Rogers Communications Inc (RCI) 2007 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Rogers Communications fourth quarter 2007 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 is being recorded today, Friday February 22, 2008 at 11:00 a.m. eastern time. I would now like the turn the conference over to Mr. Bruce Mann over the Rogers Management Team. Please go ahead sir.

Thank you very much operator. Good morning everyone and welcome to Rogers fourth quarter '07 earnings teleconference. On the line with us today here in Toronto are Ted Rogers, our Chief Executive Officer as well as Bill Linton, our CFO and Nadir Mohamed who is the President and Chief Operating Officer of the Communications Group and also we have got the three divisional Presidents, Rob Bruce from Wireless, Edward Rogers from Cable and Tony Viner from Media along with some members of their respective teams. So we put our detailed fourth quarter release out on the wires before the markets opened. If you don't have a copy, find it on rogers.com or on any of the major wire -- wires, but please have a chance to fully review that along with our '06 annual MDA and the release we put out on January 7 with respect for our guidance including all of the cautionary language in those documents that will apply equally to the dialog on our call today.

So with that, let me turn it over to Ted Rogers and then Bill Linton and Nadir and Tony are each going to makes some very brief remark. And then the management team will have plenty of time to take your questions. So, thanks very much. Over to you, Ted.

Hello everyone, and thanks for joining us. I have got a few brief remarks and then Bill, Nadir and Tony will each say a couple of words as well. Let me start by saying that I am very grateful for the results that the Rogers management team and employees delivered for the fourth quarter and for 2007 as a whole. We said -- we did what we said we would do. And that's, I think critically important. We did what we said we would do, which was execution, integration a balanced mix of subscriber and financial growth and we delivered on or exceeded the financial and operating targets we laid out for you at the start of the year. We added subscribers across the business at continued healthy rates, we grew revenues and operating profit and free cash flow, all at double digit rates. Now, did we do everything perfectly? No. Have we got improvements still that we can make? Yes. I feel like we could do a better job with home phone, which is improving all the time, but it is important to really move it. And I think in customer service, as you know, we are working on or doing all of our practices and procedures, and we have a long way to go there with Don Moffatt and Nadir and all -- the whole group.

Our credit ratings were upgraded to investment grade. Years after they should have been increased to investment grade. And that in turn provided us with the opportunity to significantly simplify our corporate structure. A few weeks ago, we announced the doubling of our dividend from $0.50 to $1.00 per share. And remember, this was just not too much later than we doubled the number of shares so that this works out to $2.00 per share (inaudible) old ones. We are guiding for continued double digit revenue and operating profit growth for 2008. (Inaudible) results overall. We can do better, and we are working very hard to do better, but I it's also a reflection of the benefits of how we are increasingly operating as a single group, a single company. Helping each other, working together with all the different projects we have.

I am also pleased with some of the tuck-in acquisitions we've had opportunity to take advantage of, deals like Aurora Cable and City TV are going to be, without question, and strongly -- add strongly to the franchise and our future growth. I congratulate Bill Linton and Tony Viner for doing those -- those deals. They take a long time, and are really worthwhile to us. We have a history of taking these acquisitions and implementing them to our main business with very successful results. We have also embarked upon several important initiatives including our systems, our networks and capabilities. And we have a long way to go. Making these investments today to develop and reinforce our platforms will help tremendously to secure our continued growth well into the future. If we don't do them, and in my opinion guarantees that we will slip behind and we will not be competitive in two, three, five years. We have to do these.

I think that our plan for 2008 which were recently laid out strikes a healthy balance between first the continued delivery of both subscriber and financial growth. That's the key issue here. Second, the return of increasing amounts of our growing free cash flow to shareholders. We have listened -- we have listened to our shareholders and to you on this call, advisors and the necessary investments for the future. On that investment side, we continue to spend to assure that we have the absolute highest quality networks in Canada at each of our businesses.

To be able to advertise is that we have the finest wireless network in this country, and not to be questioned on that by our competitors shows you the results of careful, prudent but significant financial investments over the years. We now have to make sure that we have at least six months of capacity in place as -- when we will actually need it. This is important to me because with -- with the movement in the marketplace, you could get yourself into real trouble if you don't have capacity estimated at what you would need six months from now. And then you will get into trouble and you will have poor service to your customers and and it is just something that we just don't want. On the worry side, do I lose sleep? Yes, about ongoing regulatory risks. While we are fortunate to have a robust economy here in Canada and the service we provide continues to be strongly in demand, I don't think it would be prudent to not take a degree of caution from some of the economic issues occurring south of the border. These are troubling times. You can't pick up the paper that you don't read of billions more lost by -- by very knowledgeable financial people.

