there are any particular factors that you see preventing you from hitting something more like a 35 percent margin longer term?

))Nadir Mohamed: Well, Richard, you started with 30 and then talked about exceeding 35. I certainly like your confidence in our capabilities. But I think it's a matter of staying on course with the kind of driver that we've talked about, which is, you know, you look at the three or four key things in this business. (RPU) is one of them, clearly. Churn would be another. COA is the third. And those are probably the most important of all of them. And I think we're doing the right things in terms of focusing on them.

Part of the issue with margins is you also have to be careful in terms of what the definitions of margins are, and I know that there's been different numbers quoted in terms of percentage of total revenue versus percentage of net revenue. So I suggest that that is one thing that we need to get better clarity around what the benchmark is in Europe.

But generally, my view is that if we keep improving on those three metrics, we'll continue to drive improved margins. And the trick is going to be - this is all done in an environment I think that's conducive to strategy that's driven on a profitable growth. And I'm speaking to pricing stability. And if we continue to have - see the three or four players having discipline in market, then I think the potential for significant market margin growth is there.

))John Gossling: Richard, just to jump in - it's John Gossling. If you look at our margin excluding the equipment revenue, which is essentially a zero margin business for us, the margin is actually above 34 percent for the quarter. So that's probably more in the range that you're thinking if you look at it on network revenue.

))Richard Talbot: Thanks. And Nadir, when you took over a little over a year ago, I believe, I know there was certainly a big focus on cost reduction efficiency improvement, particularly at the back - at the back office. And can you update us on where you are today? Have you largely gotten out most of those synergies? Or do you still see some room for significant improvement there?

))Nadir Mohamed: There's no question that a couple years ago - I think most people are familiar - we had some real issues with our billing and care environment, particularly with our implementation of (AMDOCS). I think the good news is that those issues are behind us. The system has been stable. And our service levels have improved significantly. We've been running, you know, I'd say even - if I looked at this quarter, well over double the service level of our same quarter last year.

So that's good news, both from a cost perspective, but also from a service - from a customer perspective. And that all helps us on churn.

To the question of, you know, of looking at getting more out of it in terms of lower costs, no question there's opportunities. I think one of the things that we've taken on as a thrust is the notion of sales service. And sales service both from customers interacting with our systems directly, but also our distribution doing the same. And I think that is a big initiative that drives out some of the labor costs that we have today, because all of the - all of those interactions today are handled for the most part by human interactions. We do have some volume on IVR - interactive voice response systems, but there's more we can do there.

))Richard Talbot: Thanks.

))Bruce Mann(?): All right. Operator, if you could give us just a moment. We're going to go on mute for just a moment here and switch a couple of people around. We'll be right back on for the second half of the call. Thanks.

))Operator: Ladies and gentlemen, we will be taking a brief intermission. We ask that you continue to stay online. Thank you for holding.

))Bruce Mann(?): (AUDIO GAP) Laura Nixon, the CEO and CFO of Rogers Media are here, as is Greg Henderson, our corporate controller.

I think - let me just make a quick comment. Most of the participants would appreciate it if we could keep the questions to one or two parts, and then we'll cycle back around if we have time on the queue. And of course, Eric and I would be happy to answer any other questions that people have after the call to the extent you don't get them answered or we don't have time on the queue.

So with that, I'll turn it over to you, operator, to poll for questions for the second portion.

))Operator: Ladies and gentlemen, if you'd like to register a question, please press the one, followed by the four, on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered, and you'd like to withdraw your registration, please press the one, followed by the three. One moment please for the first question.

Our first question comes from Bob Bek from CIBC World Markets. Please proceed with your question.

))Bob Beck: Thanks. Good morning. I just had a question on the very strong new product growth you had, both on digital and high speed. Can you give us a sense as to how much of this came from bundles and how much were sort of one-off product sales? Just trying to get a sense as to the timing for when these products actually started generating full revenues.

As I understand it, the bundles, you get a savings, but would the revenues start right away? Or is there a bit of a lag as far as starting to recognize some of these revenues?

))Edward Rogers (?): The sale of bundles was about 33,000 in the quarter, so it was obviously a strong contributor. And again, there was a very strong proportion of people who were upgrading to both digital and high speed Internet from analog. In fact, 24 percent of those people had neither - you know, had neither digital nor high speed at the time that they took the bundle. So this was sort of a double win for us in terms of them taking two new products from us.

