Rogers Communications Inc (RCI) 2005 Q1 法說會逐字稿

Good morning ladies and gentlemen and welcome to Rogers Communications first quarter 2005 results conference call. At this time, all participants are in a listen only mode. Following today's presentation, instructions will be given for the question and answer session. [OPERATOR INSTRUCTIONS]. As a remainder, this conference is being recorded today Tuesday April 26, 2005. I would now like to turn the conference over to Mr. Bruce Mann, Vice-President of investor relations. Please go ahead, sir.

Good morning everyone. We appreciate you joining us for Rogers first quarter 2005 earnings teleconference. With me here in Toronto this morning are Ted Rogers, our CEO and Alan Horn, our CFO. Also with us are Nadir Mohamed, CEO of Rogers Wireless, Edward Rogers, CEO of Rogers Cables, and Tony Viner, CEO of Rogers Media, as well as members of their respective senior management team as well as Ken Engleheart is here from our regulatory team is here with us.

Our detailed first quarter earnings release was made available publicly this morning on all the major newswires. If you do not have a copy already, please get one. You can find it on Rogers.com, PR newswire, or First Call. You should have it for this call and review it in the context of this call including the Safe Harbor language which it contains, which implies equally to this discussion we will have today.

As we did last quarter following the take of Rogers Wireless this morning. We will do one integrated conference call where Ted Rogers would like to make a few brief introductory remarks and then we will take your questions pertaining to our wireless cable and media segments in whichever order that you have them.

So with that, Mr. Rogers, please go ahead and start.

Let me start by saying as we did in the release we had a very solid first quarter offering results in nearly every part of the company which together with a favorable impacts of the strategic wireless transactions that were completed in the fourth quarter of last year have combined to deliver an excellent start to this fiscal year. This is basically a quarter of no real surprises to speak of, we're just busy executing what we laid out for you back in February, which is to remain solidly focused on our core strategy for optimal growth, focused on the successful integration of Microcell and on the launch of our cable telephony service. Focused on driving continued operational enhancements across the businesses and focused on continuing to leverage opportunities more closely, we integrate various aspects of what we do here at Rogers.

From an operating perspective and proforma for the Microcell acquisition, we delivered extremely good growth of 15% consolidated top line growth and consolidated operating profit growth of 22%. On driving very healthy subscriber acquisition numbers and importantly, retention of both the cable and wireless, and overall, a good set of quarterly results to start the year with. Nadir, Bob and Rob together with their teams at Wireless are very much on track with the Microcell integration. What we are continuing to see, the results, as I said last quarter, which is that we think that this is probably, one of, if not the best acquisition that the Rogers companies have ever done.

On the network side, we have now integrated the 2-GSM networks across nearly one third of the country. In markets where we have completed the integration have seen tremendous increases in coverage in sense of the network service quality. Two others things quickly on the wireless side, first is around wireless number portability in Canada and the announcements that we saw in the last couple of weeks in this regard, both from the Canadian Wireless Carriers Association from the Minister of Industry. As you have seen the, the major wireless players agreeing to work together to implement this complex undertaking with a way that meets that government's desires, at the same time doing so in an efficient cost effective and coordinative manner and in a manner that minimizes customer impacting issues that have been seen in other countries that have gone down this path. You know, I think this is another example, just like SMS, [wide] interoperability, of how in a relatively small country like Canada, the carriers can be strong competitors in the market as well as at the same time working together to do infrastructure projects in sensible ways. So, the benefit of the customer is which can also contribute to a healthy industry.

Secondly, is around the fixed wireless specter that Rogers ended up owning as a part of Microcell acquisition and the related proposed [nut checked] joint venture that was created prior to the acquisition to the operational lines of spectrum and which is still conditional upon government approvals. We like the fixed wireless opportunity and think that over time as WiMAX emerges, that this could very well end up being an important asset for us. Not only do we have approximately 100 megahertz of fixed wireless spectrum at 2.5 gigahertz across the country for Microcell, but separately we also have on average of 50 megahertz of 3.5 gigahertz spectrum in nearly all the major markets across Canada that we acquired in a series of auctions over the past couple of years. As many of you saw during the first quarter, BCE announced that they had an agreement with NR Communications, a US partner, in a proposed a [inaudible] JD. To become involved with them in their US and Canadian fixed wireless initiatives. We are starting to try and negotiate through some of these issues, but as time goes on, my expectation is that this probably ends up in the courts and drags on for some period of time. Given the probability of legal proceedings around this particular issue, I stop my comments on this matter here and we don’t intend to discuss it further today.