While we aren't seeing slowing in our markets, I have asked our team to be extremely diligent about our controlling cost and exercising restraint around spending so that we can react quickly if softness does spread across the border in a meaningful way. That ties in a little bit with our work on improving our systems and procedures so that we don't need as many people doing manual things. I will stop here by just saying I am very grateful with the results that we have delivered and with the progress that we are making. We still have a tremendous amount of hard work in front of us. Mustn't minimize that at all. These are not glory days, they're satisfying days. But, we are a lot to do, and I think we are exceptionally well positioned to continue our success. So thanks, everybody and I will turn it over to our Chief Financial Officer, Bill Linton.

Thanks, Ted and good morning everyone. I think it is clear from the results that we are continuing to maintain our growth, really right across the board. Consolidated revenues of $2.7 billion up 13%, adjusted operating profit was up 25%. Consolidated margins up over 320 basis points and free cash flow was up 210% over the same quarter last year. So good growth financially. With continued positive operating leverage and importantly, with continued healthy subscriber results at the same time. A couple of quick comments I would like to share.

First, as Ted mentioned, we announced in January that we were doubling the dividend, effective immediately to $1 per share. At the same time, we announced the dividend increase and our 2008 guidance which was just a few weeks ago. We also announced that our board had authorized the buy back of up to $300 million of our shares in the open market during 2008. We obviously haven't been able to buy any shares back under the program as of yet. In the week since the announcement, we have been in a trading blackout pending today's release of our result. However, on a related note, it is important to point out that during 2007 we also put in place a stock option repurchase program. Under that program during the fourth quarter, we were able to buy back approximately 1.2 million options in cash instead of issuing shares. This is roughly equivalent to a $50 million tax deductible share buy back. This option -- this stock option buy back program will continue in place during 2008. In addition to the new $300 million buy back program.

Each program is combined with the doubling of our dividend represent a very significant increase in the return of our growing cash flow to our shareholders. In terms of our operating profit growth in Q4, I also wanted to point out, and some of you may recall this, that the year ago period of 2006 included one-time items which increased our operating profit at wireless by about $20 million. So year-over-year growth at wireless and on a consolidated basis actually even stronger than it looks on the surface when you factor in those changes from last year. I also wanted to note a couple of items on CapEx in Q4. First is that you will notice a $36 million increase from last year in CapEx at the corporate level. This reflects the purchase during the fourth quarter of a new building to house our City TV and OMNI television operations in downtown Toronto. At the start of 2007, we centralized our various real estate holdings television holdings at the RCI level and thus the acquisition of properties like this reside at the RCI level versus the operating companies. Second item on CapEx for Q4 was at wireless, where CapEx was up year-over-year by approximately $50 million.

We pointed out at the end of Q3 that we had expected our wireless CapEx to track above the high end of the guidance range and it did as we undertook multiple initiatives around network redundancy density and expansion in support of our claim as Canada's most reliable wireless network as well as beginning the expansion of our HSP network. I am pleased to report that with wireless CapEx being the only exception, we met or surpassed every 2007 financial and operating metric target which we set out at the start of the year. 2007 was a solid year financially for Rogers. As we laid out in January, we are targeting to deliver double digit growth in revenues, operating profits and free cash flow again in 2008. I will end there and turn it over to our Chief Operating Officer, Nadir Mohamed.

Thank you Bill, and hello everyone. Q4 was another quarter of being button down and successfully focusing on execution. Starting with the wireless side, my congratulations to Rob Bruce and his whole team for the strong quarter with network revenue up 17% and operating profit up 26% year-over-year. Our focus has continued to be on a balanced mix of subscriber and financial growth and our Q4 results demonstrate our commitment to that strategy. We continue to target high value postpaid subscribers in driving increased wireless data penetration.

On a subscriber front, we finished the year by delivering 118% of our wireless net ad guidance and we had good success in attracting and are retaining high value postpaid subscribers. In fact, our postpaid and prepaid mix came in at 86% postpaid. At the top of our industry for Q4 and our postpaid term take down year-over-year to 1.17%. So very successful focus on very high value customers in the quarter and tha bodes well for future ARPU and churn results. Something to note, the Q4 subscriber numbers for our industry and ourselves reflect the trend we have been seeing in the last few quarters -- I'm sorry, in the last few years, where there has been a continued shift in the seasonality of subscriber loadings from the Q4 holiday season forward into the Q3 back to school season reflecting the strong growth in the youth market. On the revenue side, wireless data is significant and continues to be a significant growth driver for us and by far the largest contributor to our 6% ARPU growth this quarter. In Q4, wireless data growth was very strong at 48% year-over-year and now represents 14% of network revenue compared to 11% a year ago. So clearly, Rogers continues as the Canadian leader in wireless data.