Because of the success we enjoyed in the quarter, the - on the digital side, a lot of the people are still in their pre-preview period, so they will have, you know, not that they have to - the pre-preview period helps them to pick the channels, for example, that they're going to pick out of the (Pick 10) that comes as part of the bundle. But in terms of the revenue and the price point, they're starting to pay us for the bundles the minute they sign up. So it's contributing from the day they sign up.

))Bob Beck: OK. So the expectations for Q4 cable, I mean, to kind of get to the lower end even for the EBITDA guidance, you'd have to see some pretty strong continued strong growth obviously on revenue, but also on the EBITDA side.

Is that - I know Ted talked about some further improvement in core cable margins. Is that something we can start to look for, therefore, in Q4 and from that point forward? Or - just trying to get a sense as to the magnitude of improvement we can - we could see perhaps in Q4.

))Edward Rogers (?): Well, can I say that our objective is obviously to do all of the things you talked about, in particular beginning with stabilizing the margins and trying to, you know, begin to push them back up. And that's something that begins now, not, you know, not any day other than now. In fact, it began well before this.

We will have helping us in the fourth quarter the full effect of the rate increases that have been applied, starting with the ones that were done in the summer, which had some modest impact in Q3 on the basic subscriber base. And of course, there is an additional series that took effect on October the 1st in some of the other deregulated systems that will only make a contribution in Q4. In other words, they didn't contribute in Q3.

In addition to that, we are obviously working hard to ensure in the fourth quarter that we continue to have strong sales results from both high speed Internet and from digital, as well as I - what I hope will be, you know, more than satisfactory results in terms of a protection of a basic subscriber base, which is, you know, really, at the end of the day, key to it all.

So I think that that, combined with our cost reduction initiatives, which have been ongoing and which are picking up in terms of the intensity are - of those, will contribute to our being able to, you know, come in at I think what will be toward the low end of the EBITDA guidance for the year, but nonetheless, within the range. That's excluding any costs that arise out of - out of downsizing.

))Bob Bek: That's great. Thanks very much.

))Operator: Our next question comes from Benjamin Swinburne from Morgan Stanley. Please proceed with your question.

Benjamin Swinburne, Morgan Stanley: Thank you. Good morning, guys. Quick question just on the networks. John, could you just run through where you are at the end of the third quarter in terms of upgrades, two-way, and 750? And are you still planning, you know, given sort of the cap ex capital outlook in the markets right now, to get to 90 percent 750 at the end of next year? Thanks.

Gossling (?): On the on the status of the network, we are, you know, continuing to hold to our, you know, projection that we will be 90 percent upgraded to 750, which, of course, by definition means as well two-way by the end of '03. We expect by the end of '02 at the end of the fourth quarter to be at about 72 percent. So that we're on track with where we project it to be.

And in a nutshell, what we have left to finish, and it really it really is accounts for the remainder of the of the upgrade expenditures is the Shaw (ph) areas in Scarborough (ph) and Richmond Hill (ph) and New Brunswick. I mean, in a nutshell. There's bits and pieces more, but, I mean, those are the two areas, and those are more recently acquired systems that were more recently budgeted for upgrade. And in areas such as New Brunswick, as an example, you know, to upgrade it, in many cases is to make available for the first time a high speed Internet. And, in fact, we're seeing great success selling that product in the province of New Brunswick, and it's only because we've upgraded the network we can do that.

In areas like Scarborough (ph) and Richmond Hill (ph), it's going to allow us to expand our range of digital services offered to people which are more limited relative to the what I'll call the old Rogers, or the Rogers systems that have been in Rogers' hands for some time.

Was I forgot. Was there another part to the question I didn't answer?

No. You got it. Thanks a lot.

Our next question comes from Tim Casey from BMO Nesbitt Burns. Please proceed with your question.

Tim Casey, BMO NESBITT BURNS: Thanks. Good morning. John, I'm wondering if you could comment on any potential ramifications from the current Videotron (ph) situation? And do you think, in a in a clumsy sort of way, if I can put it that way, Videotron's (ph) actions has opened up an intellectual can of worms that may lead to programming fees declines to the cable industry, and specifically ...

... up an intellectual can of worms that may lead to programming fees declines to the cable industry, and specifically to Rogers?

Gossling (?): I've forgotten the word you used to describe the Videotron (ph) situation, and I'll try to adopt that word, or I won't adopt by inference clumsy, but I think they have a number of things that they're that they're pursuing. And I think that, you know, whether it is the manner in which our competitors compete, or whether it is the burden that is on us of on all of us of increasing programming fees, there are things that need to be aired out.

