Rogers Communications Inc (RCI) 2008 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Rogers Communications second quarter 2008 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 this conference call is being recorded today, Tuesday, July 29, 2008, at 9:30 a.m. eastern time. I'd now like to turn the conference over to Mr. Bruce Mann of the Rogers Management. Mr. Mann, please go ahead.

Thank you, Operator. Good morning, everyone. Welcome to Rogers second quarter '08 earnings teleconference. On the line with us today are Ted Rogers, our Chief Executive Officer, Bill Linton, our Chief Financial Officer and Nadir Mohamed, President and Chief Operating Officer of our Communications Division. Also with us are three divisional presidents, Rob Bruce from Rogers Wireless and Edward Rogers from Rogers Cable and Tony Viner from Rogers Media. We also have a few members of their respective Management teams and a couple of the members of Management are actually dialed into the call remotely today, so hopefully that will be seem less, but pardon us in advance if we need to pause for a couple of seconds at some point during the Q&A to un-mute a line. We put our detailed second quarter earnings release out on the wire just before the markets opened this morning. If you don't already have a copy, please find one on the rogers.com website or on any of the major newswires in U.S. or Canada. You should fully review the release as well as our 2007 annual MD&A, especially the risk factors and the cautions regarding forward-looking information. These apply equally to our dialog on today's call. So with that, let me turn it over to Ted Rogers and then Bill Linton and Nadir Mohamed and Tony Viner. They will each make some brief introductory remarks and then the Management team will take any questions you have, so over to you, Ted.

It's a good morning, everyone and thanks to you all for joining us. I've got a few very brief remarks and then the senior operating Management will speak. I'm very proud of the results that the Management team and employees have produced for the second quarter. We've added subscribers across the business. We grew revenues, operating profit and free cash flow, all at double digit rates while continuing to expand margins. We remain focused on execution. We've focused on execution for some time and we've still got a long way to go. Integration, a balanced mix of subscriber and financial growth , I'd say we've delivered generally well against that focus. We have some work to do on the cable subscriber acquisition side for the second half, which I am confident that we will do. But overall, a balanced set of results. I believe we also -- it's also a reflection of the benefits of how we are increasingly operating as a single company.

Last quarter, I said that we were concerned about the continued strength of the economy, particularly in our largest market, which is Ontario. While the Canadian economy overall continues to hold up, we're continuing to see softness in Ontario with continued manufacturing job losses tied to strong canadian dollar and U.S. economic softness. Now, we see this in our media business that Tony could respond to, and I think to some degree are seeing it in the sub numbers in the cable side in Ontario as well with. But frankly, frankly, I think Ontario has been surprisingly resilient, given the degree of manufacturing sector losses that we've seen to date. So we must continue to demonstrate restraint on the cost side. That's essential. Now, I'm pleased that we're able to get the iPhone launched earlier this month, very complimentary of Apple as partners leading up to the launch and the creation of what I think is an incredible piece of industrial engineering and design. It's a natural product for Rogers. It's innovative. It's new, it appeals to young people, and I predict we'll do very very well with it.

I'm pleased with our results in the spectrum auction which ended just a week ago. Now, we acquired exactly what we had targeted going into the auction. At the end, we were the only Company to acquire 20 megahertz of spectrum contiguously across the country, and we did so at a lower cost per pod than Telus or Bell. I'm also encouraged by our City TV business which we acquired this past November. They've begun to achieve success sooner than we have expected. As well, the whole media business under Tony Viner provides a tremendous support for our communications business across Canada. There has obviously been heightened competitive concerns of late in terms of new entrants in the wireless market. From my own perspective, when I started Rogers nearly 50 years ago, it was the first and only FM radio station in Toronto, CHFI, just one. Today, there are more than 20 FM stations in the Toronto market, and guess what? CHFI not only remains the number one billing station in the market, but it also has grown to be one of the top billing radio stations in Canada. Whether it's radio or cable or wireless, Rogers has seen the number of competitors in all our businesses ebb and flow over the years. We've not only survived but thrived, and we will continue to do so. That's the DNA at Rogers.