At cable, another respectable quarter in terms of both stock line and subscriber growth, but reasonably with the growth but with operating leverage modestly impacted by the timing of various marketing activities and the increased variable sales costs associated with increased the volumes of internet and digital subscriber acquisitions. All in all, in line with our guidance and expectations, they are doing a lot of initiatives at the same time with Cable and I believe are doing an excellent job. Importantly in Cable, our digital phone service project is progressing as planned with our operational readiness testing commencing quarter, several thousand employees in the process of being installed, over the course of the testing. We are not going to probably send a signal on our specific thoughts around pricing until closer to the launch. It is safe for you to assume there will be a priced rationally.

The other item in Cable we want to point out was a relatively historic agreement that Rogers and the Canadian programmers signed last week. We have agreed together and submitted this document at the CRTC on how we will manage the transition to an all digital world where existing tiers continue, impacts matter more and more, by definition becomes more prolific and the technological restrictions of analog go away over a period of time. I spoke last quarter about how we are accelerating our transition to an all-digital Cable service and how we are already simulcasting our analog channels in full digital. These two efforts, one on the network side and on one the content suppliers go hand in hand and my hat’s off to the Canadian Programming industry for their willingness to work proactively and cooperatively to prepare for this inevitable transition. It makes sense for the industry players to cooperate together and try to go to the commission with a joint recommendation than to just argue in front of the commission ad nauseam about such important matters.

On the Rogers Media side, we have had a quarter that Tony described as the perfect storm in reverse. Basically, everything was falling into place. [Bench Lab] market picked up which benefited the army channel, shopping channel delivered strong growth in both sales and margins. Radio had terrific margin growth over last year and they were incurring start up costs for several new [inaudible] and Sportsnet saw significant production cost reductions due to the NHL player walkout. What a quarter for media, 74% EBITDA growth. Now I should say that our strategy in media is to be diversified. There are a lot of technical developments happening which could have an adverse affect on one or other of different media businesses, we think Rogers is in the perfect position for such a combination and the fact that we are not all in one particular area that we can withstand any storms and indeed with our liaison with Cable and Wireless benefit from them. With three quarters of the year still in progress, management is focused in addition to delivering on targets that we set forth at the start of the year, as well as the successful integration of the Microcell and launch of our cable telephony services are continuing to deepen the integration between our Cable and Wireless business on a cost efficient basis in all of the areas where it makes sense. We are starting to see examples of why such integration increasingly makes sense. With, for example, our launch of TV, where Rogers wireless subscribers access live TV programming on their mobile phones, another first for Rogers in Canada and of course it makes sense for the Cable Programming Acquisition Group that we have and Philip Lind their, Vice Chairman and his team to cooperatively team together so that we can speak with one voice on behalf of Cable, Internet, Wireless, and so on.

Separately, I also think it is time that we take a good look at both our OpEx and CapEx in a coordinated fashion across the company and see where we have opportunities to drive increased operating leverage. This is something we will do. We want to continue to build upon the Rogers brand and as a part of that see if there are ways to extend more of the Rogers products nationally, although at the same time, we are committing more focused end resources to continue to build up the Rogers business solutions. Thank you, for your support, I will hand the [indiscernible] back to Bruce, so we can go to questions and answers that you might have today.

Thank you very much Mr. Rogers. And operator, I think we are ready to being the Q&A session in just a quick moment. I wanted to ask everybody in advance before you walk through how you would like people to go through Q&A for their questions if they could please be respectful of all the other participants and try to limit your questions to one particular topic so that as many people as possible have a chance to participate and then to the extent that we have time, which I hope we do, we will circle back and take any questions that might remain. So with that operator, please go ahead.

Thank you sir. Ladies and Gentlemen, at this time we will begin the question and answer session [OPERATOR INSTRUCTIONS]. Our first question is from Jeffrey Fan with UBS. Please go ahead.

Mr. Rogers you mentioned the Business Solution Group, I guess over the past couple of quarters the non-compete on the previous transaction came off. Can you talk little bit about what you have done there, maybe think how the group is building what the strategy, the type of customers you are going after, and that would be very helpful.

Let me lead of with [indiscernible] called the Rogers Business Solutions and the intent that it is really the focus of our efforts in that markets for all of the Rogers group of companies that as you know both within the Cable organization as well as the Wireless organization we have had channels to that market, I will deal with the Wireless people and ask Edward to jump in with Cable and Internet on the specifics. When we-- three to four years ago we talked about our move to profitable growth, at that time we said that we are going to focus on chief segments in the market, the three we picked were the used market, business segment, and data and I think the reason with picked a business segment, if we look at the [inaudible] profile of business customers particularly in the small and medium market, a very strong potential driving that value, so we have done a lot of work to get our acquisition and then going with we've had lots of wins in the market particularly on the data side, our strategy of leading with data and following up with voice is working and this unit, really for us, is to create that focus to provide end-to-end service not just on the activation side but on retention and on providing end-to-end service. So we are excited about the potential with trade, the focus it creates and one place so far whereas we have not given specific numbers on this and separately on calls, I can tell you internally we are definitely doing better than planned this year so far. Edward?