Do I think that what they're doing is going to have any material impact on programming fees? Possibly. There's no question when we sit with the programmers, we have made it very clear to them, that given everything, including their economic and financial performance, ours, and all the things that sort of surround both, that we're not we're not in a position to absorb, or, for that matter, to, you know, pass through to our customers on a continuing basis continuous programming increases. And that's the posture we're taking in the meetings.

I think in many cases the programmers are, you know, sort of more responsive than they might previously have been to sitting down and having a good solid discussion about that. Is it going to lead to decreases in programming costs in the short term? I don't think so. But I think these issues are now sort of much more on the table, and they certainly are very clearly aware, without us being as much in the newspapers, of what our position is on that. You know, and it speaks to the whole question of value and all the rest of it. And this is not a criticism of programmers. It's just a statement of the reality of we can see from ratings, we can see from subscriptions. It's what people are buying, what they aren't buying, what drives subscriptions and so forth, and we're having to sort of try to apply some market discipline to that environment with the programmers.

I just it's Ted here. I'd just like to add that, you know, we're also in the in the programming business and broadcasting, and there are very heavy responsibilities from the CRTC that requires heavy expenditures on Canadian talent so that we can have a Canadian system and not just have an American system. We also the programmers do have a problem that apparently the at least one of the satellite company's service is able to stolen a great chunk of it. And Canadian programmers are and talent and artists are not being paid for the performances that are being stolen.

So I don't see any downward revision of the CRTC requirements to the programmers, and that would tend to make it difficult for any significant downward move of prices for programming services.

Thank you. Just as a follow-up, is there's a lot of obviously condominium units coming online in Canada or, sorry in Toronto in the next little while. Could you discuss the nature of the relationships? Is it going to be a very competitive situation, or do you expect to maintain your market share with all the new units coming online? Thanks.

Gossling (?): We expect to maintain our market share, and I base that not on speculation, but on the fact that in most cases, when these buildings are under construction, that is the time we go and negotiate with them, and that is the time I assume our competitors are showing up to have similar discussions. And we're very pleased with the success we've had on a percentage of the units being built, or whatever measure you want to sign those people up to provide Rogers services.

And it's a it's a very much a kind of a building-by-building thing because in effect the sort of developers really have to cede a lot of the authority to make those decisions to the condominium boards of directors and so forth, and we're just having success, you know, at making sure that Rogers has a significant presence in those new buildings going forward.

Thank you.

Our next question comes from Greg MacDonald from National Bank Financial. Please proceed with your question.

Greg MacDonald, NATIONAL BANK FINANCIAL: Thanks, and good morning again. It's not I don't want to say it's not often we get Ted on the on the line, but he's not ...

... question comes from Greg MacDonald from National Bank Financial. Please proceed with your question.

Greg MacDonald, NATIONAL BANK FINANCIAL: Thanks, and good morning again.

It's not I don't want to say it's not often we get Ted on the on the line, but he's not on every quarter, so I want to take the opportunity to ask him a question on something that the newspapers have been talking a little bit about recently, the succession issue. And in particular, Ted, if you could just comment on whether anything's changed recently in your minds, particularly with respect to your view and Rogers' as a corporation's view of how Edward now fits into the into the situation in terms of potential executive positions.

Well, I'll do my best. I think it must be obvious to anybody who attends these conference calls or comes and meets with our with our with our executives that we've got an extremely good bench strength in all of the three jobs and the three departments, three companies, and there is great bench strength under the CEOs in those three companies.

I'm very proud of the change since the last few years, and I think you've sensed it. I think you sense it in this meeting today. Now, if one of those executives decides to seek a career in another field, then I think we're confident that we've got a number of alternatives to go forward to our compensation committee with in quick response and to our board. And so that, of course, when you have an outstanding leader go into another field, you will suffer for that. You will pay for that.

But I think we have competent people, including Edward, who has done an excellent job in RCI in the program planning and the planning for our budgets and strategic plans. Whether it's he or others or other outstanding candidates for that, that would be dealt with by the compensation committee and then the board of directors.

But I just want to say that I'm very grateful personally for the for the work that the operating companies are doing. This is not sort of all done by RCI. RCI is doing the things that you would expect RCI to be doing in the financial area and the legal area. We are trying to work get the groups working together to lower costs, to increase sales, to improve our efficiencies. Having great success at that through the cooperative actions of the operating companies.

