Rogers Communications Inc (RCI) 2005 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Rogers Communications fourth quarter year end 2005 results conference call.

[OPERATOR INSTRUCTIONS] I would like to remind everyone that this conference call is being recorded on Thursday, February 9th, 2006 at 11:00 a.m. eastern time. I would now, turn the conference to Mr. Bruce Mann, Vice President in Investor Relations. Please go ahead, sir.

Good morning, everybody. Thank you, operator. Appreciate you joining us this morning on Rogers fourth quarter '05 earnings teleconference.

With me in Toronto this morning are Ted Rogers, our Founder and CEO, as well as, Alan Horn, our Chief Financial Officer. We've got Nadir Mohamed, who is the President and COO of our Communications Division, as well as, Edward Rogers, President of Rogers Cable, Rob Bruce, the President of Rogers Wireless, Tony Viner, the President of Rogers Media, Randy Reynolds from our Business Solutions Group and several members of their respective management teams. Quickly, our fourth quarter earnings release was made available this morning on all the major financial wires.

If you don't have a copy you can find one on the Rogers.com website. It's on First Call and PR Newswire. You need to review it fully including the Safe Harbor Language, the risks and uncertainties and all the assumptions, as well, contained in that release, as that language applies by reference equally to our discussion on the call today. Let me turn it over to Ted Rogers, who would like to say a few brief introductory remarks and then the management team will take the questions. Go ahead, Mr. Rogers.

Good morning. Thank you for joining us. I will keep the remarks brief to ensure there is lots of time for questions and open dialogue with management. I am delighted with the results we issued today for the quarter. Rogers delivered 15% pro forma revenue growth, 19% pro forma operating profit growth before integration costs.

This was a fitting cap to a solid year during which we essentially met or exceeded all of the guidance ranges that were laid out. At Wireless we have now basically completed the microcell integration, having successfully finished the billing system conversions during the fourth quarter. Wireless continued to grow at a very healthy pace in terms of higher value postpaid subscribers. Most of whom continue to come into longer-term contracts while postpaid term continues to come down and our ARPU continues to rise at industry leading rates, a good combination as all of you know for creating value.

At Cable, excluding the startup costs of our cable telepathy service, we saw the core cable margin back up above 40% to 43% during the quarter. At the same time, core cable revenues grew at 9%, when we drove continued strong subscriber growth in Basic, Internet, Digital and our new Cable Telephony Service. This growth is really important to us.

Media delivered strong topline growth through its year-over-year operating profit results for the quarter. They were held back with the NHL labor dispute being terminated and the accounting which resulted in us having higher production costs and the accounting impact of several Blue Jay's player trades.

Overall, Media is executing well on managing their core operations. At the same time, launching new stations in both the Radio and Television divisions, as well as, new titles on the publishing side. Slow, steady growth, solid operating people. Obviously, the primary driver for Rogers in 2006 will again be Wireless. As you can see from our guidance today, we're targeting roughly 15% revenue growth, 25% operating profit growth for the year in this part of the business.

We are beginning our deployment of 3G wireless network technology in the first quarter of this year. HSDPA is the next step in the GSM technology evolution, which is being deployed today by Singular Vodafone and many GSM providers around the world. It will ensure that Rogers remains at the forefront of wireless data speeds, devices and applications in Canada well into the future.

As you can see from this morning's release we have transferred ownership of Rogers Telecom, which as most of you know is the call-net business, which we acquired in July, 2005, into the cable segment and I have renamed the segment Cable and Telecom. We have further broken down the Cable and Telecom segment along the lines of how [Nader] and his the team are managing it, with core, cable, and internet in one bucket, our cable telepathy and circuit switch residential telephone services together in another, our business telecom services in another, and finally, our retail stores.

We present this breakdown in the guidance section of today's release and this is how we will report the results of the Cable and Telecom segment going forward. The Cable and Internet portion, obviously, represents the majority of the segment and carries margins of 40% plus. But the Home Phone division is a relatively new business and is one that we are investing in and positioning to be a source of future growth for us.

As well, the Business Solutions division represents an important sales and service channel for Rogers but the Business Solutions division, we bring together all of our various communications services from across the group to a single point-of-sales and service contact that is focused exclusively on the unique needs of the business section of the market.

We have an opportunity to do better in this part of the market than we have and I believe, that this structure will be very helpful in facilitating further inroads in this market segment. I should say that Rogers has been traditionally a residential Company primarily and it is important to us to have the diversification of business revenue, even though we acknowledge the business market is extremely tough and competitive.

