Rogers Communications Inc (RCI) 2006 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Rogers Communications Inc. third quarter 2006 results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. [OPERATOR INSTRUCTIONS] I would like to remind everyone that this conference call is being recorded on Tuesday, October 31, 2006 at 10 am Eastern Time. I'll now turn the conference over to Mr. Bruce Mann, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Operator and good morning everybody. We appreciate you joining the Rogers third quarter '06 earnings teleconference. On the line today with us here in Toronto, Ted Rogers, our CEO, Bill Linton our Chief Financial Officer and Nadir Mohamed, who is the President and COO of our communications division. Also with us are the divisional presidents, Rob Bruce from Wireless, Edward Rogers from Cable and Randy Reynolds from Rogers Business Solutions. We've also got a couple of other members of their respective management teams here as well as Ken Engelhart on the regulatory side.

Let me quickly dispense with the one or two administrative things. You saw our 3Q '06 earnings release, was on the wireless this morning. If you don't have a copy you can find it on www.rogers.com or canadanewswire, prnewswire. I say this because you should review it fully, as well as our 2005 annual MDNA for the full year specifically with respect to the cautionary language that they contain about risks and about forward-looking statements as those will apply equally to our discussions and the dialogue on today's conference call. With that let me turn it over to Ted Rogers. And then Bill Linton for just some brief introductory remarks. And then the management team from Rogers will be pleased to take your questions. So I'd ask Mr. Rogers, please go ahead.

Good morning. Happy Halloween. Thank you for joining us. I'm going to start by saying that we're competing well with very powerful and heavily entrenched monopolies. I'm not at all satisfied and we have a lot of work still in front of us. However, I'm grateful to our management and employees for another quarter of strong and profitable growth. This quarter's actual subscriber and financial results combined to represent one of the best quarters the company has ever had. Revenues, EBITA, net profits, free cash flow and subscribers to our various products have all moved significantly higher as more and more we organize and operate as a single company.

On the subscriber front, obviously, very solid continued clothes [peg] growth at Wireless with continued terrific performance on churn and some growth on pre-paid as well. Excellent subscriber results at the cable business, an outstanding performance year-over-year on cable telephony and basic cable in particular and with continued strong growth of both high speed Internet and digital cable. In fact, combined we added 69% more revenue generating units of cable in the third quarter of this year than in the same quarter of last year.

As I always say the best is yet to come. From a financial perspective, double digit top line growth at all three of our main businesses, we generated more than 200 million of free cash flow in the third quarter, more than doubling from the third quarter of last year. We continue to be very focused on making Rogers more stable in what I call industrial strength. I believe that our results this quarter demonstrates the progress we are making in this regard. There's a good balance of continued solid customer growth, strong double digit revenue growth, good growth in our free cash flow and at the same time continued healthy investment in the many MPV positive growth opportunities that we have on our plate.

We also continued to de-lever during the quarter. We will hopefully be within spitting distance of investment grade some time in 2007. Our strength and position and continued growth allowed our Board of Directors to announce a 113% increase in our dividend this morning as well as the two for one stock split which we announced at the same time.

I'm pleased with the progress we're making, very grateful, but make no mistake, we are in a fiercely competitive market and we have much hard work and continued investment in front of us if we're going to remain strong and continue our industry's leading growth project rate. We have the right capital structure to enable us to take advantage of the many investment opportunities outside of our normal CapEx program that present themselves.

Few examples, investing to expand our presence in the business market, important to us to diversify from being mostly residential. Investing to expand in Intel, our wireless footprint and to rebuild the last of our rural cable systems surrounding our major markets. Strengthen our defenses. Investing to continue the rapid growth of our home phone service. Investing in future technologies like WiMAX, HSDPA and high definition to continue our innovative product leadership over the years.

We're going to continue to invest for future growth and to further strengthen the infrastructure of our facilities, where we believe, we can build value for our shareholders and franchise. That's what we've always done at Rogers and that's how we built the company into what it is today and how we're able to deliver quarter after quarter of strong industry-leading revenue and EBITDA growth.