You can rest assured that no one is going to deliver the breadth or quality of products, provide better customer service, have a more respected brand, or deploy more advanced networks than Rogers. Together, these things just aren't replaceable. They can't be copied, and 25,000 partners here across Canada wake up every single morning all set on making sure it stays that way. Now, some will likely just wait until things play themselves out and they can't be faulted, but don't be too quick to have your confidence shaken, because I assure you that history has a way of repeating itself. But yes, we have challenges. But overall, I'm confident that we are exceptionally well positioned to carry on our growth with an excellent management team , excellent facilities, and in great financial shape to meet all challenges. Rogers has always been an under dog, fighting the powerful telco dominant companies and other powerful interests. As long as I'm around, we will continue to act as the under dog with I passion. Working full out, never giving up. Truly, we think the best is yet to come. Now over to

Thank you, Ted. A couple of quick comments on the financial results of the quarter. First, obviously, continued strong growth from a financial perspective, with the top line up 11% and strong double digit operating profit growth of 17%. So good operating leverage as well, which took consolidated margins up over 200 basis points for the quarter. The numbers in the release speak for themselves, so I'll just highlight a couple of the unusual items. First, as we said in the release, we began accruing what I'll refer to as part two regulatory fees following an appellate court decision which ruled in favor of the CRTC in April 2008. Now there are a couple of pieces to this in our results. First, is that piece actually relating to Q2 '08, in which we recorded in our operating expenses up $7 million, $5 million in cable and $2 million in the media. Then, there is $31 million related to 2007 and $6 million related to Q1 of 2008. Both of these amounts are reported below the operating profit line as adjustments in our quarterly numbers. As we say in the MD&A, along with the other parties to this matter, we are in the process of seeking leave for appeal to the Supreme Court. But this isn't something likely to be decided quickly, so as you think about the remainder of 2008, you should assume for each of Q3 and Q4, we'll continue to accrue the same approximate $5 million per quarter at cable and $2 million per quarter at media for these part two fees. These costs weren't assumed in our 2008 operating profit guidance, but they are not material enough in and of themselves to adjust for.

We also had a full quarter of City TV results included in media's numbers. The City TV acquisition was done in November of '07 and layering in that business in this year's quarter drove about $46 million of revenue change and $5 million of operating profit growth in the media segment. Tony will talk about it in a moment, but City TV business is tracking much better than we expected at this point. On CapEx, I know that at $800 million for the six months of 2008 is somewhat lower than many of you were forecasting, but the spend pattern is generally seasonal and more heavily loaded towards the back half of the year, so there is intra year timing associated with the capital spend and you should not extrapolate CapEx for the first half into the remainder of the year. Use Ted mentioned, the AWS spectrum auction, which we successfully participated in, ended last week. We acquired spectrum valued at approximately $1 billion. This is beachfront property for our wireless business that will only appreciate over time, and while we don't decide when it becomes available, we have always been opportunistic in acquiring spectrum and look at it as a long term asset and to a large degree, expungeable over time with CapEx. We'll pay for this spectrum over the next 30 days. As you know, we have a $2.4 billion credit facility and an additional $500 million one-year revolver in place. At the end of 2000 -- at the end of the second quarter, we had about $1 billion drawn in total. So we have good liquidity position, especially considering our operating free cash flow, which is adjusted operating profit less CapEx and interest, is up 20% in the quarter and 50% for the first half over the prior year.

During the first half we declared two dividends, both at the $1 a share annualized rate which is double the amount from last year's 50% rate, and also during the second quarter we bought back 1 million RCI shares in the open market. This is a first for Rogers and a data point that's not insignificant. As we said in our release this morning, as of the end of the second quarter, we're tracking strongly ahead of the guidance range we set for our operating profit back in January. At the same time, we hadn't assumed the iPhone would be launched under the subsidy model, which we recently agreed to with Apple, which will put upward pressure on expenses in the second half as we sell more units. Don't get me wrong. This is I terrific opportunity and each sale creates value in terms of accretion to both ARPU and churn going forward. It's just a front loaded cost model for us and we hadn't planned these amounts of incremental COA and COR. But for now, we are going to hold the full year guidance unchanged, assuming that these items offset one another and see how actual sales progress in the second half. I'll conclude by saying that overall, we've got a very solid first half of 2008 under our belts and we're on a good trajectory for continued success in the second half of the year. I'll now turn it over to our Chief Operating Officer, Nadir Mohamed.