While the Microcell integration consumed considerable focus in 2005, this year will turn a portion of that focus to more fully integrating Call-Net into the communications division. I am grateful for the [Nader's] terrific work in moving along the various integration projects that we have in process and for the leadership he is showing in bringing the Company together with a single focus of serving the customer and delivering profitable growth.

In addition, we are being quite successful in recruiting proven leaders into Rogers, to help enhance the quality and depth of the leadership team. This Company is going to continue to grow. We just simply have to have some more really top flight professional management. For instance, Randy Reynolds joined us recently as President of Rogers Business Solutions. As many of you know, he has a terrific background in wireless and wired Telecom in Canada.

We have also brought a seasoned executive on board from the U.S. with Kevin Penington, who joined us to lead our Consolidated Human-Resources function, an area where I believe we have significant opportunities for efficiency. Most recently, Stephen Graham joined our senior management team to lead Marketing Communications across the whole Rogers Group. Steve has a tremendous telecom industry and agency background and I think he is going to add great value on coordinating and leveraging the important branding and marketing work that we do across the Company. We will continue within the operating companies to have the marketing done for their particular products.

Lastly, we announced back in December, Alan Horn is stepping up into the Vice Chairman's role later this Spring and also assuming the role of President of the Rogers private companies. We're fortunate that our old friend and colleague, Bill Linton, will be stepping into the RCI CFO role. He knows Rogers well. He has proven himself many times over within the Company in the past and outside the Company over the past number of years. Overall, I believe that Rogers has started 2006 extremely well positioned with clearly defined objectives that will be achieved.

As our guidance today suggests, we are targeting continued double digit top line and operating profit growth for 2006. This reflects a continuation of our strategy, a profitable growth and our intention of remaining a competitive but responsible industry player.

I am exceedingly focused on cost control as we continue to grow the business because all of us appreciate the significant free cash flow generation potential that we have and I also intend that we will continue along the course of deleveraging that has progressed so far down during 2005, and I have committed to to in previous quarter reports.

We have tremendous assets in the right parts of the communications industry. We are unique in North America in their regard. We're strong in terms of product offerings. Markets for our services are generally continuing to grow and we have a solid road map in place that we are executing on in terms of integrating the businesses, continuing to invest in and nurture new businesses that will help to drive future growth. That has always been the hallmark of the Rogers competence. We have gotten increasingly strong leadership team in place, accountable for delivering results.

Thank you for your support and with that I will turn it back to Bruce, so we can get on to answering any questions you have today.

We are ready to take questions from the participants in a couple seconds. Quickly before we begin, we will, again request this quarter, as we do on each of these calls. Perhaps, we will least have the benefit of osmosis on this one, that those participants asking questions be courteous enough as to limit them to one topic, so that as many people as possible have a chance to participate for the benefit of everyone on the call. And to the extent we have time, and I hope we do, we will circle back around through the queue and take additional questions or we will get them answered separately after the call. With that operator, if you would go ahead and just explain how you would like to conduct the Q&A. We are ready to go.

[ OPERATOR INSTRUCTIONS ] First question comes from Greg McDonald from National Bank Financial. Please go ahead with your question.

Good morning. The question is on pricing in its first public appearance since joining Bell. George made it pretty clear the plans on moving his pricing strategy of the Company toward greater focus on profitability. Even announced some price increases that day. I am wondering, did his comments have an impact on your 2006 guidance in any way or the were the calculations you made exclusive of the recent changes announced there?

Greg, It's Nadir. I think most of the folks on this call know us, know myself, know the strategy we've had as a Company around profitable growth. We have shown discipline in the market. It is a competitive market. We don't like to talk about pricing because we think it is a market that is very much won and lost in the retail level.

I will tell you that rational pricing has been a hallmark. One of the first things we did, including when I took over my new role to look at our price plans and our products to make sure that we were looking at all of the plans to make sure that we're actually driving value. So to that extent, you have seen some changes in the market already in the last quarter of this year. We have announced some changes last quarter of 2005, and we announced changes for 2006 already.

I will tell you that our plans are based on what we think is happening in the market, our strategies, to the extent that the competitive world has a similar view that is a positive.