I've said before that I want that growth to be controlled to be increasingly profitable as we go forward. We're certainly not going to start resting on our laurels just collecting the cash. So there's a strong commitment to investing to ensure that healthy harvests continue well into the future.

I'm going to stop here by saying, we've had an excellent first three quarters of the year. We're optimistic about the last part of the year as well. We have a lot of work to do. And we're coming at it from a position of increasing strength. I would like now to turn it over to our Chief Financial Officer, my friend, Bill Linton, to highlight some of the results.

Thank you, Ted and hello everyone. I'm going to quickly hit on a few major highlights in the quarter. First, we recorded the highest revenue quarter ever with revenues above 2.34 billion. This represents 15% top line growth versus the same quarter last year and that is all organic growth. It was driven by Wireless, which was up 18% and it was strongly supported by double digit top line growth in both cable and telecom and our media business.

Second, continued good subscriber growth, which was, reflects very heavy focus again this quarter of postpaid wireless and cable telephony. Wireless net adds of 203,000 were slightly below last year 213. Cable telephony sets were at 106,000 versus 18,000 last year and basic cable subs were up 13,000 compared to just 1,000 last year. Digital cable net adds were about flat, 62,000 to 66,000 last year. And high speed was flat at about 52,000. The wireless net adds combined with postpaid churn at 1.3% and the 5.3% ARPU increase creates very powerful operating leverage for this quickly growing segment.

Record growth in cable telephony with 106,000 subs loaded onto our voiceover cable telephony network was six times what we added in Q3 last year. Of the 106,000 cable telephony net adds, approximately 14,000 were subscribers we migrated off of our circuit switch telephony platform where you can see we had a reduction of 24,000 in the quarter. These migrations onto our cable network enable us to eliminate payments to the [Ilex] for unbundled loops.

Just a reminder, which we footnoted in the cable subscriber table of the release, is that last summer we changed the treatment of how we count certain terminating subscribers. And the impact of this was to increase the number of additions last year. Adjusting for this you can see that Internet and digital subscriber growth continued strong and that we also began to pull through an increasing number of basic subscriber additions, helped by broader marketing focus around our cable telephony product.

So overall we had good subscriber growth and retention across the business. EBITDA or operating profit for the quarter was $784 million and it's up 33% from Q3 last year organically, the highest quarter for Rogers. So great growth, good operating leverage, consolidated margins up 460 basis points of Q3 '06, Q3 '05. With most of the expansion coming from Wireless as the margin expansion in our core cable and Internet business was offset by the sales and marketing costs associated with almost a 90% year-over-year increase in the number of cable telephony subs we added.

As you may have seen in the release this morning we're adjusting the high end of the fiscal '06 guidance ranges for several of our financial subscriber metrics. Capital expenditures in the quarter totaled $415 million up primarily from the planned HSDPA deployment spending of Wireless. And from the significantly greater than planned growth in our cable telephony business. We did adjust our CapEx guidance to reflect a much greater than planned growth in cable telephony subs that we're seeing in the second half of the year. But we're generally on track with CapEx for the year otherwise.

Free cash flow, which is EBITDA less CapEx and interest was over $200 million in the quarter, more than double year-over-year and up over 12% sequentially from Q2. So excellent growth in free cash flow. Now if you follow Rogers closely, you know that from a timing perspective, free cash flow generally declines in Q4, based on the seasonality of high Q4 customer acquisition of Wireless and this year the push into cable telephony. With the cash flow in Q3, we paid down approximately $300 million of debt and bank facilities which combined with the strong EBITDA growth, drove our debt to EBITDA ratio down to three times with the derivative and 2.6 times excluding it.

Given the process in our de-leveraging and the continued cash flow growth Ted mentioned, our Board increased our annual dividend from $0.15 to $0.32 per share. That's part of the dividend policy change. The Board also provides dividend payment schedule of being semi-annual to becoming quarterly going forward. I'll echo the earlier comment to say that it's been a very good first three quarters of 2006 for the Company. Clearly we're maintaining our growth while improving our results. I'll end it there and we'll now take your questions.