I would just to add that I say I think by having a combined group for customers is appealing and it gives our customers the ability to have an integrated relationship and we can increase our strength. From the Cable side, we have been pretty small to be honest on business, but we view that as a great opportunity for us and a place of growth. If you look at Southwestern Ontario, it is where a large portion of Canadian business is based and that gives Rogers, and when you look at our cable territories are, the ability to peel into that. So we are extending our network to pass a lot more customers looking at other ways to get to customers if it is Wireless or others, and we are looking at getting into more enterprise applications such as point of sale and managing that work and so we are early days, but we are participating in some RPs now where customers may not have seen Rogers and I think we are doing quite well and I think over the next few quarters, we can give you some more color on a one-on-one basis on what we are doing there.

Just a couple of quick follow-ups, this is a group that sounds like it is a coordinated group that sits on top of both Cable and Wireless, can you just confirm that and then also your distribution channel, are you using partners or is this more direct sales force that you are building up?

Jeffrey, you definitely spot-on in the sense that it is one channel for all of the Rogers products and services. If you think of it from a customer's point of view, a single point of contact, single interface, and a complete solution, we will provide it, whether it is wireless, wireline, or fixed wireless product that we bring to market. So, from that perspective, it is clearly one unit. I am sorry, Jeffrey you had a second part as well?

The second part was in terms of how is your distribution channel, whether this is a direct sales force that you plan to go to market with or is it just more through partnerships and other channels.

It is both actually and depending on the segment we are talking about, we have got different approaches for the [indiscernible] market from the general business market and enterprise. When you get to the enterprise it is clearly seen on the streets, direct sales people. As you go to the smaller end of the market, then it is a combination of inside sales and seen on the street. Particularly on data and applications we are using third party to bring solutions to there. So the classic example when we had recently with [Hydro one] smart power solution, it includes a partner that is working with us to deliver the solution, and I think you will see more and more of that, and I guess at the start, we should have to reinforced that one of the key things that actually drives us coming together between cable, internet and wireless is data, because a lot of solutions now are not commodity high products, but applications, and the applications sent to write on both the wireless and the wired networks.

Thank you. Our next question is from Tim Casey with BMO Nesbitt Burns. Please go ahead with your question.

I am just wondering, Edward, if you could expand upon the MoU that Ted Rogers highlighted with respect to how you're gonna move forward on digital migration and I guess, what it means, given that you seem to have your programming community on side?

I will just talk high level, and then Ken Engleheart can add some more color on what the specifics are really. We felt it was important as we move forward to move to an all digital world that we work with our partners at [inaudible] us drawing the line [inaudible] others and do this as fast as we can, and as more of the team and less of everyone protecting their own turf. I think we were thrilled when we went in with that approach led by our Vice Chairman, Phil Lind. The people really engaged, and we have come up with an agreement that we have jointly given to the CRTC for them to use in their overall review of this process.

The sort of immediate practical benefit for us is that we can start moving the analog services into team packs, so that will give us the last thing that our competitors could do, that we could not do, we can now do that as well. So, we will be able to do everything our competitors can do, and more and we will not have to wait until the outcome of the proceeding. We will be able to move forward with that now.

Thank you. Our next question is from John Henderson with Scotia Capital. Please go ahead with your question.

Mr. Rogers, in light of your interest in doubling your exposure to cable in Canada as recently quoted in the press, I wonder if you have received any indications from the Shaws about their willingness to sell. Are they willing to sell that is?

It is always hard when you see quotes in the press. I do not know which one you are referring to, but basically as I said today, we want to extend more of the Rogers products across the country. We will partner with our wireless product across the Canada, available to 93% of the Canadians. There are different ways of doing that. You are referring to one where you make an acquisition of a company and I think I have repeatedly said that is extraordinarily hard when they are family companies and the families are quite happy with the situation and doing a hell lot of a good job, I might say in all the cases that you might refer to. So that is not something that is likely. The second manner is for the [Bearin] company to make arrangements with other cable companies as they have with Eastlink to make the wireless facilities package with the Eastland facilities in the package in the interest of wireless is well served there. Whether that is able to be expanded to other people across the country will be determined in the future. Third, I guess is through such futuristic things as WiMAX and [nut chuck] and so on, which as you know by 2006-2007, we will be in a position to supply more of the Rogers products literally across Canada.