During the quarter we announced that our higher -- high speed packet access or HSPA is now available in 25 markets covering just under 60% of the Canadian population. We see this as a key platform for driving wireless data usage and ARPU even further. During 2008, we will continue to expand our HSPA footprint where the economics makes sense. And we will continue to increase the data throughput speeds of the network and our backlog capabilities at the same time. We are feeling very good about our network position generally and specifically in the largest markets where our HSPA deployments further solidify Rogers position as Canada's most advanced and reliable wireless network.

On the cable side, kudos to Edward Rogers and his team who also had a solid quarter with good RGU growth and pricing discipline combining to push the cable operations revenue up 13% helped by the traction we have gained with several of our new triple play offerings. We also made good progress this quarter in expanding the cable operations margin which are up 115 basis points year-over-year and as suggested by our guidance, we expect this to further expand in 2008. We are at or near the top end of the range of our North America peers in terms of RG use per homes passed and revenues per RGU reflecting our strong product and service offerings leveraging our superior cable network. The cable team very focused on margin improvement and we are making progress on delivering more efficient support for our home phone business and insuring we have a more integrated and cost effective marketing approach across all of our cable offerings. In 2008, we will also see the benefits of our restructured Yahoo! agreement (inaudible). So all in all, a good Q4 at cable and a commitment to continue to focus on capturing more operating leverage. With that, I will turn it over to Tony Viner.

Thanks, Nadir, and hello everyone. First, media drove solid growth and operating leverage in Q4 with revenue up 15% and EBITDA up 31%. So great results year-over-year with margins expanding by well over 200 basis points. We had solid organic revenue growth across most of our divisions in additional acquired growth coming from the five new Alberta radio stations we brought on board in January of last year, which by the way, have performed terrifically, and from City TV which we closed October 31. Really good performances, especially at radio and sports net but with good results as well at Shopping Channel and publishing. The City TV acquisition is progressing as we planned with no major surprises or hiccups. That business contributed approximately $30 million of revenues for the two months of the quarter in which we owned it and was just shy of break even on an operating profit basis. Implicit in media's guidance for 2008 is the assumption that City TV delivers revenues at around $160 million level and we expect to drive the EBITDA losses to be well less than $10 million, and hopefully get the business very close to break even in this first transition year.

Many of you saw a few weeks ago the arrangement for the Buffalo Bills to play eight games at the Rogers Center over the next five years. We are very excited about this at Rogers media as it gives us additional opportunities to monetize our Rogers Center asset while at the same time giving us some extremely valuable sports content for our radio and television businesses. We also cleaned up some of the ownership positions in our specialty channel assets during the quarter. We applied to the commission for full ownership of Outdoor Life Network Canada buying the 66% interest we didn't already own from CTV globe media and Comcast. And we completed the buy out of Comcast 33% in G4 tech TV. The G4 deal has already closed and I expect OLN will close some time in May or June after CRTC approval. With that, I will pass it over to the operator questions.

Thank you. Ladies and Gentlemen, we will now conduct the question and answer session. (OPERATOR INSTRUCTIONS) One moment please for your first question. Your first question comes from Phil Cusick of Bear Stearns. Please go ahead.

Hi, guys, thanks for taking my question. I was going to ask a little more specific technology question but since I'm first, Ted, maybe you can give us an overview. Any changes you're seeing in how you are viewing the auction over the next -- from this point versus where we were a few months ago and maybe if you could just give us an update on the timing that you expect and how long you expect it to take. Thanks.

Our policy is to have no comment on the auction or any related matter. This is a highly confidential matter and we do not wish to comment at all before the auction.

My apologies.

No not your apologies, my apologies.

Maybe you could talk a little bit more instead on the competitive level of the industry. We saw some of your competitors very aggressive in the fourth quarter and then drop away pretty quickly in January. What are you looking at from these guys as they go through, or at least one of them goes through some structure changes?

Nadir?

Sorry Phil, I am not sure whether you are relating to the general comments or on auction. I am assuming you now have changes for the market and what we saw on the market.

Yes, more on the market, thanks.

Sure. When you look at overall, not just on the wireless side but the cable and wireless market, frankly, the market remains very competitive. We have seen it on the cable side with the win back activity from our largest competitor, Bell, and we see it on wireless side and I am going to ask Rob in a minute to talk about the specifics of the wireless market, but it remains as competitive as ever. And the thing that I want to make sure people understand, our approach to the market very has been very consistent. We have talked about our strategy in terms of going after [inaudible] space, going after high quality customers. Pushing and really driving data penetration and focusing on the use and small business market. And from that perspective, I am very pleased to say we remain focused on those things and I think our numbers are starting to show that quarter in, and quarter out. But let me get Rob to talk specifically about the wireless market.