All right, thank you Bill and Ted. Operator, we'll be ready to take questions from the participants in just a moment. Quickly, before we begin just request of the participants as we do on each of these calls, because there are a lot of people on the call that everyone be courteous enough to limit your questions to one topic so that as many people as possible have a chance to participate. And for the benefit of everyone. And then to the extent we have time we will circle back around and take additional questions or we'll get them answered separately after the call. So Operater, if you'd quickly explain how you'd like to poll for questions, we're ready to go.

Thank you. Ladies and gentlemen, we will now conduct a question and answer session. [OPERATOR INSTRUCTIONS] Your first question comes from Jonathan Allen from RBC Capital Markets. Please go ahead.

Thanks very much. Great results, guys. Question for Mr. Rogers, very happy to see the dividend increase coming through this quarter. Just curious how we should look at things going forward. You mentioned that there would be -- that Rogers would not be sitting on cash and yet there would be still be some investments to be made. Is the Board looking at the potential for growing dividend steam from Rogers or do you view this as being a one time adjustment?

Well as we said last year, we plan to increase the dividend as we go forward and have increasing profitability in the Company. We're always nervous of increasing it too much where you have to retreat and lower it at some subsequent time. So we're probably quite cautious. But it will be our, I think, our Board policy, to review the dividend each year.

Well just looking at least at my base case forecast, the dividend increase looks to be somewhere in the order for just about a 10% payout ratio of free cash flow. Is the Board going to look at it as a percentage of free cash flow?

Ted Rogers: I wouldn't be able to comment on that but I just would reiterate that the Board is going to review it each year and we are trying to get the right balance between the interests of the shareholders and the interests of the debt holders and as you know that involves a fair number of calculations.

From the last conference call I believe there was two other topics that came up. One was your view to get investment grade credit. And previously you had used a long term debt leverage of three to three and a half times. Do you see that coming down a little bit lower perhaps to two and a half times and also just curious as an update, your views on share repurchases.

Well I don't think we have a forecast on the -- whether it's going to go below three. Obviously it's moving in that direction but I don't think we have any forecast to make on that. And I think the -- other question you had was what?

Share repurchases. We saw the dividend increase and if you'd like to maintain flexibility, share repurchases seems like a logical next step.

Again this is all in the study. We have a finance committee on the Board and the study between the interest of the shareholders and the interest of the bond holders, that's a topic that would be discussed by the finance committee as we go forward.

Well thanks very much.

Your next question comes from Greg MacDonald from National Bank Financial. Please go ahead.

Thanks, good morning, guys. Quick question. By the way, excellent results on the wireless. I think I'll let other people attack that issue. I wanted to focus a little bit on the business solutions side. Mr. Rogers, in particular, last quarter you indicated that you wanted to build back business. Looks to me like margins are still an issue there with respect to carrier costs. I was wondering from a strategic perspective given the operating margin pressure, is there a move more toward focusing on the SME part of the market through either On-Net or close to On-Net type customers or are you still looking primarily at focusing on sort of the enterprise or large business part of the business?

Greg, it's Nadir. Let me take the question. First, I think, anybody that would look at the business market in Canada would know that in fact what we're seeing across the board is a move from legacy circuit business to IP data. And from that perspective it's a disruption in the market and it's a opportune time for somebody like Rogers to try and exploit that.

I think in terms of where we see opportunities and where we would like to focus would definitely be on the smaller end of the market as opposed to enterprise. I think the enterprise market generally is very price competitive. It's the market of the large players. Not an area that we would see ourselves playing in. The real focus for us on the business market though is leveraging our network, our strength and that is looking at On-Net services, we've got our cable network that's increasing the cable that's handling this kind of traffic. That's going to be a focus. We've got through the Call-Net acquisition access to fiber in our own network and importantly with GT, we have now, at the end of this year, we'll be picking up a bunch of assets from GT and Ontario and the Atlantic. So On-Net definitely will be a focus for us and obviously one of the plans for '07 is to try and get that business going in a very focused, disciplined manner.

