Rogers Communications Inc (RCI) 2008 Q3 法說會逐字稿

Welcome to the Rogers Communications third quarter 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 today Tuesday, October 28, 2008 at 8:30 A.M. Eastern time . I would now like too turn the conference over to Mr. Bruce Mann of Rogers Communication Management Team. Mr.

Thank you very much, Patrick . Good morning everyone, appreciate you joining Rogers third quarter '08 Investment Community call. It's is Bruce Mann here, joining me on the call here in Toronto this morning are Ted Rogers, our Chief Executive Officer and Bill Linton, our Chief Financial Officer, as well as Nadir Mohamed, our President and Operating Officer of our Communication's Division, as well as our three divisional Presidents, Rob Bruce from Rogers Wireless; Edward Rogers from Rogers Cable; and Tony Viner from Roger Media, along with a few members of their respective management teams joining us in the room.

So as you know, we released our third quarter results early this morning and the purpose of this teleconference is to provide the Investment Community with additional background and answer as many of your questions as time will permit. Just quickly as these calls almost always seem to involve some degree of discussion about estimates or forward-looking types of statements, which our results at the end of the day could end up being very different, make sure you fully review today's earnings release and also, importantly, our 2007 annual MD&A. In our annual report, the risks and uncertainties and cautionary language that they include apply equally to our dialogue on today's call. You can find either, if you don;t already have them, either on the www.Rogers.com website in the Investor Relations section or they are also filed the OSC Edgar system or SEC Edgar.

With that, let me turn it over to Ted Rogers, and then Bill, Nadir and Tony will make a couple brief introductory remarks as well and then the management team will take your questions, over to you

One of the things that are most important calls like this are the state of the balance sheet and the liquidity and the financial strength of the Company. We were proactive on the balance sheet as well. Opportunistically executing a US 1.75 billion investment grade bond offering. That is investment grade bond offering at the end of July, as a market window temporarily opened. Under Bill Linton and Lorraine Nelly's excellent leadership, we were well positioned to move quickly and decisively, which we did.

Compared to many companies today, we are extremely well financed to weather a star, even a big one. Our balance sheet is rock solid with every manageable leverage, 1.8 billion in liquidity, no approaching debt maturities. This provides us strength and allows us important flexibility to continue to invest and growing our businesses as well as continue to be opportunistic. Even with the economic slow down impacting manufacturing and commodities in Canada, we at Rogers continue to generate significant amounts of cash flow, even after substantial capital expenditures to maintain our leadership positions. And this, also finds with, I believe is important to our shareholders, that is the healthy dividend beyond reproach for its being carried on. Accompanied with our growth profile a $1 per share, which today is a yielded of more than 2%. A key factor is [secure] in an ideal set of interrelated businesses. How many companies have that?

Unique in North America and they are experiencing healthy, organic growth. The majority of the services we provide continue to be strongly in demand. In today's age, broadband, television and wireless revenue systems are defensive ones in a down economy. As the utility of these services, is extremely high and research shows our services to the consumer is less likely to terminate. Studies have actually shown that if you could pick what you read the last things you wanted to give up, it would say Internet. Or they would say their cellular phone. Some would say television. Well, Rogers has all of them. We don't have things that people wouldn't mention that are hard to sell. We have 8 million customers. We are well diversified so that if something goes wrong, and some customers it doesn't bring down the ship. How many companies in North America are like that, with all these other benefits. The quarter, I think we put up a respectable quarter of growth given the economic back drop. On one of those quarterly calls, nearly a year ago, I said we needed to be cautious given the economic issues occurring south of the border and that Canada would not remain insulated. We need to be prepared for restraint on the cost side. Well, we certainly forecasted that right and the Company has made efforts to work since then to improve its operating situation.

Are we perfect? Of course not. Of course not. Particularly in this day and age. But we have an excellent management team. A first-class management team. Who in my view are capable-- are the best ones capable of handling this type of situation. And now, we are in a position with our relative strength and our well-positioned on many levels. Many levels. Financial, operating. We have the best plant in North America in terms of high-speed. Nobody has higher speed than we do. And all of this means continued growth.

Now, I am going to turn over the rest of this to the, our excellent operating management who will go through some of the results with you. Thanks, Ted.

Couple of quick comments on the financial results of the quarter. Let me begin by highlighting our continued strong revenue growth which was up 14%. Even normalizing for the City TV acquisition last year, the top line growth is still very solubly in the double-digits. As we suggested last quarter, spoke about in the release today, the iPhone launch in Canada was rapid and frankly, the volumes we actually did in the quarter are more of 250,000 were quite amazing. It did; however, drive significant amounts of incrementally customer acquisition and customer retention costs. We conservatively estimate that the incremental hardware subsidy and data plan commission cost from the iPhone activations during the quarter drove at least 95 million of incremental expenses.