I wonder if you would bear with me on my follow-up and that is just in wireless [R2] I wonder if there have been very significant positive trends [inaudible] obviously positive trends in the last few years. I wonder if you see any meaningful rest to that on R2 growth in the near term? [inaudible]competition bureau review or through competition?

John, if you look at the arc we [inaudible] and it has been very strong quarter, a very significant close to 6% growth in [inaudible] and in on a blended basis over 8%. So, really, if you look behind the number what are the key drivers—two of the big drivers this quarter and fairly consistent over the last several quarters, that being data and roaming. We are particularly pleased on data. Data revenue this quarter we're up over 80% year-over-year and in a minute I will ask Rob to actually go through some of the specifics, but when we look forward at the growth potential data and I keep reminding folks that North America has been relatively speaking late getting into the data space, particularly on the consumer side, and if you look at the Europe percentage of revenue coming from data is in the teens. We had a very strong quarter, over 7% coming from data. So, looking ahead I think those particular aspects of the revenue profile will continue. Obviously, offsetting that will be a couple of things. One is getting deeper into penetration will lead to more lower [indiscernible] customers coming into the mix. I think the third factor that will influence certainly in the blended picture it would be what percentage of the mix comes from prepaid and my own sense is with Virgin in the market and so on, that we will see a little bit of an increase on the prepaid marketing fronts. By definition, that tends what happens when you get a new player, although at this point it is fairly early to comment on specifics that are likely. Having said that, to be honest John, I have been long on making the call prepaid for the last couple of years. So, we will see how that shapes out. Rob?

Just add a little bit of color in terms of our data portfolios continue to be strong. Two years ago, we would have said BlackBerry was the anchor of that portfolio. BlackBerry continues to be a very strong business force, built on the fact that our devices are the only devices that can be used around the world, vastly superior customer care, and tier 2 for those customers, that is proving to be a very successful part of our strategy, as has a very diverse device selection from the BlackBerry people. So it continues to be a strong player, but I think what has happened is a very fundamental shift to where we moved from being about 60/40 business, actually 60/40 consumer, as we have seen massive growth in both SMS and wireless internet. Those two components now being much more sizeable than the BlackBerry business and continuing to grow. So very positive things on horizon and lots of good news in the data.

John final comments on the roaming side. Clearly being the only GSM player in Canada is really a bearing fruit. We have seen growth on roaming in the last several quarters, but particularly strong in this year, and I think the aspect of GSM international traffic coming our way, given that most of the world is on GSM is really bearing fruit. The last piece, where you asked about the competition bureau, when you look at the market Q1, there is no question that remains as competitive. Therefore, I think both on the product side we will see innovation and distant companies trying to be first on many new offerings and same thing on promotion on pricing, there is no question that it is a healthy market and strongly competitive, and I think that speaks well for choice for Canadians not to mistake that for [inaudible] but I do not think any of that would change as we go forward and will be competing both on a single-product basis but also increase from these factorings on multiple products.

Thank you. Our next question is from Vince Valentini, TD Newscrest. Please go ahead with your question.

Question for Nadir. The [churn] numbers are too quite impressive they seem to be integrating and converting the Microcell subscribes over quite well. Can you give us an update on where you stand on contracts, what percentage of the high value postpaid Microcell subscribers you would have converted in the contracts now, and also follow-up on that of City Fido changes I guess occurred late in the quarter. Can you give us any sense of what happened in March with those few hundred thousand customers that would have been on City Fido price plans, is there any impact on churn we can see in the future quarters from the significant changes you have made there.