Thanks Nadir. Just a quick add on to that, it's comforting to hear that that's where your focus is going to be and Shaw -- I asked a similar question on the Shaw call. They were good enough to actually give an estimate of what the addressable market is. Have you guys done any analysis on, sort of, rough estimates on a revenue basis what the addressable market is to sort of, On-Net or close to On-Net type customers?

Greg we have but Greg we're also not in a position at this point to actually share that. I suspect there's people that -- on the call that would love to hear what our views are so pass on the second part of it.

Your next question comes from James Breen from Thomas Weisel. Please go ahead.

Thank you. A couple of questions, one, on the cable side. Seems like the monthly core op was stepped up a little bit. Can you talk about what's driving potentially higher ARPUs there? And then also on the Wireless side, ARPUs are a little bit higher or considerably higher this quarter than last quarter. Can you talk about some of the impacts? Thank you.

I'll take the first part on cable. And I think when you say core Internet and the television business and it's a combination of the rate increases that we did in the March time frame. We put through rate increases on both the television business and every tier of the Internet business from the end of last year through March. You're seeing some of the flow-through of that and obviously they continued deepening penetration of the Internet business, digital cable and additional purchases on digital.

It's Rob Bruce. On Wireless, we saw significant improvement in ARPU of 5.3% almost evenly split between voice and data. Data solidly up driven by continued success across all facets of our data business, our BlackBerry and email businesses, our SMS businesses, wireless, our wireless Internet business. And in terms of the voice side, again, spread around across different categories, some of it driven by some price increases on out of bucket air time and LD and continued strong growth in essential services and roaming.

Great. Since you brought up the BlackBerry, any comment -- care to comment at all on the sales of the Pearl since you started in October.

It was fine. We kind of expected the question. It's been very successful, embraced by the market and running ahead of expectations.

Your next question comes from Dvai Ghose from Genuity Capital Markets. Please go ahead.

Yeah thanks very much. Happy Halloween. Nothing scary about your results unless you're Bell, I guess. So congratulations. But my question is on the Wireless side, very significant decrease in retention spending. I think 16.6% sequentially, about 10% year-over-year. You're heading into number portability in Q1 '07. Has basically most of the retention ahead of that been done and should we expect lower retention spending going forward and therefore higher margins or is there anomaly in the quarter? And on a related point, post the implementation of number portability, do you think as the smallest wire line carrier relative to wireless of the three major carriers in the group, that you will be pushing wireless substitution as number portability has been an impediment in the past?

Okay. You packed a lot into the question.

That's one question.

Let me do the first part and then I'll come back on, maybe get you to restate a little bit of the second one. In terms of retention, yes, our retention spending is down quarter-over-quarter. It's driven by both a combination of volume and rate. The rate element being the dominant part of it, being down about $20 per device and the short answer is we really, both on the acquisition and retention side, put less into our handset subsidy, which drove significant savings. And they are not savings that we expect to get in the future as we drive toward L&P we think things will continue to get more competitive and so it's not money that we should count on in the future.

Okay. So it was unusually low in the quarter, is that what you're saying? I just wanted to clarify. Okay. Unusually low.

Dvai, on the second part with respect to L&P and wire line/wireless substitution, a couple of points. Obviously to the extent that there is substitution in the market given our position on home phone as being a relatively new service, there's a lot more opportunity for us to gain than our big competitors. So from that perspective it's a positive for Rogers. But I think from a behavioral perspective when you look at wire line or L&P and the impact of wire line to wireless substitution I think in itself L&P, I don't believe will be a substantial catalyst for that more than -- Fido has had that capability for some time. Looking at the U.S. experience in terms of porting, if memory serves me, less than 10% of the porting came from wire line -- numbers being ported to wire line. So I don't think in itself it's going to be a big catalyst but generally obviously we're seeing some movement to wireless from wire line and frankly that's a great opportunity for Rogers.