I don't know if that is over-answering your question, but I just, you know, ad libbing, that's how I feel.

Well, I'll rarely I'll rarely say over-answering as an analyst is a negative thing. Perhaps one follow-on on that. You refer to the outstanding leader. I mean, I'm aware I'm not going to get specifics on what's going to occur here in the next half-year or so, but can anyone give us the market's eagerly awaiting an answer on this issue. Can anyone give us an indication of timing? Will we know, before, let's say, the next two months or before the end of the fiscal year, an answer on this issue?

Gossling (?): Maybe it's better I should answer that. It's John speaking. That I'm not sure I probably wasn't the outstanding leader, but I mean, you're asking about my plans, and let me just say this. First of all, I'm here. I'm on the job each and every day. I'm not taking any time at the shareholders' expense or anybody else's expense to do anything other than my job. We're doing the budgets, we're doing the plans for next year, we're focusing on cost reductions, and all the things you've asked about thus far.

And the answer to your question is yes. You will know, you know, well within that time frame if I have any plans to change careers. But I'm fully engaged in what I'm doing and intend to continue to be so.

Great. Thanks, John. Thanks, guys.

Our next question comes from Tim Newington from Goldman Sachs. Please proceed with your ...

. . . continue to be so.

MacDonald (ph): Great. Thanks, John. Thanks guys.

Our next question comes from Tim Newington (ph) from Goldman Sachs. Please proceed with your question.

Tim Newington (ph), Goldman Sachs: A couple quick questions. First of all, on margins, just wondering with respect to declines sequentially quarter to quarter what basically results in that? And then, secondly, just on basic rate increases, could you give us some idea of the number of subscribers that could be impacted by that for the residual of this year?

Yes. The margins I think it was a combination of things that contributed. First, I think is just the mix of product is changing you know as we sort of see the kinds of healthy digital increases we've seen.

As you see, for example, even in that quarter a healthy number of digital increases but a lot of them still not yet you know through preview periods and what not unable (ph) to contribute to you know to the purchase of programming and so forth.

And so we have some of the costs associated with selling and marketing and bringing them on and not yet some of the revenues. We've seen some increase in customer care costs but I think that probably the single biggest contributor has been the fact that we've made an investment in sales and marketing in the last couple of quarters that was designed to do two things.

One is to produce what I hope are the sales numbers you'll find acceptable - more than acceptable in today's context. But, secondly, to increase the awareness of digital because as discussed in previous calls, we you know found that the lack - relative lack of awareness of digital was contributing to basic subscriber you know instability and that that was very much not in our interest.

And so I think a combination of you know of more moderate sales and marketing expenditures more in line with past experience, people coming on stream with additional programming revenue and our cost reduction initiatives including an attack on a turn (ph) will allow those margins to stabilize and begin to come back up.

I'll just jump (ph) out (ph) on the second part of your question - on the rate increase - customer in October, another 250,000 customers. So, as John eluded to before, we should get a bit (ph) of incremental $2 million per month - from those increases.

Newington (ph): Yes. Just to follow up on the margin question, I guess could you quantify somewhat how much sales and marketing picked up this quarter relative to other quarters? And also just - I was asking more specifically on the high speed data you know went from 41.7 percent to 40 percent from Q2 to Q3 and what was the reasoning for that.

Well, I think in - you're doing (ph) you may see some impact there though I'm very pleased to confirm what you said which is that the margins have stayed over 40 percent notwithstanding that we now have about eight percent of our base you know in the light you know product. Which is a product that has proven to be successful for what it is which is a large day (ph) retention tool and so on.

But you know I think the good news on that is that you know the - those customers has had you know really insignificant or immaterial impact on margins because as you look at the - of different other costs that go into producing the overall internet margin it's relatively stable.

And I forget what the second part was - oh, on the sales and marketing. You know I - it's difficult - I mean we could obviously quantify in terms of dollars spent. But I mean I'm not - you know I think we obviously spent more in the last two quarters partially in response to this experience we had in the first quarter.

But I think that what we're now as I see doing is moving more to a more peace time type of expenditures. That means we'll be aggressively in the marketplace in the fourth quarter. But we will be - you know we'll be sort of really rich - what's the word I'm looking for, moving back to the kinds of expenditure levels and so on that you've seen in fourth quarters traditionally.

Newington (ph): OK. Thank you very much.

Our next question comes from . . .