Thanks. As a quick follow-up, and I am wondering to what extent you might answer this, but I will give it a shot anyway. Do you think there is room -- pricing power is important for this industry and I know it is not your intention to go into any detail, but do you think there is room for potentially greater pricing power in your cable products and I would include Telephony in that? If the strategy remains in place, I happen to think this is a pretty big change with respect to that company.

Let me start with the Telephony pricing approach that we have taken in Alaska. Edwards will talked about the cable side in a second. Clearly, when we launched Rogers Home Phone, the service that we now offer both on our cable network and with the acquisition of Call-Net on the circuit switch side, we embraced and adopted what was the Sprint pricing approach. Clearly, the pricing demonstrates our view of rational pricing. It is a fairly modest discount to the in-coming telephone companies. It is not based on a deep discount of philosophy. We really want to drive our pricing based on value and we think we have a lot to offer as brands and features, whether it's in Wireless on our GSM side or whether it's on Internet with our high speed offering that we have or Digital service. We think we have a tremendous product to offer.

I don't really believe in deep discounted pricing as a sustainable way to grow value and share. Having said that specifically on cable we have made some pricing changes that I would love Edward to cover.

Thank you. We have already communicated to our customers rate increases in 2006. That will be on our basic interior products and some of our digital cable products on the cable TV side, which would represent approximately $2 per customer on a blended basis. Rate increases on Internet are $5 on Ultralight, which we previously put into the market from $19.95 to $24.95, $5 Light from $24.95 to $29.95 and $2 on the $45 package to $46.95 which would have an impact of $2.75 on a blended basis for Internet. On the Home Phone is our competitive businesses, and we look at pricing upfront, pricing and current pricing every day, continual with our philosophy of rational pricing and reinvesting for better service and better products for our customers.

On the Home Phone is our competitive businesses, and we look at pricing upfront, pricing and current pricing every day, continue with our philosophy of rational pricing and reinvesting for better service and better products for our customers.

Next question is from Peter MacDonald of GMP Securities. Please go ahead with your question.

Thank you. Can you talk about the wireless pricing environment and the mix between your retention and acquisition spending and in the quarter it looks to me like the acquisition spending was in check but the retention spending was up . And was that the case and is that a trend that we should expect to see throughout 2006?

Hi, Peter, It's Rob Bruce. Let me comment. I think Q4, as it always is, was definitely an aggressive quarter. Everybody out there with good offers. Our focus was going after profitable customers in Q4. We did that with our program on Razor phones and Rokr's and we skimmed off some very good quality customers in Q4. We're happy with our acquisition efforts there.

With respect to the retention, that becomes more of focus and the success of that spending has been realized as you look at our churn numbers. It feels to me we are at the right space in terms of retention spending year-over-year, we're about 45% in total on retention spending if you look quarter-over-quarter, Q4 over Q4. The focus there is really couple fold.

Second, focusing on some of the higher costs devices like the Razor in our retention spending. But just more physical devices the customers, prior to buying Fido, they hadn't done much handset operating with the base. So we invested over the course of the year to ensure that base is upgraded because we know that has a tremendously positive focus on churn. Probably from prior calls, we have created a huge shift in focus from one and two to two and three-year contracts on the Rogers side, which has driven up the retention spending. Over the horizon, Peter to L&P coming, we think that is the right thing to be doing.

As a follow-up you mentioned Fido and we are a year into the acquisition. Should that retention spending slowdown there? As an additional follow-up, when we look at local portability, do you increase your retention efforts now, or is it just an ongoing thing that is going to be continuous with the Company?

To some degree, we have been increasing over the past couple of years. It will plateau out right now, just in very rough terms, postpaid customers, we're replacing about 22% of their handsets on an annual basis, which feels like we are approaching the right zone. Think about the life expectancy of a customer and the life expectancy of a handset but clearly, as we go up towards L&P, we're going to be taking a pretty hard look at higher value customers and try to stagger our spending on retention against higher value customers to make sure our dollars are spent as efficiently as possible.

Next question is from Jeff Fan from UBS Warburg.

Question on Wireless. Your net additions for 2006 and your guidance implies a slowdown in subscriber growth. You mentioned earlier, ARPU growth should be strong, which explains the revenue growth. But I am just curious why you think net adds for the market is going to slow down through 2006?

It's Rob Bruce, again. I think market-wise, we think that roughly we will see similar penetration increases year-over-year. We had a great year. We had two quarters where we had over a 55% share of postpaid net adds in Q1, and Q3. Realistically, those are great quarters when they come along but we think that is more than we will typically get in the highly competitive environment that we exist in.