Rob Bruce here. Just before I go there, back to your question on the auction. Obviously there has been a fair bit of dialogue back and forth between Industry Canada and all of the carriers. That's on Industry Canada's web site and I think it captures the essence of much of the dialogue and background that's gone on. Maybe that will be helpful. In terms of competitive activity in Q4 in wireless, it was a much more competitive quarter from a rate-plan perspective. I say that because it was different and distinct from the typical hand set or promotional offer oriented quarter. These were rate plans being more heavily discounted and as many of you noticed in your, in your remarks, we didn't respond to much of it. So, we were pretty quiet, but there was a lot of competitive rate plan centric activity in the quarter.

Okay. Thank you.

Your next question comes from Jonathan Allen of RBC Markets. Please go ahead.

Thanks very much. As much as I would like love to ask a six sigma efficiency question, I'm going to ask more about the phone side of the business and specifically, revenue and subscriber growth has been pretty good the last few years, but we still see on a consolidated basis, if I look at the implied phone ARPU that you are generating, it still seems to be declining about 14% year-over-year, and I understand that the circuit switched call net customers may be at a higher ARPU level and that the new cable voice over IP customers may be at a lower level, but I'm curious if you could speak a little bit about the trends that you are seeking in ARPU, both at the circuit switch base and for the new Rogers home phone customers and whether or not we should expect that ARPU trend to turn up some time in the near future, whether it just be a function of promotional discounts, et cetera. And on a related question, I am curious if you could talk to us a little bit about some of the recent price changes that you may have implemented on the cable side, whether it be cable or on the phone as well. Thanks very much.

Okay, thank you for that. I think on the ARPU on the Rogers home phone, you answered a bit of the question, that the start -- that the initial ARPU on the Sprint side was a bit higher, and that was -- that was due to, I think initially, they were the only alternative choice in the market. They had some very high LD rates because Sprint was originally a long distance company. We have been agressive on trying to acquire customers. And so you have some of the up-front offer pricing offer that works it way into the average revenue per price per customer and as you know, Ted and others mentioned, we are fighting a little harder with Bell to keep our customers and to lock our customers up into terms through better choice bundles and some of the triple play pricing.

Maybe just add a little bit to that is when you look at the simple average that you're trying to calculate, it also includes some LD-only customers that is are in the Sprint -- the Sprint Canada base. If you take out the LD only and you take out the promotional activity that Edward is talking about and you look just at a local customer we have with their features in LD, we are pretty steady year-over-year in the $45 to $48 range. We are not seeing a precipitous drop in ARPU at all, on the phone side.

On that -- thanks first for that. If you look at just the stand alone LD that is declining, how much more of a decline should we see or can you give us a sense of the what the total revenue base is of that long distance revenue stream?

It's becoming less and less significant, and let's leave it at that.

By less significant we are talking less than sort of $50 million a year?

Let's leave it at, it is not a significant number.

Fair enough. The other question was just on some recent pricing changes that might have happened on the cable or phone side, if any.

Oh, I'm sorry. On the rate increases in March?

Correct. For 2008, that is, if there's any.

Yes, we have communicated that with customers, but we have put some rate increases on TV, $1.00 on basic, $1.50 on tiers. We have changed our -- some of our data packages and for new customers that will be paying higher rates on ultra light and light and the extreme and we have matched and moved our staff up on Rogers home phone $1.45. Those all go into effect in March, but we stagger, depending on when customers get their bills, and if they're prepaying, they start those higher rates at the next billing cycle so you start seeing those coming on through Q2.

And that would be applicable to the majority of the subscriber base?

Yes.

Okay. Thank you.

Your next question comes from Rick Prentiss of Raymond James. Please go ahead.

Yes, thanks for taking my question, good morning, gentlemen. A couple of questions for you. Down here south of the border, quite a week with a lot of discussions on unlimited rate plans and increasing MOUs. Talk to us a little bit about what you viewed from your side of the border on what was happening down in the U.S. and, given the penetration rate and MOU levels up in Canada what you think the future might hold.

Rick, it's Rob Bruce. Listen, we have always made it a bit of a practice not to be armchair quarterbacks and comment on other people's specific pricing. I mean, I think you hit the nail on the head. The U.S. market is very, very different market in many, many ways from Canada. I think what we would say is we've had great success with our Canadian focused pricing and our focus on high value customers that Nadir made reference to in his opening remarks and we're going to stick with that.

Okay. And then on the data front, maybe, probe a little bit further there. Obviously, nice improvement on the data year-over-year growth on the wireless side. Now it is 14% of your net revenue. Can you update us a little bit about where the revenues are coming from currently, as far as what makes up that 14%. Is it games, rings, short messaging, kind of how that breaks down. And you look for it to grow next year, or this year, 08, how much are you relying on air cards or other stuff to kind of really move that forward?