Now, this is just the incremental subsidy and data planned commission cost versus what the same volume of devices would have been with our normal device mix. In reality, incremental customer service and support costs were probably an additional 20 to 30 million over and above the 95 million. If you normalize just for the incremental 95 million of iPhone subsidy and commission costs, wireless adjusted operating profit would have grown by 15% versus the reported 1%. Network revenue margins of wireless would have been 51% versus the reported 45%. On a consolidated basis, adjusted operating profit would have grown by 14% versus the reported 4% and adjusted earnings per share would have been $0.10 higher or $0.82 per share versus $0.72. There is no question that when you look behind the immediate impact on the income statement of this one investment initiative, which frankly, is a low risk one with pretty certain returns, you see some very healthy results.

On the cable operation side, continued double-digit top line growth and good margin expansion. Although cable slowed modestly given the circuit switch de-emphasis and softness in RGU growth versus what we forecasted. You will note this quarter two significant non-cash items impacting our reported net income and earnings per share. The first is a $62 million recovery of stock based compensation expense. Based on the change in Rogers stock value in the quarter.

The second are tax adjustments to reflect the harmonization of Ontario and Federal Tax administration and to reflect the Company's view of the future tax benefit of derivative. The net result was to reduce reported income tax expense in the quarter from an effective rate of 33% to only 3%.

On the balance sheet, many of you have noted that at the end of July, shortly after the conclusion of the Spectrum Auction and somewhat threading the needle through very turbulent credit markets, Rogers successively issued 1.75 billion of 10 and 30-year notes on investment grade terms with some the tightest spreads seen the entire summer. With the proceeds and our internally generated funds we effectively (issued - background noise) 20 megahertz of Nationwide (AWX - background noise) spectrum we won in the auction this summer. We paid our quarterly dividend for the $160 million. We bought back $100 million of Rogers shares. Settled $375 million worth of swaps, which freed up capacity and we acquired the remaining two thirds of Outdoor Life Network Canada, which Rogers did not already own for $40 million. As Ted pointed out at the end of Q3, we had very strong liquidity at $1.8 billion. This is on fully-committed multiyear bank lines. We have no debt maturities until 2011. Whether you look at leverage, liquidity, or refinancing requirements, Rogers is in a very strong position in terms of its balance sheet.

In terms of the outlook as we said in our release this morning, we are adjusting some of the full-year 2008 guidance ranges, which we set out in early January. The most significant adjustment is to reflect the impact of the iPhone launch and the extremely heavy sales volumes that were not assumed in our original outlook for the year. We have also reduced the cable RGU range to reflect the de-emphasis of the outer region circuit switch telephone business and the softness we have seen in sales of Internet and home phone services. Finally, you'll see we have adjusted the media numbers, some what, given the very soft advertising markets which those businesses are obviously facing in the current environment.

I will conclude by saying that despite the incredibly challenging environment around us all right now. When it comes to Rogers, you should be comfortable with our strong financial position, as well as the subscription based nature of the majority of our businesses and the strong utility of our products. I will 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 Bruce and his team. Once again, strong double-digit top line growth. Good subscriber load mix with the healthy percentage of high-value post fade subs. A terrific first quarter for the F1 sales. Continued success in holding down churn levels, both post paid and prepaid with post paid RPU growth of 4%. All of this despite a proliferation of discount brands and an economic environment that has limited roaming and usage. At the same time we have simplified and added significant value to our wireless data packages to drive much deeper customer adoption.

We launched a host of great new 3-G devices including Blackberry Bold and continue to aggressively expand what is already a multiyear lead in terms of network capabilities and are quality advantage. A busy quarter indeed.

Clearly, the iPhone, just because of the shear numbers involved defines the quarter both in terms of sales and financial impact. As Bill mentioned, if you adjust for a conservative level of the incremental cost if this initiatives, and wireless operating profit margin would have grown 15% and margins would maintain about 50%. Let me take a moment to highlight the significance of our iPhone launch. First and foremost, as widely expected customers embraced the iPhone. The number of activations of over 250,000 is simply phenomenal.

Second, as an iconic device, the iPhone association with Rogers, reinforced our brand proposition around innovation. Third, this is a straightforward financial proposition. Positive lifetime value per sub, given that we know the subsidy investment, we know the the contract term. And we know and I have now seen the ARPU profile of more than 150% of our average wireless subscriber and fourth, and perhaps most importantly, it is not just about the iPhone but what it represents to our business. The first breakthrough device to put mobile Internet in the hands of the consumers and catalysts for the biggest growth opportunity for our Company, Wireless Data. The iPhone symbolically represents two new huge new categories for wireless. Compelling consumer Smart Phone devices and wireless handout Internet access with the desktop site functionality.

These categories together are going to generate significant growth for Rogers and the industry overall. There will be a plethora of these kinds of devices that we will carry not just from Apple and RIM but from many others as well. We have been pushing hard for this day at Rogers and finally we have the speeds, the devices and the applications and the consumer demand all opening up. So all good.

In our Cable Operations Division, Edward and his team delivered double-digit top line growth with adjusting operating profit up 18%, a solid financial performance. On the RGU front, while better than last quarter, still soft reflecting our decision early in the year, de-emphasizing our outer region circuit switch business, as well as the combination of the consumer caution and largest market in Ontario and deepening penetration of our Internet product and the intensity of the Telco win backs. Helped somewhat by the lower RGU activity but with a tight focus on cost we saw good operating leverage driving margin expansion up 275 basis points year-over-year, even excluding the benefit from the renegotiated Yahoo deal, Cable operations delivered 15% operating profit growth and 173 basis points of margin expansion. Steady progress and good reflection of the operating cost control that the team has focused on in the past several quarters. With that, I will turn it over to Tony.