. . . looking for, moving back to the kinds of expenditure levels and so on that you've seen in fourth quarters traditionally.

Newington (ph): OK. Thank you very much.

Our next question comes from Paul Pew (ph) from Griffith McBerney (ph). Please proceed with your question.

Paul Pew (ph), GRIFFITH MCBERNEY (ph): Thanks very much. It's on cap ex again on the cable side. Happy to see your exceeding expectations on RGUs but clearly disappointed a little bit in your eluding to the fact that you may actually go above your cap ex budget.

I would have thought that there should have been or is enough leeway in that capital budget to still be within range even though you are exceeding expectations on RGUs and maybe from a trimming of the engineering budget. So, I'm just trying to get a sense for how do you balance that in the context of the current financial markets?

And I guess just as a follow on to Tim's questions on the margin, core cable margin, it seems to be coming a little bit of a trend where this thing keeps ticking down in the gap between yourselves and the other industry leaders is widening.

So, I'm wondering, first of all, when do you actually take some decisive action to increase core cable margins? And, secondly, what is your target on core cable EBITDA margins? Where would you be happy if you could get them to stabilize?

John (?): Well, we're in the planning process right now for next year and it's not yet complete. And obviously we're going to try and try to get those numbers to stabilize at as high a number as we can. And I think when we're being compared to others hopefully we're being compared on an apples to apples basis.

But - that your question sort of started off dealing with capital expenditures and I guess you know you - in expecting to finish slightly above our guidance that we gave for the year, that carries inside it an increase say over the originally budgeted numbers of say 20 to $30 million driven by the demand for our products, for our high speed modems and for digital boxes, for example. It carries within it an expenditure higher than we had anticipated with respect to new area rebuilt which is new areas we've rebuilt to produce new customers for the cable company.

So, I think if you take all of those different - again, clips (ph) and tapes (ph) into account, you will see that we've done exactly what you would have expected us to do which is we've absorbed most of a significant increase in demand driven capital and most of some unanticipated expenditures on new area rebuild that exceeded our plans and come in at a number that we think is going to be very modestly over the guidance that we gave.

And we're continuing to work hard for next year and again the planning process is not yet complete to bring those numbers down as rebuilds are completed, as we achieve efficiencies on the capital side as well as on the operating side as we you know work hard on bringing those numbers down by prioritizing our projects in an even more disciplined way.

And, finally, you sort of asked well, when are you expecting decisive action. I think that we have been doing this on a gradual basis over the course of the year. And I think that if you look at for example some of the efforts we've made to reduced the head count in the company over the course of the year it is not insignificant compared to others.

That is going to have a material positive effect on our ability to contain costs and improve margins next year. And those are plans that we've implemented over the course of the year and continue to implement at this time.

Pew (ph): Is it still the objective of the company to be free cash flow in 2004, the cable operation?

John (?): Yes.

Pew (ph): Thank you.

John (?): By the end of 2004. That's what we've said consistently and we're not moving away from that position.

Pew (ph): Thanks.

Our next question comes from John Grandy (ph) from Yorkton Securities (ph). Please proceed with your question.

John Grandy (ph), Yorkton Securities (ph): Thank you very much. I guess getting back to the question of the cable margins, I mean one of the - you mentioned apples to apples, John, and one of the differences between you and certain other companies is your expensing of subsidies. I'm just wondering if it's possible to know approximately what that would have amounted to in the quarter.

John (?): It would be a number of $800,000

John Grandy (ph), Yorkton Securities (ph): . . . approximately what that would have amounted to in the quarter.

John(?): It would be a number of $800,000.

Grandy (ph): Good. Thanks very much. And just - you also said I believe eight percent of your base currently on the internet light (ph). Could you give us an exact subscriber number? I apologize if it's in the press release . . .

Well, yes, we're not . . .

Grandy (ph): . . . because I didn't find it.

I mean the number's above 50,000 subscribers.

Grandy (ph): Fifty thousand. Thank you.

Our next question comes from Glenn Campbell (ph) from Merrill Lynch. Please proceed with your question.

Glenn Campbell (ph), Merrill Lynch: Yes. Thanks very much. Two questions. First, could you talk about the number of cable subscribers who are buying their digital boxes and how that trend might have developed say through the quarter?

I think the total number is just about 21,000 and if you look at it on a sequential basis it's in kind of you know really a fairly sort of steady and not changing kind of pattern in terms of how many that the total of 21,000 cumulatively. We've had them on sale I guess for two-and-a-half quarters.