Yes, basically it comes from what I think of as four large categories. A couple of really big ones are the PDA category and SMS being kind of the two largest. Then there's basically services that whether it is down loading ring tones or games or what have you, rides on the -- on our wireless internet, that's another category. And then -- then lastly, our really customized applications that we do for corporations and semicustomized applications. Those are really the four big buckets where we see the growth coming from. As well, we are starting to see significant growth of mobile broadband which will be -- which will grow more and more over time driven by, you know, USB cards and the like that will enable lap tops, and with the higher speeds, our HSPA network can now provide, we think that will be a very, very significant stream of revenue in the future. Our focus as Nadir said, is we are strong, strong believers in data. We think that's where there's a lot of growth. Our focus on building out the best HSPA network we possibly can, and building out the reliability is all anchored in our future ambitions that continue to be the best wireless data company in Canada.

Great. Good luck. Thanks, guys.

Your next question comes from [Devi Goethe] of [Genudy] Capital Markets. Please go ahead.

Yes, thanks very much. Rob, I understand why you don't want to comment about AT&T and Verizon's plans, but you have potential new entrance in Canada such as MTS and Video [inaudible] threatening to unleash unlimited plans in Canada. What to you think would happen, especially given that you have the high end customer base disproportionately, in particular in terms of network CapEx. You did overrun your CapEx for '07. What is the risk that you overrun in '08?

You managed to squeeze a lot of questions, [Devi], into one --

But it was pretty short questions (laughter).

I have never heard the potential buyers in spectrum have decided to have any have any particular price plan. I have never heard that before.

Well, I just in meetings, including peer calls speaking yesterday talked about things like your relationship restricts them from using unlimited price plans, perhaps alluding to the fact they he may pursue such pricing.

Talk to his Treasurer.

Yes, fair enough. (laughter)

Listen, [Devi], you've given me a great opportunity to talk about our focus and how we are going to continue to create differentiation going forward. And you saw it in how we spent, and continue to spend, money on our network,both the reliability and rolling out HSPA across the country. We are deeply committed to that and we're deeply committed to the wireless data that that will ultimately carry. I think we have seen many price players come and go over time. We believe, and we have seen great success from being the premium player in terms of delivering great service and delivering data and invasion ahead of our competitors. We are going to continue to do that, and what you saw in terms of some of our capital spending that became more evident in Q4.

But of course, we were spending on that HSPA network across the whole year to continue to start -- to continue to build those capabilities at a faster rate. So we are are even more ready as time goes forward.

But what about your CapEx budget for the year? Can we -- do you think there's a risk you will be above it?

We've given our guidance and unless we change that, that will be our guidance.

Okay. Sounds good. Thanks.

Your next question comes from Jeffrey Fan of UBS Securities. Please go ahead.

Thanks very much, and good morning. My question, again, is on the wireless -- wireless CapEx and maybe more specifically, in your PP&E disclosure, the network -- the other network category was the one area that jumped pretty significantly while the HSPA spending, that was expected to increase and was a big bucket, but the biggest jump in the quarter was in the other categories. So wondering if you can explain a little bit there, and just as a follow on, maybe tying it back to some of the unlimited plan questions that is being asked, as you roll out HSPA, can you maybe talk a little bit qualitatively on the efficiency that you expect to gain on voice traffic going forward, because that is one of the things that we see a lot of global carriers taking advantage of and maybe Rob, you can explain a little bit on that. Thanks.

Jeff, let me touch on capital. I think when ever you look at capital, particularly for a wireless company, you really need to look at it on almost a full year basis, so why don't I tackle the full year. And on a full year basis we are over by roughly $100 million over what we had initially -- what we had initially talked about and as you know, in Q3, we tried to highlight that we plan to go beyond that. And Bill made reference to that earlier.

Our spend, when you look at that $97 million, we spent about $42 million, $43 million of it on continuing to push ahead with HSPA. You saw our announcements on 7.2 broader footprint and the like. As well, continuing to build out cell sites, accounting for about another $55 million. Some of those things were offset by some savings. There was a little IP in general in the mix as well. But those were the things that is we did, again that's part of our vision about the continuing to own the leadership space from a network reliability and from a future data capability perspective.

With respect to unlimited plans, I think you have heard us say on the call before that, two things. Number one, we are not fans of unlimited plans and secondly, that we want to make sure that as data continues to be more and more a factor, we create plans that is are helpful and don't become barriers to adoption. So we will continue to be committed to straddle that balance and try to do the best job we can of making sure that customers have enough data and have affordable data so they can actually use and devices and applications that they have. Bob, do you want to talk a little bit about how -- how the future iterations of technology will help us in terms of efficiency on voice? Because I know you're -- you're much more well versed in that than I am.