Yes, Vince, obviously we are pleased with first few months of the integration with Fido, looking at right from day one we said we want to make this transaction customer friendly and turn on roaming for both parties Rogers and Fido right from day one and as Ted mentioned that we are now well down the path of networking integration of both spirit of the sites now being integrated, that is showing some really good performance on the network. Reason I highlight that I think from a service point of view that really helps. On the specific of contracts in market now, with combining the two branches Rogers and Fido on a combined basis close to 90%, somewhere from 85-90% of our customers are now going on contract on the acquisition site and then on the total base today combined the two branches over 70% are now on contract. So, we are making good progress and by the way my comment on close to 90% for both plans, just so you know, the Fido numbers are fairly close, so we are making good progress on getting people on contracts right at acquisition but also on the retention side, trying to put more and more folks on contracts. I think [the churn] if you look at specifically the first quarter, the 2 things that are coming into play, one is clearly an improved service on the network side and then second, right literally almost from day 1, we had some very strong retentional offers in market for Fido customers and we made it very easy for them to migrant onto contracts, so I think that will bear fruit as we keep on that and obviously build on the quarters going forward. With respect to City Fido, we made the changes in the latter part of the quarter obviously the changes significantly changed the profile of how City Fido loads will come in for us being a much smaller piece of the mix as we go forward, given the significance of the changes in the context in which they are made. So, on the churn side we should make sure that everybody understands that we are definitely grandfathering everybody that is on City Fido, if you are on a contract or if you commit to a re-contracting, there is no change in your pricing, so again keeping that mantra on keeping customer friendly. I think if the question is specifically on City Fido customers, if anything, you know from a retention prospective it is the fairly healthy offer to stay as long as you continue on contract you get to keep that offer going with you. So, I am not sure if you want a new answer on that City Fido but I think from a retention point of view I do not see an issue on that City Fido sites specifically.

Thank you. Our next question is from Richard Talbot, RBC Dominion Securities. Please go ahead with your question.

Thanks very much. Good morning. I wonder if I can follow up on the prior question in terms of one data point Nadir, at the end of last year, you had indicated that about 40% of the postpaid Fido base were on long term contracts. I wonder if you could give us a sense on where that particular data point might be today and what your ultimate goal would be. Then secondly, a broader question which has to do with the overall integration cost, the budget is 200 to 230 million and we've obviously seen that the figures for this particular quarter, I wondered where you see the bulk of integration cost and this is probably for Alan through the balance of the year, is it likely to be fairly steady through the course of the year or likely to have it more back-end loaded?

Richard I will start then I will get John to talk about the integration cost and give you a flavor of timing. So here is the deal Richard, between you and I and everybody else on the call, we will answer this one more time but obviously one of the things we are doing going forward is talking about what is in the—from the prospective on New Rogers Wireless as opposed to drilling down to distant brands and how they are performing, but just to give you a context and to be specific, it's just over 50% now or so. What I talked about in terms of how we are doing on the acquisition and more the retention going on contract is playing out in that 40% number is just over 50 now.

Richard on the projected integration cost spent, it was quite low on the first quarter and that was as expected. It does ramp up into Q2 and Q3 as we get into the heavier or the larger networks markets and then we also we have got the IT works that is coming out in terms of CapEx and OpEx as well. So, I think over the next couple of quarters we will see the ramp up in the standing and that will probably come back down in the fourth quarter. Just to caution you a little bit, there are some items in there that are hard to pin down to a quarter, so and it depends on the subject of negotiation with various centers, so we are working hard on those as well, but I would expect that towards the end of the third quarter it will be well [inaudible] through [inaudible].

Our next question is from [Simon Flannery], Morgan Stanley.

I have a question for Nadir. You mentioned in the press release retention spending is expected to continue to grow relating to deeper penetration but also Wireless number portability. If there is anything specific for the next couple of quarters that is really going to change from what we saw in the first quarter around that or is there is a more generic statement. And related to that, can you help us with the CDMA/GSM conversion or any stats on where we stand there. Thank you.

Simon with reference to that number portability and retention is more of generic general statement all this is recognizing the importance of [churn] as the key method and the need to focus on retention so nothing more specific than that. On second question if I can -- I am sorry, Simon, would you mind repeating the second question again?

Your CBMA made to GSM integration.

I will get John to give you more specific number but off the top the number of the CDMA customers that we have would be above 20% of our postpaid base and obviously by the end of the year we would look to significantly lower numbers just based on natural migration that is happening as well as some very specific implant programs on migrating high value CDMA customers on through GSM.

Is there a point on which you can sort of highlight step function down where you can start to turn off the CDMA network and really stop running multiple networks.

Simon I do not believe so and if you look at analog networks we have less than a 100,000 analog customers on board today, but we have not turned it down, part of that reason is of course we get roaming revenues on that network. Bob anything different to offer on the CDMA side?

There isn’t specific date to be established, and again, a substantial part of our roaming continues to be inbound roaming revenue continues to be from US visitors coming into Canada, so I would say when the time is right we intend to shed those costs as quickly as possible.

It’s Ted here. I would just like to emphasis that the Wireless is very fortunate compared to Cable. In the case of Cable, they have about two-thirds of their capacity taken up by the analog. As the number of people move over to digital, they still have to keep the full two-thirds available, indeed Cable could go where they only have 100 customers on and you still need two-thirds of the capacity.