To actually forecast and build that into the base going forward we think would be way too aggressive. We pulled back to more realistic assumptions about what we think we can expect to get in terms of share and that is what is reflected.

I'll just add to what Rob said. There's no question in our execution of the strategy, the underpinning of our strategy,it has brought double growth. As Rob mentioned in Q4, our drive is always to get to the higher valued customers. What is reflected in the guidance numbers is obviously underlying what is reflected into the big push to continue on the path we're in, which is to drive a higher ARPU postpaid customers.

We would love to continue on that path that we are on in Q4 and continue to go after those high-value customers, and do as we did in Q4 and not subsidize phones down to $0, and do other things that I think many of us have done in the past, ourselves and competitors that we think are just not that healthy for the long term in business.

Are there any signs more recently that you are seeing that would suggest to you that the market is slowing down? From what you are saying it seems like a slight less aggressive strategy.

Coming out of Q3, we don't have all of the Q4 numbers. It is premature to say there any signals from Q4. Coming out of Q3, I think the consensus view of the analysts is very close to where we are in terms of thinking about market size.

Thank you.

Next question is from Jonathan Allen from RBC Capital Markets. Please go ahead.

Good morning. Why are we doing HSDPA now? I got the sense in the past that the economics of it were not quite there yet, that it seemed the applications and devices were coming on Verizon but we're just not here yet.

Why are we doing it at the beginning of 2006 and perhaps not waiting another year until we see the economics improve a little bit? Question specifically, do you see any applications and devices coming sooner than expected now?

Again, it's Rob Bruce. Maybe I will start off and make a few remarks and turn it over to Bob Berner, our Chief Technology Officer.

We are really excited about HSDPA and what it will mean for our customers. As you probably know, Cingular and others around the world have already ruled this out with some success. Terms of availability of devices, there's not going to be a landslide of devices next year but there will be between -- in 2006 there will be five to seven devices over the course of the year, which we think will give us a great running start on the year. We feel it is going to give us some great opportunities to enhance some of the applications that we have for our customers already and make them more useful and more helpful. We see some new applications coming along. Bob, do you want to talk about the specifics of HSDPA launch going forward?

Jonathan, we think the economics of HSDPA are what are driving the decision and [inaudible] are quite positive. What that gives us are integrated voice and data platform which will be second to none in terms of capability. It has the higher GSM voice quality delivery, relative to other competing technologies, as well as, having what will be the -- by a significant margin the fastest data rates in terms of throughput per customer peak and average than is available on any other technology.

The deployment will come in a couple phases during 2006. These phases are rate determined by handset capability is that we expect to be seeing throughputs that are sort off on the order of one-and-a-half times or greater than what is available on the competing technology in market today. That will accelerate that difference, accelerate as we go forward into 2007. The economics are driven by greater spectral efficiency. Up to the competing technology, as well as global economy of scale. At this point in time, there are over 60 operators in the process of trialing or deploying HSDPA on their UMTS Networks. As you know, at this point in time the GSM community represents well over 80% of the subscribers in the world and the operators that serve them are all progressing in the direction of HSDPA while the competing technology appears to be declining in terms of its customer base on an almost monthly basis, as operators are making decisions to follow the same path that Rogers is on.

We are in fact bypassing the UMTS step that many operators in the world have chosen and moving straight to what is now, starting to be referred to as 3.5G technology and skipping the third generation altogether.

Do you just want to touch on a little of our Rollup plans for 2006 and beyond?

Rob, we haven't actually gone public with which markets we will be in in 2006, but our plan is that by 2007, we will be in all of the top markets in Canada with other areas of economic interest.

When you say all of the top markets are we talking about the top five cities or so? Or are we doing something more expansive than that?

By the end of 2007, something more expansive than that.

That is fully included in that $390 million of CapEx? I am curious, one quick follow-up for Rob, you mentioned you have five or seven devices coming available this year .Would that include some things like perhaps a Blackberry that runs on HSDPA? Is that coming sometime in the future? How do you plan to do this? Do you have larger data packages that you charge maybe $30, or $40 a month for the new network?

Even if I was aware if there was a BlackBerry coming on, obviously, I couldn't comment. What was the second part of your question on larger data?

You have a new devices coming, do you plan on charging a larger data package on the monthly subscription?

As required, yes, but we worked very, very hard not to go to flat rate.

Thank you.