Thanks, Bill. Let me quickly give you some perspective on the operations front. First on the wireless side, it's been a busy quarter for Rob and his team. We delivered strong double digit growth with good operating leverage again driving margin expansion, a slightly lower growth rate on the top line reflecting on the voice side, slower usage based revenues including U.S. roaming. On the subscriber side, continued healthy post-paid growth, though we believe there's some disparate purchases following our late April announcement of the iPhone launch in July. Also, when comparing the prior year's very strong Q2 numbers, just wanted to recall that we had strong pull in numbers post-paid (inaudible) of local affordability which occurred in March of last year. We had good success attracting and retaining higher value post-paid subscribers with churn down again to 1.06% and ARPU growth continuing, with strong growth particularly on the wireless data side where wireless data revenue is up 34% to $224 million in the quarter driven by both increased wireless data penetration and usage. With the rollout of our high speed HSPN network, the fastest in Canada, and in anticipation of a great selection devices, we revamped our data pricing to help drive the adoption of mobile internet.

On July 11th, subsequent to the end of the quarter we launched Apple's iPhone across Canada. At this point, two and a half weeks into it, we're pleased with the early sales results. In fact the launch weekend we had the highest sales in the company's history. We've been getting great support from Apple with regular shipments, more than weekly, but demand continues to outpace supply and we're working hard to replenish stock as fast as we can. In our cable operations division, Edward and his team delivered solid double digit top line growth with adjusted operating profit up 21%. Importantly, we again made good progress this quarter in expanding the cable operation's margins which were up over 300 basis points year-over-year. Excluding the benefit from the renegotiated Yahoo! deal, cable operations delivered 17% operating growth -- profit growth and 200 basis points of margin expansion. On the cable subscriber additions side, the results weren't where we wanted them to be. Our marketing shift to multi-product value bundles from individual product cultures in hindsight was over ambitious and we have now refocused our efforts for the coming quarters. Our (inaudible) on the clock side has been steady and has been a strong contributor to our margin expansion. So with good financial results serving as a platform, we intend to build on the momentum of what historically is a strong Q3 with universities going back into session to drive better performance on our sales in the back half of the year. With that I'll turn it over to Tony.

Thanks, Nadir, and hello, everyone. First, media's results for the second quarter were on balance, very good, with strong double digit top line and operating profit growth. The inclusion of City TV has been accretive to both revenues and operating profit lines. If you normalize for the acquisition of City which we acquired in November of last year, the organic year-over-year revenue and operating profit growth would have been -- both been about 4%, which I think is a terrific performance by the media team in the current market environment. I mentioned on the last call that we had definitely started to see and feel some impacts on advertising sales in the latter part of Q1 in terms of economic softness. It's fair to say that trend continued across Q2 with mixed advertising results across the country. Things are continuing strong in the West but have softened in Ontario in both the radio and TV ad markets. We expected this on the top line so we've managed well in terms of restraint on the cost side in order to protect operating profit. We're very pleased with the early results we're seeing from City TV and the integration of that business with our OMNI stations. We feel a sense of reinvigoration with the City franchise and a degree of momentum with our employees and customers, so we are on a good track with City, which was a large acquisition for Rogers Media and an important priority and focus for 2008. We also closed the Channel M acquisition in Q2, which is the Vancouver multicultural over-the-air TV station and, not a large acquisition but really the critical final link for our network of OMNI multicultural TV stations in Toronto, Calgary, Edmonton and Vancouver. Having these OMNI stations together in markets where we also have City TV stations combined with a strong local radio presence is a tremendous opportunity for leveraging not only our programming assets but also our sales resources and physical assets in all of these key markets. With that I'll pass it over to Bruce for questions.

Thank you, Tony. Operator, we'll take questions from the participants in a couple of seconds. I just want to quickly say before we begin as we ask each quarter, if those of you participating that want to ask questions please limit them to one topic, be courteous to the other participants so that as many people as possible have a chance to participate. And then to the extent we have time, we'll circle back and take additional questions or we'll get them answered for you separately after the call, so operator, why don't you explain how you want to organize the Q&A polling process and we're ready on our end.

Thank you. (OPERATOR INSTRUCTIONS) First question comes from John Henderson of Scotia capital. Please proceed.

Thank you. I'd like to focus on ARPU growth and I notice it slipped to 4% growth from post paid from 7% last quarter, as data revenue kind of showed I'd say a material slowdown to 34% growth from 43%. The U.S. carriers are showing very strong data revenue growth at 45, 50% from levels that are already 20% higher from where Rogers is on a sort of amount per subscriber per month, so I'm just wondering to what extent you would call this a temporary slowdown, maybe caused by price action taken by Rogers to drive penetration or is it signs of economic slowdown or what would you point to?