In the case of Wireless as the number of analog customers come down or CDMA come down then the -- it is proportionate, the capacity come down proportionately, in Wireless where as it does in the Cable, so we are in fairly good shape in the Wireless, and that is why in the Cable we have to work as we discussed in that agreement to say “well, one of the terms when we might move say tier three off of analog completely.” That will be a couple of years from now and all sort of things happen before then that we have negotiated. But, in case of wireless, we’re in very, very good shape.

One think I want to share with you, the [inaudible]8 testing frequency we have is fabulous for getting deep into the buildings and deep into city. That would be the ideal location for the new 3G services and so if you can see the acceleration of CDMA moving off and 3G moving on.

I can’t give you a specific number, the growth in analog are virtually nothing now in terms of the cumulative basis mentioned are actually under 20% of the postpaid basis of CDMA or analog right now that is coming down quite rapidly. So, in the next part is self selection and partly we have been migrating some customers, some of the high value customers from [inaudible] on GSM newer handsets as well, so we expect that to continue to ramp down pretty quickly.

Next question is from Rob Goff, Haywood Securities.

My question will be for Nadir. If you can give bit more clarity or visibility on consumer pricing trends. Could you give us your perspective on pricing in competitive landscape within the enterprise and medium business marketplace.

Sorry, so Rob you want me to cover customer at all 3 segments?

Sure, sure I’ll go for two and take 3.

What we are seeing in the mass market or commonly seen as the consumer pricing, everybody’s familiar, there is lots of promotional offers that in Q1 had some very aggressive offers from our competitors including 12 months free and hardware that was free for people converting from Rogers to Fido, so that was extreme I suggest in the early part of the quarters seems to have changed to the kind of what I would expect is the going forward position with lots of promotions on hardware offers of 3 to 6 months “freedom of speech” kinds of pricing. So, it tends to be fairly stable on core pricing and lots of promotions on the upfront incentive for people to join our moves, so I do not think that will change. On the enterprise site, on this medium and large enterprise, we are starting to see a lot more of is data being a significant driver, so pricing moving from just going from schematic that says it’s minute based pricing through both minutes and data and data as an element of pricing and then applications, so much more value-base pricing on the business side obviously pressure on the minute side of voice specifically but more and more we would like to present solutions that are all in as opposed to stand alone voice based. Within the business segment you are seeing more enterprises go to contracts and that tends to take into account again longer-term nature of pricing so they tend to be one off as opposed to something that you could see in a rate card which is very different from the consumers and small/medium markets.

And if I may as a follow-up, has the number of portability issues have been a bit of a hurdle for you to make further inroads on enterprise.

Rob it is always an interesting question in terms of how much of a hurdle moving numbers is. Obviously our general view is that it is harder for business people to give up on numbers so from that perspective when local number portability comes in a market in Canada, one would expect that on the business side there will be more people moving but that is hard to predict. It is one of those conjecture things that we’ll see how it plays. I think to me it is just one thing that will sort of drive success is the continued focus on service and we tend kind of think less about impediments more about what actually causes people to stay and that is always based on providing great service to the market.

Next question is from Glen Campbell, Merrill Lynch.

Mr. Rogers you alluded to increasing efforts to coordinate CapEx and OpEx between Wireless and Wireline. I was wondering if you or someone on the call could elaborate on what the plans or organizational impacts, are there any specific targets for this?

Well, I was attempting to say was not to coordinate the OpEx and CapEx, of wireless or cable, but just in general to review all of our OpEx and all of our CapEx and seek areas where we might be able to reduce costs. Some of it will come from the two groups working together in a coordinated fashion, but much of that will come from independent action in various departments. I just think that it is important to have in our list of priorities that priority and we have no set number yet but we will probably on future calls be able to elaborate you some of those steps too. If you are going to get into this, you got to have excellent reporting systems, probably got to reorganize your financial group. You got to do a number of things and get people focused on it before you save a nickel. All we are announcing is that in the list of things I would like to see us accomplished and my colleagues would, this is one I think it is attainable.

Thanks. I might have a quick follow-up just to clarify on the [inaudible] spectrum leaving aside what is going with Bell and NR I mean are there any obstacles to Rogers developing the spectrum that it acquired through Microcell, that is not the part of the joint venture?

No, none that I know of. I think technology is making steady progress and we are very much a part of that. Alexander [Brocket] is Vice Chair of the committee that is doing a lot of developmental work. So, we are very keen – we think it’s going to be a very important matter as we go forward in future and that is why we have invested in these funds in the 3.5 frequencies.

Next question is from Greg MacDonald with National Bank Financial.