But if I can just follow on that there really quick there. I can understand why Bell and even Tellus didn't want to push wireless substitution because of that big wire line basis but your incremental margins as well as CapEx requirements per wireless subscriber is so much less than home phone that yes, you have two areas of growth but one is a lot more profitable than the other, no?

Yes what I'm distinguishing is the L&P in itself. I think the [averly] wire line is a number that's used for a home as opposed to an individual. So I think the two are different issues to the extent that we have wire less substitution, obviously wireless is a big driver for us and we see great opportunities, not just from numbers but frankly new technology and new services. We have seen what T-Mobile is doing in the U.S. with the ability to layer on Wi-Fi to wireless and so on. So I think you will see us continue to be very aggressive on the wireless side.

I might add -- it's Ted. I might add that our objective is to develop a phone service that can work out of the house on wireless and in the house on wire line and to have a lot of services that are common to both the wire line and the wireless and to offer more and more a combined service. So that's something that may be a late '07 and '08 program but it's important for Rogers to keep developing new products, new initiatives to keep the revenue and profitability going up.

Your next question comes from Marje Soova from Goldman Sachs. Please go ahead.

Thank you. I quickly wanted to follow up on the wireless margins. It seems like the higher end of your guidance range -- the updated guidance range implies about 39% margin for 4Q which is significantly lower than the record 49% in 3Q. What else can you point to in 3Q aside from the lower end subsidies that seem to be one-time in nature. It seems like sales and marking costs were lower as well. If you could just help us understand kind of more of a normalized number for 3Q. And then separately, if you could touch on the prepaid it looks like churn is down there and clearly much better net adds and also higher ARPU at the same time so what are the new initiatives on the prepaid side? Thanks.

Great, thank you. Let me follow up and I'll actually repeat because some of the items you highlighted were kind of key and we obviously don't give specific numbers about what normative would have been. But we said earlier that Q3 is the seasonal high margin quarter. As well in the quarter particularly on the revenue side are a bunch of one time price increases on a la carte, LV and out of bucket minutes that are not insignificant. As well as the handset pricing impacts both retention as well as acquisition are almost $25 million, so again, significant. In the long run we don't think these kind of margin levels will be sustainable. There'll be a lot more pressure on margins as we go into L&P.

Moving to prepaid, I guess there's a number of things that I'd like to highlight. We continue to drive our quite successful Much phone product. We closed the pricing gap in a number of areas versus the competition. Some interesting initiatives on the $1 a day incoming calls and the $1 a day on evenings and weekends on Fido brand and Rogers brand respectively. We continue to work our churn machinery that's been very successful for us on postpaid and apply it more diligently to prepaid and we're doing some revenue stimulation to the base and I think that's the sum of the activities that's producing the better results.

Thank you.

Your next question comes from Simon Flannery from Morgan Stanley. Please go ahead.

Okay thank you, good morning. Nice results on the cable telephony. You commented on investing to improve your installation capacity so can you just help us think about -- is this the run rate? Are you now sort of able to handle the demand that you have? And some color around the customers that you are adding. Are they -- is it really new customers to cable people moving or is it there's a lot of existing customers that you are up-selling into the bundle? Thanks.

Okay. I think I got most of that. I mean generally the guidance past the end of this year we give -- we don't talk about yet but clearly we have the ability to achieve the results in the third quarter that we did. The third quarter for cable companies are a strong quarters. Folks come back to the store and we get a good lift on all of our products and telephony was part of that. There's two kind of trends with telephony. First, obviously customers that buy existing Rogers products are open to take on more Rogers products including the new Rogers home phone and that's a trend but also it's been a good product to get into. Customers who buy no products from Rogers and we can go back to them with offers for home phone that actually drag in other products which we've seen. So we're seeing activity pretty well from across the customers and possible customers.

Okay thank you.