I'm sorry. This is Bob, again, I just wanted to clarify one thing. The 390 in fact includes what is over 70 million of substitutional capacity that we don't have to spend on GSM now because the loads will begin to accelerate and go on to HSDPA with the UMTS voice. On a net basis the numbers are considerably lower than that relative to our spend rate.

Thank you very much.

Next question is from Glen Campbell from Merrill Lynch Canada.

Thank you very much. Question for Mr. Rogers. We are reassured by yesterday's press release, but more generally on the question of a possible stock position. Can you comment on whether you do see any possible value at some point in the future in acquiring a company like that with the highest cable margin in North America?

The highest margins in 2006, we will see about that as we go forward. First of all, you should fully appreciate that the Rogers family is by far the largest shareholder of this Company. The last thing I or the board are going to do is a bad acquisition that is dilutive to shareholder value. That will hurt no one more than the Rogers family.

Second, I have ten things on my plate right now, and half of them are about getting operations tightened down and integrated. The other half is about how we can make more money. And the plate is full, for Viner and myself and the management team, I kid you not, that most of us have never worked harder in our lives in trying to do this integration and move the Company forward with one brand, one message, one operation, and many excellent parts.

But we are first and foremost a Wireless Company and I am proud of the growth we have generated over the past several years and we continue to generate. We are not going to do anything irresponsible to disrupt that growth. I do look, as I should, at assets, opportunistically, that might come up, that are cheap and fit in with we are doing. We would be negligent if we didn't.

We have been very disciplined over the past number of years in terms of mergers and acquisitions. I have no intention of changing that. The whole truth of the pudding is in the integration afterwards. You can spend any amount of money you want but if you don't really dive headfirst into it, as we have, it is not going to work. I don't know where these things in the paper come from, but it is untrue. In my view, irresponsible reporting, and I am not going to comment on it beyond that.

That is very hopeful. Perhaps a follow-up on the issue of integration. There was some useful detail in the press release about where you stand at both Wireless and Telecom.

Can you give us more detail there? I was thinking in terms of Wireless, it is described as essentially done but should we expect from an operating expense point of view, more savings still to flow through? Can you give us more detail on where we stand on the call integration?

It's Rob Bruce. Maybe I will start with the Fido integration information. All of the savings are in our guidance. I should say that first and foremost. The comments that I make maybe will be helpful in a general sense but everything is reflected in guidance.

Originally when we looked at the Fido integration costs, we thought the total number of CapEx, OpEx and including purchase accruals and the whole lot was around $233,000 as we looked at it on a full-year basis through 2005. Things have moved back and forth between the categories. The numbers come in probably a little closer to 200. So we underrun our total costs, although the mix between CapEx, OpEx and purchase accruals is actually moved around a little bit as we have gone further into the acquisition itself.

As you know, all of the back end systems have been integrated and integrated successfully. Obviously, the one we were most concerned about was the postpaid cut over, which went extremely well.

We're not kidding ourselves. The process of acquisition is way more than just the back end systems and we continue to work together as two different brands to coordinate our activities, create greater synergies and more effectiveness against our competitors going forward. I will turn it over to Mike Adams to talk about the integration of Sprint.

Thanks, Rob. During 2005, we did a number of things to integrate more from an organizational perspective. During '06, we will complete or at least substantially move forward on the integration of the billing platforms. We're doing a lot of work on the moving the IT sports systems and the applications that exist over to the Rogers systems. We will continue through '06 on that and complete them in 2007.

Thanks very much.

The next question is from Vince Valentini from TD Newcrest. Please go ahead with your question.

Question on the cable guidance and margins. If I understand correctly, your splitting out the home phone service so none of that will be in the core cable and internet anymore. But yet the guidance implies margins will still drop in 2006 versus 2005 from what looks like 41.7 down to a range off 40 to 41.5. Please explain what is causing that. You talked about rate increases. You have great subscriber loading in '05 that should flow through in '06. What would drive the margins down?

I think we give a range in our guidance on the numbers but we have a range of 4.5% to 6.5% growth on Cable and Internet. That reflects rate increases on products that obviously are not done at the start of 2006. But I would say there is work being done to continue to expand the margin that we look forward to trying to accomplish over the next 12 months. From a running rate, and that is where the plan is and we hope to better achieve against it.

Okay. My assumption on the losses, it looks like $26 million, $24 million in 2005 and an incremental $26 million in 2006 based on the guidance because the way it is split up now, you see where that is? Does that make sense?