Good morning guys. Let me ask one Cable. I am trying to get some insight on the relationship between Digital Services and revenues core Cable revenue growth. Contrasting a little bit, we saw some very nice Digital growth, in fact I think the subscriber adds are accelerating, but core Cable revenue growth still seems to be sort of that 2 to 3% range, and I am wondering if spoken in the past about trends on Digital are approved specifically on video-on-demand related revenues, and if you can just speak generally may be add an indication of VOD related revenues but also what the impact of HD is on the quarter. I am just trying to get some insight as to when we see re-acceleration in revenue on the cable side and I think that should be coming at some point. If you can help there, thanks.

I will say a few words and then Mike Lee may give some more examples on VOD and high def, but when you look at what we are trying to do is reposition our Digital products where our customers look at as a vehicle to buy more services above basic in tiers and while that is good and it helps move customers entire packages it obviously limited the number of customers that we are moving into digital. So, as we simulcasted the existing analog channel so our digital customers can now watch every channel in digital. The strategy has moved to try to connect every customer that comes on no matter what package to becoming a digital customer. Now, of course we always try to up sell customers for higher tier of packages. It’s priced such a way where that is attractive. We give customers 3 months of free of all the specially channels when they take a box. We use that premise when we take a customer, if the digital customer that the likelihood of churn goes down, their value for money goes up since it is better, since they have more product associated with their spend and obviously digital is the gateway to future products and services that we not launching anything on analog. So, if you are a digital customer and you launch some new services you can see them for a few months, if you want to understand what a product is you can try it out and obviously get access to the on-demand which we’ll help grow.

So, I think we will see today new customers that are coming on not taking as much incremental revenue, as they have in the past, but I think you will see that customer [pay roll file]. In all it will be a better quality customer, lower churn basic Cable customer and have the ability to grow its revenue to areas where we do not have to send the truck out to home and have a lot of other associated costs.

And on VOD?

Greg, this is John. If my voice holds up, I’m still under the weather. In view of this relatively small contributor overall we are seeing extremely healthy growth as we get more and more customers using it over and over again. What we have seen grow dramatically in the past few quarters is the increased usage of free on demand services and what we are finding that if more people use the free on demand, the more likely they are to go into the paid on demand services, so we are seeing some good growth in terms of the video on demand revenue increases. HD, you mention, and HD, again even a smaller component yet again as [inaudible] said, a stickiness factor and not a strong revenue stream factor today, but more so in the future. Does that help you?

It does and Edward, just one very final one. You mentioned that the term benefit on the digital, I have not seen any indication in the press release, or I apologize, if there is. Could you give us a sense of, even if you do not want to give us the churn number for digital, whether that is improving or staying flat?

Yes. On a digital customer we have a lower churn than just a basic cable customer.

If the churn on digital is remaining flat or is it improving?

It is feeling better and I mean, that is those are two things that we are talking about. In terms of the turnover digital by itself, that churn is getting better and the churn of the customer from being a cable customer is lower than our digital cable customer.

Our next question is from Dvai Ghose with CIBC World Market. Please go ahead with your question.

A question for Nadir, if I may. Earlier in the call, people were focusing on that [inaudible] going forth given the fact that you are truncated a lot of aggressive Fido programs in the past. On that vane, I am wondering if you would release what percentage of the 3M and 30,000 gross outs on the quarter were on the Fido rather than the Rogers brand name. Do you plan to make further changes to Fido programs, in particular, the fact that you are still offer per second billing while Rogers offers per minute billing. There is a $30 unlimited evening and weekend package which seems quite aggressive compared to the Rogers packages and so on. Should you make those changes, what do you think the impact will be on the growth conditions going forth? It seems as if there are some aggressive [indiscernible] at Fido in particular pricing has helped grow conditions in this quarter.

Clearly, we are not planning on, alright, we’ve given the splits for the quarters so I won’t do it on a call. If something going forward, we look at it is as one company with 2 brands in market with lots of pricing, plans that offer different value propositions in different segments. I will tell you, our approach to pricing as a company, I think you seen over the last four years, is [inaudible] anchored impossible growth and rational use of the market. Having said that, as a brand we are known for innovation, and I would expect that the Fido will continue to be innovative in terms of pricing. By the way, I would not equate innovative with cheap. I think innovations speaks this, knowing the segments better than the other guys and providing value to different segments, so you will continue to see different approaches to market. I think it ties into having a vibrant, competitive market, we are here to serve our customers and keep our competitors on their toes and we will see Fido as a key piece of the fat side as we are going forward, I know I am not being specific on numbers, but it is important we have 2 brands as we speak to different markets, different segments in the market, we will speak to them differently, so you will see elements that are different between Fido and Rogers for that matter, and clearly, definitely so, between us and the competition.