Your next question comes from Glen Campbell from Merrill Lynch. Please go ahead.

Yes thanks very much. I just wanted to get some more comments I guess, on the wireless competitive dynamics during the quarter. I mean it seems that both Bell and Tellus hit back pretty hard when you launched urban Fido. Tellus in particular and yet your subscriber growth is extremely strong and you lowered your handset service. Can you kind of give us a bit more color on what you think is going on there? And just I guess clarify the comment that the reduced level of handset subsidies probably won't be sustained, are you thinking that you're going to have to -- is it that you got a break in terms of the cost of the handsets that you didn't pass through or do you expect to have to increase the subsidies going forward? Thanks.

Actually Glen, I saw it as a relatively normal quarter. Yes our competitors did respond to Fido Urban which we had highlighted was a specifically targeted plan, a bit of a niche plan frankly, so we were surprised. Frankly that plan and the business in total has been strong throughout the quarter so really not much to add in that regard. What was the second part of the question Glen?

Just if you could clarify the reduction in the per handset subsidies. Did you get this because the handsets are costing less of your suppliers or because you put -- you reduced the actual subsidy level in the market.

Yeah, it was the latter. We reduced the subsidy level in the market. We raised the average handset prices up a little bit and it takes -- obviously saves us COA on both the acquisition side but also saves us retention costs. My expectation is although we will certainly not go there proactively, that as we get closer to L&P at least the possibility of more aggressive handset pricing and I'm just making that comment because I think it's a realistic comment given the environment we'll face shortly.

Okay thanks very much.

Your next question comes from Rob Goff from Haywood Securities. Please go ahead.

Thank you very much. And good morning. When you look at both the technology and the regulatory window on cable and concerning the demand you've seen to date, would you -- how would you characterize the balance that you have on RVU growth versus EBITDA growth and do you see yourself switching a bit more to push on the volume side of things?

Rob, it's Nadir. And I think in many ways your question is somewhat answered with the quarter's results. You've seen very strong results on the subscriber side along with margin improvement but if you look at some of the highlights that are more direct to your point, 106,000 on cable flat shows that we've switched from a marketing strategy early in the year where we were actually targeting the wireless space to a mass market approach as of July 1. And you're starting to see the results.

So we're aware of the window in terms of the regulatory front. We're going to drive the product side. But frankly our product approach has not been on the backs of pricing. I think when you look at our ARPU performance and how we have approached it what we see is look, there's great opportunity for -- to allow people to have a choice. I think our better choice bundle approach in terms of up-selling and cross-selling leads to being able to add more products on existing customers. So what you are seeing is the balance -- result of the balanced approach on the market between product rules and margins.

If you look at the success in the quarter, it is very much RHP but also digital and basic. Basic in fact, up year-over-year by about 16,000 when you factor in the adjustment of last year, same quarter. So I think it shows the impact of going mass market. It shows the power of having a connection to the home and building around it without having to use price as the big lever.

Okay thank you.

Your next question comes from Peter MacDonald from GMP Securities. Please go ahead.

Thank you. Congratulations also on the quarter and despite the loss to us, congratulations to Eric on his promotion. I have a question on your asset mix. You've been really successful at piecing together a consolidated asset. So when you look at what you have today are there any holes that you would like to fill or any areas that don't seem to be working? And specifically, if you can comment on whether your interest in All Stream has changed since your comments last quarter? And then last, can you comment on the speculation of an NFL team coming to Canada? What your interest might be in that and what if there was a potential or theoretical investment, what your exposure might be to that sort of investment. Thank you.

Ted here. Let me start with the NFL. I said before that we're not interested in investing huge amounts in a thing like that. I think one must appreciate that the way they finance those things is that they sell the seats for $10,000 or $20,000 a seat and then you have to buy tickets. And so that the net investment on that sort of operation is a far distant cry from the gross numbers that people toss around. I don't think my sales at the NHL is going to -- and I'm no expert on this -- it's going to expand materially the number of teams and if we do I think Los Angeles would be the first in line. The other part of your question was more important. Could you just repeat it or something?