And so you know I think what the expensing of the boxes has done for us you know aside from the choice we've made on accounting treatment is to you know cause us to look at the sale of the box in a very disciplined way and to make sure that we make it available you know to those customers who want the purchase option.

But it's interesting because given the choice which they have most of the customers continue to choose to rent the box. And so - but that's the number.

Campbell (ph): OK. Thanks. That's quite helpful. My follow up was on the growth of your customer base outside Toronto in the new suburbs. My understanding is a lot of those customer additions are through a wholesale arrangement with Future Way (ph). And I just wanted to confirm that is in fact the case and whether you're getting a lot of growth outside Toronto in that sort of Yorkvaughn (ph) area other than through Future Ray (ph).

Yes. In fact, it's the opposite to what you were speculating on. We're getting good solid growth probably in the fastest area - fastest growing area in the country, in Yorkvaughn (ph) outside of Toronto. But the majority of that growth is not coming through Future Way (ph).

As Future Way (ph) has evolved, had its own set of challenges, we have - we continue to work with them and have an interest in them but we are achieving most of that growth on our account now. And putting in our own network and delivering services over our own network in those subdivisions.

Campbell (ph): Terrific. Thanks very much.

Our next question comes from Vince Valentini (ph) from TD Newquest (ph). Please proceed with your question.

Vince Valentini (ph), TD Newquest (ph): Thanks very much. First, on digital boxes. As you continue to add more, I guess the cost of them becomes more important. I saw that Motorola now has a box below 200 U.S. I'm wondering if Scientific Atlanta is moving in that direction as well and if you can give us an update on what you're paying?

Well, they've certainly come down - the price has come down. But if you said are we down yet to the place where that $200 U.S., the answer is no. But we're moving in that direction. And there have been I guess a series of smallish price reductions. When you add up a series of smallish price reductions, it starts to get material.

Would we like it to happen faster? Yes. Are we exploring the purchase of alternate boxes that can operate on our system? Yes, very actively. And I think there's nothing like that to sort of stimulate some interest on the part of our incumbent supplier to keep those prices moving down as fast as possible. We've certainly seen faster decreases in modem prices than we've seen in - box prices.

Valentini (ph): OK. If I could ask a different question. On rate increases for internet, I guess close to this time last year is when yourselves and Bell (ph) both announced a $5 increase. I'm wondering if you think we're sort of capped out for a while or whether you think we could see another rate increase of that or smaller magnitude for both your high speed and your light speed customers maybe sometime over the next three to six months?

The light is a relatively new product and so we're going to have to sort of assess the market as it goes on that. The high speed I think we - the first increase we've done in five years. But $5 on a base price then of 39.95 was a fairly significant increase. And so I think that while you might not wait five years until the next one you might want to sort of let the market fully digest the last one which was a fairly significant percentage and was only six, seven months ago . John h. Tory ?: ... next one, you might want to sort of let the market fully digest the last one, which is the fairly significant percentage, and was only six, seven months ago.

So, you know, I think we're going to watch the light (ph) product as it evolves. It's still relatively new. And we're going to - we'll watch the whole marketplace, obviously. And, we're still in the planning period for next year, so we've taken those seats (ph).

OK, thanks.

Our next question comes from Richard Talbot (ph) from RBC (ph). Please proceed with your question.

Richard Talbot (ph), RBC (ph): Good morning. John, I wondered if you could comment - you implied that you were taking about your normal share of new homes past in terms of subscribers, which would imply something around 70 percent. But I wondered if you could just actually confirm that for us.

And then, with respect to your new high-speed additions, about what percentage of those will be light (ph) customers.

John h. Tory ?: First of all, on the, I can confirm what you said with respect to the, to the percentage of homes, new homes constructed that we have that we are taking. It's in that order of magnitude.

I can only say to you that the vast majority of the, of the gross additions that we've signed up I this quarter were high-speed in the order of 80 percent. So that would leave the remainder for the light (ph) product.

Richard Talbot (ph): OK, thanks. And with respect to the strong growth in digital boxes, is there any way of trying to gauge how much of that demand might have been driven by people looking to sign up for the VOD (ph) service, or, you know, buy those? And if you could give us a sense of what the actual buy rates are at this point, that would be very helpful.

Thanks.