If I can just quickly follow on the integration question, it was mentioned earlier that the costs were relatively light in the quarter, of the total $14 million, only 2 million was on severance, I am wondering, whether I guess, my interpretation was of lot of overlap function, and that there would be significant head count reduction and greater severance savings, you said in your public filings and you were not going to significantly ravage Microcell, was the language you used, but I am wondering what is happening on that side, and can we [inaudible] head count reductions some OpEx from that side?

Again, we have specifically not given any numbers on head count, I think, what I come back to is a couple of things. We said during the last call that we are looking at ‘06 we put a couple of numbers, one was that we would have operating synergies of $100 million in 2006, I tell you, that we are confident, even more so after the first quarter on that number and we are making progress, clearly when you look at the quarter, it seems light relative to the guidance for the year, but through John's earlier comment, some of the key pieces on integration like billing actually happened through the summer and fall, prepaid and postpaid respectively. So you will see more of that coming through the course of the year, on the network side, we are done with about 35% in terms of sell side integration, but you will see the benefits coming through in the next few quarters in terms of cost reduced functioning, but also improved operating expenses as well as from a network maintenance and lease site rentals and so on, that our dependence on getting the integration done, so I think if you look at some of the work done, we are satisfied with where we are at. We are also satisfied that we will hit the $100 million synergy on CapEx this year and the last number that we had to frame the integration effort was to say that by ’06 we will return to pre-acquisition Rogers EBIDTA margins on network revenue and I think again, looking at the first quarter, should give everybody some comfort that we are definitely on the right track. So, where is the numbers, you have to factor in the timing, I can tell you from a work effort, we are definitely on plan, if not ahead, to hit the numbers we put up for ’06.

Our next question from Peter MacDonald with Griffiths McBurney Securities. Please go ahead with your question.

I have a couple of questions on telephony. First a general one for Mr. Rogers is, basically when you look at the opportunities, do you view it as a way to protect the value of cable and convergence, do you consider it as a significant growth opportunity, shifting value away from the [inaudible], I know it is probably a bit of both, but which way would you lean on it?

Actually, we are going to have our 20th anniversary of being in the phone business on July 1st. We have 5.5 million telephone customers outstanding. And this is just to me an extension, this is the home phone as against a wireless phone. Eventually, within a year or so, it will all be all 1. One phone working the house and work out of the house, so we look upon this just an extension of our service, fortunate to have the largest cable company in Canada and they have this tremendous plant-in capacity and it is a natural benefit that the two working together.

The other one then, is on CapEx, if I would just get some follow-up [indiscernible] on Richards’ question, of and update on the timing and uses of it given the smallness of it in the first quarter on the fixed side.

I am going to just guess that the guidance for the year remains, looking at my colleagues and you have heard earlier that because of increased negotiations that we are undergoing with suppliers before we sign up, we don’t always have the luxury of knowing exactly what quarter these expenses will go it, but we restate the advise we gave you at the beginning of the year. Is that fair Nadir?

On our side, we are – it’s mainly some of the cable numbers and you’d look at it as below what [you thought] it may be and it’s the timing issue, but we are still on plan to deliver our products and roll-outs as they were in 2005.

Just on the timing of it. Should we expect it to be mostly Q2 and Q3, and is it more related to the roll-out of the additional areas or what exactly does it relate to because it’s pretty far behind, if you look at the total amount spent?

You can [inaudible] that fairly even over the next 3 quarters and Mike do you want to go on....

I think that is correct, I would expect from the cable side including GPS, but the spend will be further in the next 3 quarters in different and as we see, towards the latter part of the year, more of the spend will be on TPE, as opposed to network, where sequentially complete with most of the network augmentation and related to GPS. We are now into operational readiness, so the latter part of the year would be more on TPE for GPS as well as digital boxes for the cable.

Ladies and gentlemen, that is all this time we have for questions today. I will turn the call back over to Mr. Bruce Mann for any closing statements. Please go ahead, sir.

Operator, thank you for conducting the call. I am not sure there is much of a closing statement. I, first of all, thank everybody for participating and let you know as we do each quarter that we appreciate your coverage and your ownership, there will be a re-broadcast on our Rogers.com website, if anyone came on late, and I guess most importantly if there were people left in the queue that did not have a chance to get to their questions, please feel free to call my cell or my colleague Eric Wright, both of our numbers are on the release on the last page, and we will get you an answer. That concludes today's call. Enjoy the rest of your day. Thank you very much.

Ladies and gentlemen, this concludes Rogers Communication first quarter 2005 results conference call. You may now disconnect.