Yes, it does. That assumes the four-year market in the phone business and the ramp-up to the Atlantic markets in 2006. We hope a substantial increase in sales as we go through 2006. But we had a target, Vince, to break even in that business in 2007 that we gave when we first laid out our investment and we hope to be on track for positives in 2007.

Thanks.

Next question is from James Breen from Thomas Wiesel.

Thank you very much. As a follow-up on the cable telephony side, can you talk about what success you had on the launch in the fourth quarter now that you have got a full quarter under the belt? The response from customers and has it effected churn at all in the customer base?

I can start. I think, one being an integrated phone unit with Sprint. We have the learning to be in the phone business, through that company net management team. We ramp up sales through the second half of 2005 to make sure we launched new markets and had stability in the plant in the network for our customers and we saw that.

We see a substantial overlap in multi product customers of, obviously customers who already have two or three existing Rogers products are buying the fourth in the Home Phone. I know there is a lot of question on the benefits to other products as you rollout Home Phone and we are anticipating benefits and working towards more sales of two and three products at a time, as opposed to one by one. But it is early days on that still. Our pricing philosophy, as you heard, is not as sharp as some other companies and we will see benefits in other products as we go forward.

Thank you.

Next question is from John Henderson with Scotia Capital.

Thank you. A question on your integration costs remaining for Fido and Call-Net combined for 2006. . That is not part of your guidance. I wonder what you expect there and what you expect on corporate overhead impacts in terms of two EBITDA?

John, its John [inaudible] I will answer the first part of the five integration. There will be nominal OpEx coming through in 2006. Effectively finished. You will notice as you wade through the detailed release, just under $20 million in purchase price accruals left. Primarily for network reconditioning, cell sites and switch sites that we continue to work through in 2006. In terms of cash there will be some accrual money that gets spent in 2006 but not a big OpEx expected at all. In terms a corporate RCI --

John, in terms a corporate expenses, going through the integration, we should see some uptick in the Crawford expenses in 2006. One of the items we will have is some expenses related to the Crawford Campus that they just acquired from Nortell. Those figures will be flowing through corporate for 2006 until we determine the final plan for that building. You see a slight uptick in terms of corporate expenses in 2006.

Slight uptick, okay, and then call net?

The question on call net in terms of integration costs? Integration costs I think we already set out in the guidance.

I will look that up again. Thanks a lot.

Next question is from Joe Mckay from Desjardins Securities.

A question on Cable and Internet CapEx. The mid point of the guidance calls for 10% decline which is nice to see. Can you talk a little bit about where you are in the cycle with cable CapEx and is there room for that number in the 2006 guidance number to trend down or are you comfortable in the 450, 470 range over the midterm?

The day we give the guidance I hope we're comfortable with it.

Good point.

We're comfortable with our guidance, it is a reduction. We give guidance one-year at a time. So we are hesitant to go too far into the future but some of the trends that you do see in the reduction of costs for some of the networks and customer promising equipment. We anticipate the flow into outer years. I don't know, have anything to add to that.

The insider guidance, continued investment in the Internet platform for capacity and speed upgrades, that is the type of thing occurring year after year. We will continue to roll into an expansion of HSDPA services. There may be some functions in 2006, more than variables related to subscriber growth.

Ted here. You look ahead and you see that the Pan America and they're going to take over the air stations off analog in February of 2009. That is just after this 3-year planning cycle. The effect that that might have is undetermined.

Second point is the sale of digital sets, TV sets, is exploding on both sides of the border and particularly with high definition. The growth of digital and vacating of some of the tiers off of analog to make room for greater capacity to enhance that, is not determined at this point. It is something that could have a measurable effect on capital, a very positive effect on the business.

That is very helpful. Thanks very much.

Next question is from Rob Goff from Haywood Securities. Please go ahead.

My question is on Wireless. Could you address what your market share would be in the enterprise market and what your leverage may be to increasing that market share once we get into number portability?

This is Rob Bruce. We may have answered this question before on calls over the years but it is extremely hard to measure enterprise share. Randy and I have gone through this a couple of different companies and no matter which side of the table you sit on, extremely hard to measure. In terms of leverage, going in to LMP, I guess that is anybody's guess. It is about how well we satisfy our customers which we are deeply committed to doing.