John h. Tory ?: I think it's because - I mean, I'll ask Mike Lee (ph) to comment on VOD (ph) specifically. But I think with respect to - I'm not sure. You know, we've launched VOD (ph) only in Central Toronto, and we've done that for a number of reasons, not the least of which is to make sure that the system works well, which Mike can comment on, and to sort of get a sense for how the business works in a, in a, you know, a large but relatively confined area. As a result, you haven't seen us doing a lot of, kind of, for some of the rooftops marketing on this. It's more of a directed at digital box holders in Central Toronto.

So I don't think it's simulated a lot of the demand you'd see. Especially in areas outside of Toronto where there, where it isn't yet available.

Mike, do you want to pick up on that?

Mike Lee (ph): Yes. We launched VOD (ph) in the third week of August. And we went out with a fairly low-key approach initially. Primarily, just to, as you can imagine, introducing a two-way video product actually is fairly complex, both technically and operationally.

So, we started by ourselves that we had no technical issues and no operational issues associated with Video On Demand. What we did was basically notified all of our digital customers via direct mail that they had access to this new service.

And to give you a flavor for where we are right now from a performance perspective, the two-week period ending in August, we saw essentially a two buy per month average for the active household for VOD, active VOD household. And then, in September, we saw that lift to just below 2.5. And in the first two weeks of October, any indication of what October's final results are going to be, we're going to see another healthy lift again.

But this time primarily, not driven by an increase in buy rates so much as an increase in awareness of the product. Because we are starting to now wrap up with a call-out campaign to those customers once again. And, it needs to be unveiled to harder (ph) awareness (ph) of the VOD service.

Richard Talbot (ph): And in terms of content titles, what would it be up to right now?

Mike Lee (ph): Our current number is roughly 330. Of that, of that number 220 - I'm sorry - about 20 of them are actual free. 310 are actually pay-for titles. In the subcontract in our current pay-per-view window right now, we probably offer anywhere in the range of 12 to 15 new release titles, primarily constrained by channel capacity.

In the VOD service today, of the 330, about 45 to 48 titles are actually in that new release window. So, it's movies that are just coming into availability on pay-per-view.

John h. Tory ?: What it might mean, not to challenge that issue, is that we have a 48-channel offering on pay-per-view. But even a 48-channel offering, which would be one of the biggest North America, does confine

Mike Lee (ph): ... into availability on pay-per-view.

John h. Tory ?: What it might mean, not to challenge that issue, is that we have a 48-channel offering on pay-per-view. But even a 48-channel offering, which would be one of the biggest North America, does confine you in terms of the number of titles you can be offering at any one time, because of the nature of pay-per-view.

Yes, we have multiple, we have frequent start times. So you have to allocate multiple channels for one movie on pay-per-view.

Richard Talbot (ph) Great. Thanks.

Our next question comes from Rob Goff (ph) from Credit Suisse First Bank.

Please proceed with your question.

Rob Goff (ph), Credit Suisse First Bank: Thank you very much. Could you discuss any trends that you may be seeing the greater block (ph) market?

And, as a second question, could you discuss the rollout of the VOD in terms of availabilities and potentially additional content to be added to the service?

John h. Tory ?: I'll ask Mike in a moment to comment on your second question to do with VOD. I think the answer, I tried to answer part of that a minute ago. But on the grey and black market issue, I think, I think there's been some dampening down of that market, the black market issue, as people become more aware of the fact that there is, there is an issue of some legality of the, of the activities of the retailers in particular.

I think that it is still going to be incumbent upon the government and it's various agencies and so on to take more determined steps to enforce the law if they believe in the importance of the Canadian Broadcasting System, as Pat (ph) made reference to earlier.

And as yet, we've seen sort of, you know, little of that activity. And the activity is not going to be focused on individual consumers, but I would think on the retail sector where, you know, a lot of these people are putting money in their pockets, frankly, that are coming from the illegal piracy of television signals.

The grey market issue, I think, is the one that you, I think we refer to it in the same lingo. It's the one that has to do with, in effect, the sets (ph) of television signals from the licensed Canadian distributors. One in particular that being Real (ph) Express (ph) View (ph).

They have begun, in very recent times, to address this issue, which we think of as being very serious. Not only in terms of - it's a, it has a bad impact on the overall marketplace. Again, it threatens the health the Canadian Broadcast System, it undermines the value of the programming rights that we and other distributors pay for, and the customers also pay for. Because, again, if people can get the stuff for free, and in effect, steel it, then I guess it's going to cause a lot of other people who might be inclined to buy it to think twice about that.