Hi, Jeff, Bob Berner here. There's two aspects to the technology we are rolling out. The first is what we can do with data. And there's no comparison to the second generation technology because you can achieve data rates with what we are rolling out that are completely beyond the levels we could achieve on two or two and a half G technology as they were called. So we can't really compare those. There is a completely different level of performance. As far as voice goes, there's a lot being talked about in terms of voice efficiency.

What we can tell you is, clearly at this point there's a significant improvement in both other radio spectrum and efficiency relative to dollars spent on UMPS HSPA compared to our previous technologies and our investment strategy is focused on that, that we are putting all of our go-forward investment in the next generation of technology. But there's no doubt that our cost per subscriber declined on voice as we moved forward through the technologies. What we've deployed currently takes us up to 14.4 megabits with the hardware we have deployed ultimately going to book 21 megabits per second on data with software upgrades and back haul investment. So we think we are really well positioned from the standpoint of getting our subscriber demand on a very cost efficient basis.

Okay. Great. That's very helpful. Thanks.

Ladies and gentlemen, as a reminder, due to time constraints, we ask that you limit yourself to one single topic or question and then requeue should you have a second. Your next question comes from Greg MacDonald National Bank Financial. Please go ahead.

Thanks, good morning guys. Question is on the core cable segment, saw some descent growth there at 13%. I would like to think that sort of plus 10% is attainable for a couple of years. And when I'm thinking about that relationship, I'm thinking mostly about telephony. Ted mentioned that the company could do better there. Subscriber growth a little lighter than I expected in the quarter. Penetration rates around, sort of 20%. I think one can assume that there's considerable upside there. So the question is in reference to the marketing spend in the quarter. We saw just above a 20% increase in sales and marketing. And I'm one that has faith that there's a really -- a strong relationship between marketing and sub growth. Could you comment number one, where the focus was on the cable marketing side this quarter? Are you happy with the returns that you got on that marketing, and secondly, as for the company's expectations going forward, should we expect that marketing spend will continue to reflect sort of a focus of double digit revenue growth in the cable segment? Thanks.

That one question. (laughter) I am try to go write them all down. I think you are right that Ted would always like more. That he's a good CEO and that he pushes us all to always bring more. I think I'll try to step through them, and if I miss some of them, just let me know. Revenue growth, when we look at our business, obviously we give guidance one year at a time. But I think we are -- I think that we will be able to keep revenue growth strong, past the end of 2008, but as I said, we only give guidance one year at that time. The sales of RHP when we look at the quarter, I think we were pretty satisfied with the total growth of revenue generating units.

Basic was quite strong for us on the quarter and internet and digital, I think for us, were kind of where we expected and RHP, we would have liked to have seen a bit more net ads. If you look at it, we do have strong expectations for '08 internally. So we are going to continue to work toward strong growth in Rogers home phone. Bell is obviously fighting a little bit harder, and with some of the changes in the ranks in '07, that did have an effect. And we have got a few internal issues that we are trying to work out a bit better to be a more effective when we get customers. So we think we have got an opportunity to improve there. The marketing and sales spend, definitely there's a trend internally to move towards more of a multi-product spend, meaning that we are going to try to increase the number of revenue generating units sold per sale and increase the number of units that we install when we go to the home. There is a -- there is a positive impact if we do that well and effectively on the total marketing and sales costs, which we hope to see in 2008. In some of the margin expansion was earlier indicated in terms of the guidance for cable. Being more effective in marketing and sales is partly what should help us achieve that -- that higher EBITDA and higher margins.

That's helpful. Thanks.

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

Hi. It's is a question on the churn. Could you talk about, I think you mentioned you continued strong churn trends. Verizon is under 1% on postpaid churn. They have two year contracts. Is that achievable, do you think, and related to the economy, is there anything you are doing on credit checks to maybe tighten credit standards to ensure the quality of the base given maybe the risk of a slow down? Thanks.

Listen, I mean, I think we believe that churn is one of the biggest leverages in the wireless business. So, we wake up every morning trying to figure out how to cost effectively and efficiency drive down churn. I 'm not going to speculate on whether we can get to .97, but you can guarantee that we're absolutely focused on trying to drive that number down every day because we realize how much leverage there is. In terms of the second half of your question, I am not sure I understand completely what you are driving at, but John Gosselin has got a smile on his face and I think he is going to answer the question.