Hi, it's Rob, John.

Yes.

Listen, we continue to believe that the data is going along at a robust pace. We've got a new generation of devices. We're pushing very hard on the mobile internet driven by some of the new air cards and the sticks and I think it will continue to be strong. I think Apple and the iPhone and the RIM Bold will continue to drive the strong growth that we've seen and SMS continues to be robust, so I think we're on a great path. We're investing heavily in data. We think data is our future. We've led in it. And I think when you stand back and you look at the ARPUs of the Canadian market versus either the European Markets or the U.S., in terms of ARPU dollars, we're very strong this quarter, around $12 compares favorably to about $11 and change for the U.S. markets from the Q1, I haven't seen all of the Q2 numbers and an even lower number in Europe, so -- and we'll continue to push hard on it. Operator, next question?

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

Just want to ask a little bit of clarification on the guidance. You guys mentioned, I think Bill mentioned the higher costs related to subsidy. Obviously, it sounds like you guys hadn't contemplated the subsidy model and that makes total sense, but as you -- when you said your guidance, did you guys contemplate the subscriber impact or ARPU impact of the iPhone launch just on the top line itself when you were sitting there?

No, we didn't anticipate that we would be launching that device under any model this year.

And on the $150 million committment, is there a set time for that? Is that just for 2008? Is that over the next 12 months since launch? Can you just give us some color on that ?

Jeff, that's a competitive piece of information but it is more than one year.

More than one year? Okay, great. Thanks.

Your next question comes from Jonathan Allen of RBC Capital Markets. Please proceed.

Thanks very much. Nadir, you mentioned some of the early success that you'd had with the iPhone in the launch weekend. Two questions for you on that subject. One, can you give us a sense, granted it's only been a few weeks, but the mix of existing customers that are just migrating their -- upgrading their devices compared to the mix of new customers that you're bringing in and second of all, Bill mentioned the higher COA and the potential for pushing down margins in the back half of the year. AT&T had provided some guidance on the margin dilution or EPS dilution that they were expecting from the launch. I was hoping that you could provide us a little bit of guidance on what you would expect that margin pressure to be in the back half.

I'll actually get Rob to say, but I would caution it is very early so I don't want to suggest that we have anything that would give us a trend line.

Yes, I mean, I think, Jonathan, again as you know, we're bound by a lot of MDAs around a lot of this stuff is customary. This is probably the biggest subsidy on a device that we've ever had. The good news that goes along with that is we get a great ARPU and our belief is very sticky customers that won't churn over time. So the lifetime value is highly highly attractive, probably as attractive as any device we've ever launched. The challenges of course, all of the upfront costs are loaded when you make the initial activation. So I think you'll have to probably extrapolate from that. I'm sorry, I'd like to give you more but that's all I can.

Perhaps -- and on the question as far as the mix of new customers versus existing customers upgrading?

Yes, it's just not something that we care to share at this point. And frankly it's probably too premature even if we were not sensitive to the competitive info.

If you don't mind, I'll switch to a different topic since I wasn't getting too much there.

Actually, Operator we'll go on to the next question.

Thanks, Bruce.

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

Yes, thanks very much. I wanted to talk a little bit more about wireless ARPU. Nadir, you talked a little bit about some of the impacts on the voice ARPU In the second quarter. Could you give us a little bit more color? Is it lower overage? Is that a bigger factor than the U.S. roaming? Is it international roaming? Is it inbound/outbound? Could you give us a bit of a sense of why the slowdown?

I think first it's clearly on the usage based revenues on the voice side, and U.S. roaming in particular was a contributor in terms of the flattening out of the ARPU curve. Some of the airtime in long distance were not as robust as with that in the past. Very hard to go from one quarter, but clearly, directionally we've always talked about strength in ARPU is going to be on the data side and voice will start flattening out and whether some of it reflects any softness it's hard to say. Quick look at the U.S. numbers where you would argue that that's much more of on economic challenge would suggest that the wireless side is pretty robust. And so when we look at our numbers, we think it's going to be strong going forward and are particularly bullish as Rob mentioned on the data side. We have just been commercializing at 7.2 a rollout of the HSPN network going and I think with the devices coming, including air cards, we should see continued strength in ARPU on the data side.