And, we're hardened, I guess, by some of the, you know, limited recent initiatives we've seen Bell (ph) taking. But I think they still have a large chore to address if they want to make sure that they're benefiting not only their own business, in terms of not having people steel from them, but also making the Canadian Broadcasting system, the integrity of that system hold.

So, that's the best I can do on that. I'll give you over to Mike on VOD.

Mike Lee (ph): The guards (ph) measure them, but we've always maintained that they've positioned with the spectrum of all new products, in that we have an expectation of what the new (ph) bugs (ph) produce. Both in terms of financial performance, and we are continuing to monitor the current VOD offering as well as results coming from that video offering.

And, we'll continue to deploy it as long as it continues to measure up to our expectations.

With regard to content, I think you can probably, at this point in the (INAUDIBLE) break it out the product offering to three to six categories, one of which is the Movies on Demand product, SBOD (ph), and the new category, which is Free on Demand.

With respect to our studio negotiations, we have been negotiating with a number of the studios, if not a majority of the studios leading up tot the VOD launch, and basing a lot of our negotiations on what our expectations of what the product would produce from a modeling perspective.

What we've done is, just prior to launch decided rather than to model it, we're going to get theoretical numbers, and to get a little bit of operational data and experience under our belt so that we can actually build that back into our assumptions, and then go back to the studios.

We're set to engage with the studios, I would say, it's fair to say that they are warming to our forum (ph), with respect to the type of negotiations and terms of those agreements. And I think you'll see some programs in the near future.

Just to give a little bit of context with our current relationship with Alliance (ph) and Allanis (ph), and our incremental appeals with GBA at Lion's Gate, we essentially are offering roughly about 35 percent of Hollywood output today. So - and that depends on a per-year basis, obviously, because each of the studios produce - have a different performance on a year to year basis from title to title.

But we are able to offer right now somewhere in the range of 30 percent to 35 percent of everything that Hollywood's producing.

On the (inaudible) side, it's been quite rewarding to see that a fair numbers of programming suppliers of both traditional and nontraditional have been coming to the table with interesting (inaudible) proposals and offerings for us to consider, and we're currently in negotiations with a number of them on providing different (inaudible) to our customers. And we think, based on some of the results we've seen out of the U.S. marketplace, that actually could be quite a positive benefit to the POD (ph) platform.

And then (inaudible) on demand seems to have taken on a life of its own in this industry, and we are in discussions in terms of trying to produce, I think, what will be compelling content for our customers so that they have easy access to an entry point, which is no cost to them to use and experiment with the POD (ph) service. We currently offer some free service - free movies (inaudible), free content on the video on demand service, and we'll be expanding that offering going forward.

Thank you.

Operator, we'll take one more question.

Our next question comes from John Henderson (ph) from Scocia Capital (ph). Please proceed.

John Henderson (ph): Hope you don't mind if my question has two parts. On the Internet Light (ph) side, you said, I think, 50,000 Light (ph) customers to date. Does that - could you say how many came in the quarter? You said it was 80 percent of gross adds were high speed, but I guess I'm more interested in net adds.

Well, as we embark on the fourth quarter, which is traditionally sort of the last stretch in the race, it's a very competitive marketplace on all these products, Light (ph) and High Speed (ph) with ourselves and our principle competitor. And we've told you, I think, enough of those numbers so that you can sort of see generally how the market is trending, and we're very happy with the role that Light (ph) is playing as a save and retention tool for us, and we're happy as well with the continuing strength of the high-speed product in the marketplace. So I think we'll just have to leave it at that for now.

John Henderson (ph): So - and Light (ph) has been available for six months, say?

I think we launched it in May.

John Henderson (ph): And then - you had 38 million of increased deferred charges in the quarter. Is that financial related, or can you tell me what that's for?

On our side consolidated (ph), I think most of that was related to the CRTC commitments in respect of Omni 2 (ph).

John Henderson (ph): I see.

(inaudible) benefits.

John Henderson (ph): OK. Thank you.

Operator?

Yes, sir?

First of all, thank you very much for conducting the call this morning, and behalf of the management teams of all the Rogers companies, thanks to everybody for participating. We appreciate your ownership and we appreciate your coverage.

If anyone joined the call late, there is a rebroadcast on the Rogers.com Web site. There is also a dial-in rebroadcast number that's on the release we put out September 20 announcing the call.

With that, hope everyone enjoys the rest of their day. Thanks very much for joining us.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.