If there is one number that is stacked slightly in our favor is that we have slightly fewer enterprise customers than our competitors do, which may give us a better shot strictly in the numbers game perspective. But we've wouldn't say for a second if we don't do a great job in satisfying the customer we have that that will ever come to fruition although we're committed to ensuring we get there.

This is Ted. I just want to add quickly that we are very small in the Rogers Business Solutions market. Wireless is our great door opener and we have many satisfied customers. The brand as well regarded.

We just have to bulk up in the Rogers Business Solutions, take advantage of the doors being opened by Wireless and sell those existing to new customers, a wide variety of services rather than just one.

Just round of the underlying question. We have an opportunity to do better in the business market which is one of the reasons for the management structure that we have in the our RPS Group being the channel for all business products.

When you look at churn. clearly in Wireless, the hard part is the change of number. I suggest that is much harder for a business customers than it is for a consumer. So to the extent that you look at churn rates and we have been doing a lot better the past year. We are still higher than the other guys. I suggest there is a reflection more on the consumer side. There is the opportunity, if we do this right, to exploit the fact that business customers are no longer hindered by having to change their numbers. That is something we hopefully will be able to exploit.

Thank you.

Next question is from Tim Casey from BMO Nesbitt Burns.

I wanted to go back to the digital cable discussion. Edward, can you expand on your current rollout of the VOD? What sort of usage trends are you seeing and is that having any traction on the revenue side and on the HD side, what are your plans as far as rolling out new channels and managing capacity? I guess it has been characterized as a chicken and egg thing so far, to really accelerate HD sets you need more content, but the content providers other than sports are slow to ramp up with new sets. Do you sense, are we close to a tipping point as we approach February 2009 or is that still a ways away?

On the digital question, I think we are continuing a strong push on digital in 2006, but we are concentrating that push on the revenue aspect and the attach of services, as much as deploying new digital customers. When you look at our guidance to our results on digital house calls, maybe look to be fairly consistent year over year but our push on the digital revenue attach is considerably higher in 2006 over 2005.

On the VOD side, we saw roughly 70% increase in use, but there is a drop as customers move from a pay-per-view over to VOD. So on the On-Demand view, when you net off the two, it is about -- it's over 20% increase year-over-year. So we continue to see strong growth but we're also using it much better as the On-Demand side of TMN or children's services that we have in other services as we use it to drive customers into digital packages, drive customers back from satellite to cable to talk about services that are only available on cable.

The elections, recent federal election had a full coverage on the On-Demand basis, which we got considerable usage for from customers and so it will be continue to be a platform to differentiate ourselves in the future. High-definition is something we look to be a leader in high definition. We have more high definition customers than anyone else in Canada. We announced two months ago 100,000 customers and growing. The number of services and we continue to be a leader. And it is growing but we are pushing that the high definition channels show as much programming as possible in high definition and that is almost a thrust just as much as the number of channels. We continue to believe that we can adopt that growth and pass the requirements as we go forward. Rogers Sports Net, I think producers originates more high-definition programming than any other broadcaster in the Company. That is why Rogers is showing leadership in this field and will continue to do so.

Ted, when do you foresee more widespread HD content available other than on the Sports Channels?

I think it is available now, on the U.S. stations during Primetime. Tony will correct me. Because of that and program substitutions it means the Canadian stations in Primetime should be substantially high definition today.

The problem is the Canadian stations are not themselves producing Canadian programming in high definition. I think, you will find that will change. I think you will find that the broadcasters as they need to upgrade the equipment will move into high definition or they will be left at the gate, because if you have got a substantial -- let's say you have 25% of your home's with high definition which we will without too much delay, and you are watching high-definition program and come across this crummy programming that looks pretty awful compared to the high definition, and the sound is so much better on high-definition. That you will find the broadcaster will be incentive to produce more and more programming. Tony, over to you.

As you know, there are a couple stumbling blocks. It is hard to monetize for the broadcaster, hard for them to monetize their HD investment But as Ted said, exactly correct, you can't really buy broadcasting equipment now, that is not compatible for both standard definition and high definition and most of the U.S. nets Primetime programming is in high definition. So I think you are going to see increasingly as we move towards 2009 the Canadian broadcasters are going to get on with things. It is happening with increasing rapidity.

Thank you.

Next question is from our is still a from [Rahi Suva] from Goldman Sachs.

A quick follow-up on the HSDPA rollout. As I understand it, $390 million for 2006, and 2007 for a major Canadian cities. Can you give us any color, is there more spending expected for '08 and what is the total percentage of population you would expect to cover with HSDPA in 2006 and 2007 and beyond that?