Okay, I'm not hearing you mention any change in your own pricing or any roll through of say reductions you've given on airtime rates to existing customers or anything like that. This is all essentially externally demand driven or is there a little bit of it that's repricing?

I'll get Rob to talk about voice in a second. Just on the data side, we had obviously announced new revamped data pricing model (inaudible) in my view, that is actually going to drive revenues and ARPU going forward, so we think it will actually in many ways facilitate the adoption of mobile internet. So wouldn't read that as any factor that would contribute to lower ARPU and Rob, do you want to talk about the quarter?

Come back and really say two things, one that Nadir touched on and that is we have been and continue to make significant investments on network. HSPN network, the fastest most reliable network in Canada. And all of a sudden, we're starting to get that wave of devices that come along with ut and I think the iPhone is one, the RIM Bold is another, all of the air cards and sticks which I think are going to create a hockey stick in data revenue as we go forward. In terms of us taking significant voice price increases that are contributing, we're not. We haven't been. I would say the changes in the pricing dynamics at Rogers, in spite of the discounting zero dollar phones and other things that are occurring elsewhere, have been kind of business as usual. We're focused on high value customers, on PDAs and working hard against our key segments and not discounting away our voice revenue is.

Okay, thanks.

Your next question comes from Bob Becker of CIBC World Markets.

Thanks, good morning. Just switching gears to cable, could you talk a bit about what seems to be some slowing subscriber growth for some of these products? Clearly we've seen the internet start to slow down as penetration has been bumped up, but the (inaudible) has been a bit light as well. How much of this is economy, how much do you think is just penetration levels starting to push it at limits? Thanks.

Thank you. I'll go through, again, a lot of the issues that touch each product are fairly similar. First, it's interesting that we think there's some things going quite well and some things that we need to do better. In terms of the going well, I think one of the things we've done a poor job in the cable business is associating that all customers are the same and all revenue generating units are the same. And so we've tried to concentrate on getting a higher value customer both in terms of average rev per unit and in multiple or a customer buying multiple products at the seem time. And those are numbers generally going quite well for us. I think you see in the financials, including the efficiency in the operational cost. As I pointed out earlier, one of the things we did see was we probably went a little bit heavy on multi-product which didn't help the overall gross adds and so we're going to see that mix in the back half of the year. Secondly, Bell is definitely fighting harder and I think that's been something they've been continuing to do over the last few quarters. We've been a little bit I'd say slow to always match on all of the offers. We're stepping up in being a bit more aggressive there and we're also going to step up and be a bit more aggressive in pointing out the differences in some of the products because we think our television and our high speed data platforms are a much stronger choice and you'll see more that messaging such as Rogers Wireless has done a great job the last few quarters.

We're not pushing as hard out of territory, and that's reflected in some of the numbers. We do our rate increases in March and we align it for all products and probably '08 was the biggest year for right increases at Rogers Cable including $1.45 on home phones. So that probably didn't help sales in the quarter I'll call it. In terms of the internet, I think the internet is something we've been watching for the last seven years in terms of how fast would that go or how high would that go, but when you look at percentage of homes passed by cable, high speed data , we think there actually is some room left to go and some strong room left to go, but it's hard to go out too many quarters and too many years. On the economy side, I think generally on cable, we tend to see that more in ARPU in terms of people not buying as many features and as many channels. A bit harder to tell what is -- if you don't get a sale where it's from, but it's something again we're focused on in looking at and in terms of the higher -- one of the things that we also are going to change a bit is when I talk about higher ARPU, you tend to have packages and offers that are more attractive to mid and higher average revenue customers, probably haven't focused enough on the mid and some of the lower so we hope to do a better job there as well, but as I was again mentioning on the call, I think we've got good plans for the back half of the year, and we're focused on making sure that comes

Thanks very much.

Your next question comes from Scott Malat of Goldman Sachs. Please proceed.

Thank you. Just go back to wireless for a second. Maybe can you talk a little bit about COA was up 14% in the quarter. I just want to understand the increase, maybe it's just a fact or of lower than expected gross additions ahead of the iPhone.

Yes, Scott. You're spot on. If you actually took our absolute COA dollars and divided by last years subscribers, we would only be up about $8 year-over-year, so really the absolute increase was small. It was really just a function of the smaller denominator and I think as I said earlier on the call, with iPhone looming with a 46 share last year and really really strong growth, we weren't about to chase a whole bunch of of zero dollar loads to pump up the denominator of that equation at the end of the quarter.