So I was just looking at your asset in general if there's any holes in any part of it, whether it be media, on the -- on the IT side or whether it be on cable or anything else. Do you think there's any holes that you have to fill? Are there any assets that don't fit and then specifically on All Stream, your comment on it last quarter, if your views have changed with that asset -- with respect to that asset.

Well the -- you've introduced a very key subject and that is that the investment community normally is against large increases in CapEx but they are for good acquisitions -- sensible acquisitions that don't actually are not deducted from free cash flow as you know. So it tends to push managements into making acquisitions rather than building the business themselves. I've always believed in building the business ourselves and therefore we have a reputation over the years of higher capital expenditures than many. And you invest also in short term EBITDA, the losses from the investment of starting up new businesses.

As I said before the business market is one where Rogers is going to make a major commitment. And we do not intend to buy All Stream. All Stream would cost a huge amount of money and for a fraction of that but still a substantial number in terms of capital expenditures, we will in the business with the newest technologies and the newest billing systems and the best group of people we can hire in order to go after small and medium sized business, that will reduce our free cash flow obviously. And therefore we will be criticized for that but it is far better than making an investment in All Stream or another business. And I believe in this passionately is how we've built the business over the years, we've taken a lot of criticism for it.

I think next year that we're going to hit a homerun in some of our products. And if that's true the capital expenditures will increase capacity and increased cones or boxes, digital boxes or modems for high speed Internet will be significantly higher. And there again, we will be criticized for having higher capital expenditures. But that's how we've built the business over the years.

Your next question comes from Phil Cusick from Bear Stearns. Please go ahead.

Hi guys. Thanks for taking my question. Just a little housekeeping. Can you go through the one time a la carte increases to pricing? I think you mentioned LV and services, what was the timing there? And how should we think about that anniversarying into the next year?

I believe it was -- this is Rob Bruce again. I believe it was Q2. I can't remember the specifics of the date. It was a nickel increase on a la carte LV and a nickel increase on out of bucket and that would take you from $0.25 to $0.30 on both of those items.

And we will see that carry through for the fourth and first quarters at least?

Yeah you know what? We will double check the date. And if I'm wrong about the date being Q2 we'll circle back.

All right thanks guys.

Your next question comes from Jeff Fan from UBS. Please go ahead.

Jeff Fan: Thanks very much and congratulations on the quarter. I just want to follow back up on the cable question, specifically on the cable telephony. Given the strong adds that we are seeing in the quarter and higher guidance the rest of the year, can you just give us a little bit more color on whether you're starting to see some of the list on to your basic cable digital and high speed? I know the net adds on all of those fronts are improving on a year-over-year basis but I'm just wondering are you seeing a lot of effect from the phone driving it yet and should we expect more as you continue to push on a more mass market basis?

I think the answer can -- and I can reiterate, is that being in the phone business is definitely helping push other products. The way that we approach other businesses to offer products in a bundle to incent customers to buy more products. That includes the three cable products and the wireless products. And that has been something we've been focused on for many years and that's been helping. And of course we continue to invest in the core products themselves and so the Internet products are better than they were a year ago, faster than they were. We're introducing an 18 meg product.

The cable television product is -- again, has a year-over-year we have a number of the new services that's embedded in it at a richer high definition offering. And so the combination of all these things is definitely helping us in market share and in lifting our overall [inaudible]. It's tough because you look at the numbers but when -- as been said when you back out year over year change last year the enforcement of the 30 days you do see a good pick up on basic year over year and Internet is, we're pleased with it. It's fairly bright here year-over-year but I can't -- we're more penetrated than we were a year ago. And same with digital.

It's Ted. If I could add one thing, the key financially here is that with cable, the big fat pipe, you can put all these services onto one network, one pipe going into the house. And financially of course, that has many attractions. Our competitor for example will be delivering television services through a satellite service, which I think had an investment cost of 3 billion or some such number.