The spending beyond 2007 will be capacity spending and it will be substitution for spending we would have done on GSM, [inaudible] otherwise. Will we try to do is break it out so you get a sense for the difference between capacity spending and coverage spending on HSDPA. To recap what Bob said before . I think it was 390 of which 80 in the first go around was capacity and the balance of spending over that subsequent year will be capacity and more spectrally efficient capacity, that will be substitution for other money.

What is the total percentage of population you expect cover with HSDPA?

In the range off 60% by the end of 2007.

Okay. If I may, a quick follow-up question on the Wireless side in terms of the net additions. In the U.S. and Europe, we saw an acceleration in growth when penetration reached the 50% mark and in Canada listening to 2006 guidance from [telass] NBC with companies seem to point to increased flat to up net add for 2006, alluding to what others previously mentioned share losses for you guys .I was wondering if you could segment that out a little bit? You talked about your postpaid growth being higher than expected in 2005 to slowing down. Can you talk a little bit about what you expect your postpaid versus prepaid growth to be in 2006?

I think our general belief over the next four years, we will probably see postpaid percentage slowing slightly prepaid getting a little greater. We continue to be very focussed, as mentioned earlier, on trying to maximize our focus on postpaid because that is where the value is. Beyond that you have most of the other information.

Next question is from [Gary Robinson] from MGI Securities.

A quick question on the Wireless ARPU. Could you help quantify the 8% year over year increase. How much of that was data versus roaming versus increased take up in value added services? In terms of future growth in ARPU, where should we expect to see the majority of its come from? Will it be data, roaming, or services?

Actually to telegraph exactly where it came from it, it would make life awfully easy for our competitors. And I am not going to be incredibly specific but the trends that I will allude to will be ones we talked about before.

Data obviously is strong and has grown from being one or two strong products to being a portfolio of relatively strong data offerings. So very strong growth. We have fallen slightly below 100% year-over-year growth on data, but it is the strongest of the portfolio. Our roaming continues to show strong growth. We are seeing healthy growth on essential voice services. People continue to have a strong appetite for getting more utility out of the devices by adding those devices. We are seeing air time continuing to grow robustly. It has spread quite nicely across the portfolio.

Our data being pretty big, you can see that in the 9.4% of our total revenue being from data. Frankly, we expect that profile will be maintained going forward. At some point, I imagine we will bump our heads against the ceiling on essential voice services. We continue to believe there was still some head room for roaming revenue and we think there's [inaudible] on data.

And just a quick quantitative question. Do you have the percentage of subscribers that under contract going into Wireless portability in March 2007?

I do. Versus last year, we have about 78% of our subscribers under contract in Q4. We loaded over 95% of our subscribers in Q4 onto contracts with the vast majority being three-year contracts. That's 78 number compares with 73 a year ago.

Thank you.

We have time for one last question. Last question is from Simon Flannery from Morgan Stanley. Please go ahead.

If I can follow-up on the ARPU question, you cited on getting deeper into data, both BlackBerry and SMS as being important. Can you give us a sense of how the BlackBerry growth is trending and if you have any sense of market share or flow share on that? And then on SMS, where we are in terms of that contribution and it seems with Cingular and others it is really catching fire south of the border. That is where you are starting to see that you can drive in 2006?

Just to give you a little bit a color, what I was trying to say is when you look back a couple years we were fairly BlackBerry dominant and I am pleased to report BlackBerry growth continues to be incredibly strong. We continue to be the dominant player. Again, these things are all hard to get specifics in terms of share but when that we are the dominant player in terms of BlackBerry, and it is still a very fast-growing business in our data portfolio.

We said this on prior calls, is absolutely continues to be one of our portfolios that is growing leaps and bounds. So we're very pleased there. But again, the other parts of the portfolio wireless Internet downloads have all of a sudden picked up pretty strongly over the past 12 months. So the portfolio in data is much more balanced than it was two years ago with every part of it contributing significantly.

Thank you.

No further questions at this time. Please continue.

Thanks for conducting the call. We appreciate you joining us this morning. We know it is very busy time for you .So we appreciate your coverage. There is a rebroadcast of the call on Rogers.com website if you joined the call late. If you have questions that were not answered on the call, we apologize. Myself or my colleague Eric who is contact information is information is on the release and will be available to help you. With that, this concludes our call. Thank you for joining us.

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