That's just -- along with that, you've talked a lot about the iPhone but maybe a little bit about the Bold. Sounds like this is going to be available mid August. Can you maybe talk about potential impacts of that and I would assume that has a higher subsidy level as well.

You know at this point, I can't confirm a launch date. We don't generally announce things in advance, or a specific subsidy, but what I can tell you, it is too a fantastic device, the kind of device that's going to make people want to use more data, the screen resolution, the packaging of the device are fantastic and we think our customers -- both existing and new customers will be very excited by the device. It's also an HSPA device so it has the speed and it leverages the great networks that we've built. So excited about the potential of the RIM Bold.

Operator, next question?

Your next question comes from Rob Goff of Haywood Securities.

Thank you very much. You had noted the increased competitive activity. Could you give us a bit more perspective there in terms of is it COA based, pricing based or is it brand based with respect to [Kudo]?

Well, I guess there's no question in the last quarter we saw a relaunch of virgin post-pay, with lots of activity there. Heavy launch waits and launch promotions around Kudo, again focused at the very low end and credit challenged end of the market, an area of the market where we haven't seen it being a really desirable place to play. The other thing that I didn't mention is the quarter really slowed down when we announced the iPhone. It was like somebody slammed on the brakes. We just noticed a real marked decrease in demand, almost consistent with the day that we actually made the announcement, so I think that was a very big factor. You'll also remember a year ago we were at the height of our LNP success and we had a very successful launch of LNP, and we had about 46 share which frankly our perspective would be, is an atypically high share so we're looking year-over-year, I think it makes this year look a little bit smaller than it really is with that important context in mind.

Thank you.

Okay.

Your next question comes from James Green of Thomas Weisel Partners. Please proceed.

Thanks. You sort of just answered part of my question about the potential impact -- or the impact from the iPhone this quarter post the announcement. Can you also talk about any impact you may have had in ARPU this quarter because if some of these higher ARPU customers didn't want to transition over until you got the iPhone does that potentially have an impact and then also with respect to the types of customers you signed up, can you just give a little color on the contract lengths and just the overall quality of the customers and net adds this quarter? Thanks.

Yes, so I'll come back and ask you to explain the first part a little bit more because I'm not sure I understood the question but in terms of intake of customers in the quarter or in the 90s on contracts, three years being a predominant amount of 95% of -- the 90 plus percent of people on contracts are on three years, I'm just giving kind of approximate numbers but they're probably good within 1 or 2% so very very high quality intake. We're pleased with the intake of our subscribers, much higher percentage of our loads coming on voice and data devices and that's a trend that we see going forward, a much much higher mix of voice and data device, which is along with it will drive a higher COA, but it will be very positive because the lifetime value will be great of those customers. You want to come back and just try the first part of the question on me again? I'm not sure I understood it.

Sure. Basically trying to get our hands around the impact that your iPhone announcement had on your net adds this quarter. You said it seemed as though someone put the brakes on when you announced a launch date. How far below your average daily sell in terms of net adds did it drop post the announcement?

Yes, that would be really hard to say because to really get a true picture of your intake of new loads you really need to watch them for about 90 to 120 days because there's always an initial honeymoon period with an inflated usage over the first couple of months, so it would be pretty tough for me to comment right now on what the quality or whether there was any change in quality. Nothing that we saw, though, would suggest that the back half of the quarter had I lower quality group of loads. I can tell you that we expect that the loads going forward will be very very high quality and very high ARPU and a much higher mix of PDAs and we think that's going to have a very positive effect on our data growth going forward.

Great. Just for reference what was the date that you guys started to see that slowdown? The date of the announcement?

It came when we announced at our annual general meeting. I don't remember the precise date, but end of April and it became evident literally within a week.

Great. Thank you.

Your next question comes from Vince Valentini of TD Newcrest. Please proceed.

Thanks very much. I want to try to understand your stance on your guidance a little bit better. You did on a consolidated basis 19% EBITDA growth in the first half of the year. If you just trended that out for the full year you'd do just about $4.4 billion of EBITDA, but you're keeping your guidance at 4.0 to 4.2. Are you trying to tell us that the entire delta of potentially $ 300 million to the mid point is because of higher COA on the iPhone? It seems a little crazy given you only have $150 million committment in total to buy the phones.