I think you are asking whether we are tightening our credit because of potential economic concerns. The earlier comment that Ted made would indicate that we are not seeing that right now. We are not seeing a real impact of the economy. The Canadian economy is strong. We do watch it carefully. We have a pretty -- a pretty good risk strategy for lower end credit customers anyway. They're restricted in terms of how much they can spend and how far they can do. So, I think, we are in good shape there for now. We do watch it though, obviously, looking for anything that's coming from economic effect..

Thank you.

Your next question comes from Tim Casey of BMO Capital Market. Please go ahead.

Thanks. I was wondering if we could talk a little bit about your capacity management on the core cable plan. Could you just update us on what you are doing with regards to switch digital and [inaudible] and so on. Bluntly, I wonder if you could characterize what you foresee as the risk that you'll have to do a network rebuild to 1 gig in some foreseeable time frame. Thanks.

So, it's Mike, Tim. With respect -- maybe I'll start with the last part first, which is the 1 gig rebuild. I think that with the number of different tools that we have, whether that be switch digital, advanced codex and the technologies like [inaudible] 3.0 and also analog repatriation. 1 gig rebuild really isn't even contemplated as part of a future plan. With respect to an update on switch digital and [inaudible]3.0, [inaudible]3.0 is still on schedule from an industry perspective. I think we have seen a couple of preannouncements where some, some operators are using prestandard technology but [inaudible] 3.0's standard technology it is still on a schedule from our perspective for 2009 is well within our time line for looking at this type of technology and those types of services. And with switch digital, as we've said in the past, we are focused on switch digital in 2008, sort of a later 2008 launch time frame. And when you take a look at how the switch digital technology works, it leverages a lot of expertise that we have from [inaudible] with our BOD deployment and from a cost perspective, very cost effective way to reclaim some of the spectrum we have allocated to relatively underused digital services, both high-def and standard-def.

And what's the timing on analog repatriation, Mike?

Well, analog repatriation is one of the things you only do when you have a direct need to free up spectrum for new revenue generating services. So, it is not something we assign a specific date to. We will use the switch digital technology to free up spectrum in the near term and then we'll just watch how new services evolve and at which point in time where we need to look at more capacity expansion that switch doesn't provide for us, then we will take a look analog repatriation. But if you look at switched, and with the efficiency of switched it is going to take us a fair way.

Thank you.

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

Yes, thanks very much. My question is on the network investment in the wireless side. You are making good in what seemed like sensible investments in data capability and in coverage, but at that time when the regulator is making you share your towers and provide your network service on a wholesale basis. So, how --how do you expect to be able to retain a competitive advantage against the new entrants who can roam onto your network and share your towers?

I think Glenn, by answering the question, I would be presupposing the outcome of the auction and the auction rules. But, so it is going to be very hard for me to answer that question.

Let me ask you. If we assume that there will be somebody there who is going to launch service and presumably want to roam onto your network, which I think is, I think we're all taking as a pretty safe assumption.

If you look on the web site, our comments with respect to what we think roaming is are quite clear, and it doesn't include many of the things that will drive the differentiation that you are referring to. And we believe that, as we have done in the past with both marketing and with network and our data capabilities, we can continue to differentiate ourselves from our competitors.

Okay.

At the end of the day roaming doesn't equal unbundling, period.

I got you. As far as the new towers and coverage you are investing in, I mean, a lot of us see the benefits of that very directly, but are -- there doesn't seem to be any provision to kind of grandfather you from having new entrance or existing [inaudible] demand to co-locate on your new rural towers. Is -- do you see any opportunity for getting a curve out there?

Again I would just be me speculating on the outcome of the final rules, and I don't think that's sensible to do at this point. I think we're weeks away from the specifics of the rulings and we should probably just wait and see what they say.

Okay.

A bit of a history less, this issue of access the docks or access to towers, and so on over the years, has gone on for a long time and the Telcos have an obligation to make space available if it is available.

Of course, they say well, the dock is full. And the, I once sent a guy down with a flashlight and camera and he took a picture and showed it was half empty. So I took the picture over the meet my friends and Bell, and he said, well Ted, it is constructively full. And I said, I don't know what that means. And he said, well, I can show you here as we are planning to put this equipment in when we build it, we plan to put equipment in in 1980 and 1982 and1894 and it will be full, and we invested our money. If I put you in, I won't be able to put my own self in. And so, it's the same on same towers,.