Then they have -- they are putting in fiber to the neighborhood and so they have in other words -- plus they have their copper service for telephony. So they have all these different networks which all have different costs. And we avoid that by putting it onto one pipe. It's a great benefit for us. On the wireless, on the other hand, we are GSM and GSM is worldwide. You can go anywhere with your phone or your BlackBerry with Rogers and it will work. With Bell, it won't work outside of North America basically. So these are the important strategic financial reasons for the underlying growth of the company.

Your next question comes from Vince Valentini from TD Newcrest. Please go ahead.

Thanks very much. On the data revenue for wireless the growth seems to be decelerating at 48% versus 65 in the quarter and 72 in the first quarter. Is this a trend line going forward Rob or is there maybe a bit of a slowdown in your promotional activity in advance of the Pearl launch so we could see data revenue reaccelerate in the fourth quarter and beyond?

Thanks -- thanks, Vince. To be frank, I mean we have seen some pretty strong growth on the voice side. Frankly, a little bit stronger than we expected. And so when you factor that into the mix its actually -- even though we had fantastic growth across all our data businesses, it's actually diluted it as a percentage of the total revenue because voice is such a big piece of the business. So yeah, there's really nothing funny going on. All the business is very healthy and plowing ahead. The -- as I mentioned earlier, particularly the SMS and BlackBerry business is still incredibly strong so just a little bit of dilution from a strong growth on the voice side.

Okay. So I got a follow up Rob. You usually give us a contract numbers on the call. Would you be able to update those for Q3 and in aggregate where your contracts stem?

81 and aggregate 91 on the quarter.

And in terms of three year, out of that 81, most of the 81 or two-thirds or --?

I don't have the numbers in front of me but I think approaching 50% on the three year.

Okay thanks.

Okay. And almost nothing on one year and the rest on two year.

We have time for one more question. Your next question comes from John Henderson from Scotia Capital. Please go ahead.

Great. Thanks very much. Congratulations one last time. I have to ask a question on CapEx and the outlook there. You mentioned a major commitment into the small, medium or the business market. I'm just wondering if you could kind of quantify that maybe CapEx and OpEx. And what would be -- what's -- how do you look at CapEx over the long run in terms of outlook? How do you look at it as a percentage of revenue in the various businesses? Can you comment on those things?

John -- John it's Nadir. Obviously, we have not given guidance for '07 so I don't think it's the right time to talk about any sub-element of our company and guidance on that. I think just to your question on CapEx and do we look at percentage revenue, that kind of metric. Absolutely not. I think that's really an outcome. What we tend to focus is on what does the business need and we're obviously a growth oriented company and Ted has made reference to that. That shows you the spirit in which we work.

We've never shied away from making investments on quality. If you go back to wireless, when we acquired Fido, we could have shut down 1,000 sites. We didn't because we thought that the right thing to do. And it's bearing out in terms of churn improvement. So we'll always do what we think is right from a company investment point of view. And we look at all of these deficiencies based on positive MPVs and soon as a positive MPV says it's the right thing to do. And we then look at specifics in terms of what's happening in the market to come up with the right approach. But it's not driven by any kind of criteria that says it has to be limited to a percentage revenue.

Right. Is there any -- is it too early to say what sort of investment may be made in SMB?

Too early to actually say on the call, yes.

But substantial.

Thanks.

Thank you everybody for participating this morning. As we mentioned in a separate note earlier this morning, Eric Wright has been a core part of the RI team here at Rogers for six years and he's moving on to bigger and better things within [lodgers]. And Dan Coombs, who some of you may know, is transitioning into Eric's position. And hopefully I think it will be a smooth transition for all of you but we'll certainly miss all of Eric's contributions. But with that said, we appreciate your ownership and your coverage. And if you have any questions that weren't covered on the call, or you didn't have a chance to answer your question, please give Dan or I a call. And with that, thank you for joining us today. This concludes our call. Thanks.

Ladies and gentlemen, this concludes the conference call for today. Thanks for participating. You may now disconnect your lines.