Thanks for that question, Vince. As you know, over the last number of years, the Company has been relatively conservative in its guidance and certainly in changing its guidance. We did not want to make a prediction on how many iPhones or Bolds we were going to sell in the second half. They're great products, but we would just be guessing and we tend not to do that with guidance, because then you're in a constant change every single quarter. So in this case, what we've simply done is we've assumed that there will be a great degree of offset between how wireless is doing and the impact of the subsidies on these phones. After next quarter, we'll have three months worth of sales and we'll be able to comment further, but this is very consistent with how we have done guidance over the last number of years.

And Vince, it probably goes without saying but the $150 million is just a minimum committment that we're required to disclose for accounting purposes. It's not the maximum we could spend depending on the degree of success that we might see over the coming remaining five months of the year at this point. As well we've got, as Bill mentioned earlier, we've got the part two fees which is we've had to start accruing with the second quarter, which we'll continue to see most likely for the last couple quarters of the year and we've got softening economy in Ontario which is where frankly the critical mass of our cable business is and a large part of our media business and our biggest wireless market and we take all of these things together and I think we're probably, as Bill said, being our usual shelves and leaving our guidance where it is for the moment.

Okay, thanks.

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

Thank you. Good morning. I think it was Nadir, you said that you did the 1 million share buyback in the quarter and I think your phrase was the data point's not insignificant. Perhaps you can just talk about return of cash to shareholders and how you're thinking about buybacks versus dividends, particularly in the context of this year of the cash required for the spectrum and to what extent that sort of you want to delever and maybe build target leverage and how you plan to sort of finance longer term the spectrum versus giving the cash back to shareholders. Thanks.

Okay, Simon. Number one, it's not insignificant because this is the first time we've done it, and I think it's like our dividend policy. It shows that the Company is interested returning money to shareholders, where it has excess cash. Obviously, the most important thing we have to do over the next short period of time is think about terming out some of the debt that we have, and that's market dependent and now that we're investment grade, we'll be going to the market as an investment grade company which is new for us. So you can do the calculations. We'll have a couple of billion dollars of a $2.9 billion line drawn after we pay for the auction, so the number one priority is probably going to look at some different terms for that. After that, we are now going to continue to look at all of our options. The first priority as you know is investing in our business and, where possible, the small tuck-in acquisitions. After that we've established that dividends are preferable but we will do buybacks if they're very opportune, so I think there's more info to come in the future on those topics.

Thank you very much.

We have time for one more question and it is from Tim Casey of BMO Capital Markets.

Thanks. I'm wondering if you could provide a little more color on what you saw in the quarter and what you expect for the back half of the year on your cable voice product. Your growth seemed to slow there in the context of the other statements you've made regarding cable subscriber metrics, how should we approach the dynamics in cable voice?

Well I'll take that one. I think a lot of the issues that I raised obviously apply to home phone voice. I think we gave guidance on a revenue generating unit basis but I think there's a lot of growth left there. We did a -- we added about 45 on staff this quarter. I don't think there's a lot of companies doing that. I think we believe it's going to be a competitive business and if the ARPU is a couple bucks more or a couple bucks less, it still will be. But I think with our bundling efforts with the targeted marketing we're going to do, the second half is always a much stronger time of year for Rogers Cable and most cable companies. I think we can continue to take up our penetration.

Is this an area where you're seeing more competition for Bell? You mentioned they stepped up. Is this an area where you're seeing them?

Yes, definitely, since they got some of the regulations taken off of them, they fought harder. As I say, home phone is today television, high speed internet and wireless, I think it's easier for us to point out our differences and why Rogers has a better product for customers, and we're building and spending some money to try to do that for home phone over time and glue some of those products to better stick as one, but we got some work to do there. But as I say, I think we're going to have a much stronger second half than we had the first half for Rogers home phone.

Thank you.

Great. We wanted to say thank you to everybody for participating this morning on our quarterly call. We appreciate your interest and your support. If you do have questions -- I understand from the operator we had a couple people left in queue. If you do have questions that weren't answered on the call, please give Dan Koons or myself on the call. We'll be around all day. Our contact information is on the earnings release so feel free to give us a shout. This concludes today's call. Thank you again for participating.

Ladies and Gentlemen, this concludes our Conference Call for today. Thank you for participating. You may now disconnect your lines.