If we build to strengthen the tower to take our nutchuck and our high speed and the rest of it, and there's -- that's it. We can't obviously share it unless the new guy comes in and pays for strengthening. And it's a huge subject, and it's not new, it's gone on for decades in telecommunicaitons. So, we should not think it's [inaudible]. In the cities, it is easier because you are talking about the roof of apartment buildings. We have exclusive contracts there. I think they will require us not to be exclusive and then the other people can go and put up their own tower. These are just short towers on apartment buildings and so on. Nadir, would you add anything --

I was just going to say, I think there's two parts to your question, one was more specifically around access rights. But I think the other side's probably the one from our perspective that's very critical and has been playing out in terms of numbers we've been posting, and that is, we really see the market as a place where we can differentiate based on our service and product offerings. Time and time again, if you do research around, what do customers want from a carrier? It's great service, great quality and product and features that demonstrate that they're on the leading edge. And if -- a while back we were asked about churn. One of the reason why we would have had the churn improvements is actually our investments in the network. And that quality differentiation will be important, short term will be important in the long term, but frankly, no matter what the rules, we're convinced that network differentiation will be huge for us. What you're seeing now is, not only is the differentiation based on the reliability claim, but frankly, on a product offering because the speed and the throughput from our network and the data features and services that we'll get I think will allow us to play a game that's very different from where others might be which might be price. We see the market as one we can win it on product and service differentiation. So, the investments we are making are key going forward, not just with the current competitors, but whoever else might come into the market.

Thanks very much.

So Glen, just to pick up and take one more stab at this, because I think it's an important topic is, whether you are talking about Rogers brand and focus on reliable and network leadership and the innovation on products and services. Secondly, on [inaudible] brand, our focus has been around customer advocacy. And you have noticed we won the JD Power award for being the number one postpaid carrier in the country and the number one postpaid retailer. So there are many different ways to skin this cat in terms of how we differentiate ourselves on these brands and we plan to continue to do that vigorously going forward.

Okay, it's Ted. I don't want to answer it, but roaming is a big issue that they have and so on. We want to cooperate, but obviously, at market rates and with suitable protection. When they talk roaming, they don't mean roaming on the three - Telis, Bell and Rogers. They don't mean that. They mean roaming on Rogers, period, end of story. Nobody is going to roam on a old CDMA network that's about to crash. Nobody is going to do that. So, they're all going to come on ours, and isn't that wonderful. We will get some revenue for a while, but we build out capacity for say, for the next five years. And then these guys put in their own, and I've got empty wires all over the place, and I am out a couple hundred million bucks in building this stuff is that now nobody is using. So, these are real problems for us, real economic hardships for us. And I must say one final thing. We -- you must forget that our position is a change -- that some of these changes are a change in terms of our licenses that we now have. And our licenses are licenses that do not provide, outside of acts of God, or some amazing things, do not provide for being amended.

You can't ask -- you can't give a guy a license for ten years and ask him to invest $5 billion and then say, oh we are going change the terms of your license, after three or four years. So, under all of this is our position that we cannot tolerate to have our licenses amended and that's the bottom line.

Okay. Thanks very much.

Ladies and gentlemen, we only have time for one more question. Your next question comes from John Henderson of Scotia Capital. Please go ahead.

Thank you. And just a quick question on your roaming revenue with sort of the international. I wonder if you could comment on how much of that, through $500 million revenue roughly, is Canada/U.S. and already subject to competitive forces?

John, we have made it kind of a policy over time not to be too definitive about what the sources of roaming revenue are within, but if you have another question I would be glad to answer it. (laughter)

I thought that might be the case. Would it be fair to say that it is the majority?

It wouldn't be fair to ask because I just said I wasn't going to answer it. (laughter) But is there another question? I would be glad to answer that.

Just pressures on churn, I notice that churn has been picking up at your competitors. At Q4, your post pay churn did pick up a little bit. I was just wondering how much of that may be influenced by -- as contracts come up for renewal, more and more of your customers coming off contracts post L&P, should we expect churn may pick up a little bit postpaid in 2008?

I mean, Q4, I mean, with the exception of last year, Q4 would typically be a seasonal -- a little seasonal spike in churn. We didn't see it last year, funny enough, but it was a weird year because we were leading into L&P and people weren't behaving in the traditional fashion. So I would say, there was nothing out of the ordinary in the little minor uptick we saw. We have got more people historically because Q4 has been a bigger quarter coming off contracts as we lead into Q4. So, nothing atypical. Obviously, with L&P there, and people able to leave without as aggressive retention activities as we might have been able to use in the past, we are keeping a tighter reign on what's going on with churn, but I don't think there's anything to be concerned about in the short term, John. So, thanks for your question.

Thank you very much.

Alright, well, Operator, first of all, thanks for conducting the call but more importantly, we wanted to thank all of the participants this afternoon, this morning for your ownership and for your coverage and for participating on the call. If you had questions that weren't answered, I don't know if there is anyone is left in the queue or not, please feel free to give myself or Dan Coombes a call. Either of us, for our contact information is in the release. Thank you again. Have a nice afternoon. That concludes today's call.

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