Thanks, Nadir and hello everyone. A top quarter for media but largely in line with what we saw coming and I shared with you after Q1 and Q2. If you normalize for the acquisition of City TV, which we acquired in November of last year, the organic year-over-year revenue growth would have been 4% versus the 14% reported and we would have been essentially flat year-over-year on operating profit versus the 7% decline. Which I actually think is pretty decent performance in the current market environment for our types of businesses.

From a more granular perspective, I probably described the performance of our various divisions in three ways. First Sportsnet, our network of regional sports stations is doing very well. They are gaining share and they are driving good growth in both subscribers and advertising. Second, would be radio, which tends to be least effected when the economy is tough. Because most of the advertising is locally focused and that's been holding true this past quarter. The same can be said for our network of multicultural Omni TV stations, which is a bit of of a hybrid between specialty and over the air. They have been through enough of the cycles over the years that they are good at managing the margin. Then a third layer would be our publishing and over-the-air TV business where we have large exposure to national advertising and our shopping channel business where we have direct exposure to consumer discretionary spending. These are the areas where we are feeling the impacts the hardest. The bad news is that Q4 is pretty much the biggest quarter for all of our businesses. So obviously, the timing of what is happening in the economy isn't exactly ideal. But I think we are a lot better positioned than some other media companies because our properties have strong brand and audience shares in their respective categories so they hold their own better when advertisers have to make choices.

Also, we probably have less direct exposure to advertising over all than a lot of media businesses. But we have got a team here that has been through more of these cycles than I care to remember. And we know how to play it -- they play out and what we need to do in terms of cost restraint to adapt. And that's what we are doing.

Lastly, I will just mention that during the quarter, we also rebranded our recently acquired Vancouver multicultural TV station to Omni and launched our new Omni stations in Calgary and Edmonton so now we have a network of Omni multicultural TV stations in Toronto, Calgary, Edmonton, and Vancouver. They are together in markets where we also have City TV and radio stations. I think this will present significant opportunities for us as we go forward. With that, I will pass it over to Bruce for questions.

Thanks, Tony. Operator, quickly before we begin, I just want to request of the participants that we do on each of the call, those of you asking questions be courteous to the other participants and your colleagues and limit the question to one topic and one part each so as many people as possible have a chance to participate, then to the extent we have time, we will circle back to you or answer them after the call. Operator would you explain how you want to do the polling for questions.

(OPERATOR INSTRUCTIONS). One moment please for your first question. Your first question comes from Gregg Mcdonald of National Bank Financial, please proceed.

Good morning, guys. Last time the Company increased the dividend was on January 1, of this past year and that was coincident with the guidance release for the year. Couple of things, first, on timing. I am assuming the Company has a bias when thinking about changes to the dividend that that occur coincident with budget to budget process and if you can confirm that. Has the Company given any more thought to a formal dividend policy... i. e. target as a percentage of earnings. Or free cash flow. That might help us out. This Company's has got a healthy free cash profile. Ted you mentioned that the rock solid balance sheet, a comment on the outlook when it comes to the dividend I think in a market like this might be very helpful for people.

Gregg, it is Bill Linton. These are unprecedented times. We are going to wait and see what happens over the next couple of months and potentially, the next couple of quarters. I think you are going to find what our answer is the same as most company's answers. That is we are very satisfied with our position today and not impair the position of liquidity. Right now, I would say we are in the position where it is wait and see and how deep and long the economic problems are.

Just as a quick follow up to that, I mean, assuming things get back to a position where you have some visibility, that's what you are trying to say and I can appreciate that, is the Company going to at some point communicate, the balance sheet, the profile of the Company is getting to a point where they are starting to consider you a more conservative profile.

I would hope so.

Yes, so is there a point where, other companies that look like Rogers have started to give outlooks on what their dividend policy is and I wonder at some point will we get goal posts to know where it lies.

It is pretty easy to say sometime you will, because that could be months and years. But at this point we are not in a position to say that we are going to give any guidance around a dividend policy in the near-term.

Your next question comes from Simon Flannery of Morgan Stanley.

Thanks a lot. Good morning. I wonder if you can talk about the operating income guidance for Q4 for wireless. If I do my math right, it looks like it is a little bit of a dip versus Q3 levels. Can you help us about the drivers. The iPhone had us off to a huge start. AT&T is expecting less in the way of sales for iPhone sales in Q4. is that implied in your guidance and how much is relative to the economy drags you see and seasonality. Any thoughts behind that would be helpful, thanks.

Simon, it is Rob Bruce. And clearly as Nadir said, it is a big part of everything. And the other thing that is important to say is our push on Smart Phones isn't limited to iPhone. And you know, in Q3, '08 our Smart Phone as a percentage of our gross loads reach 40%. We continue to drive that aggressively. That will be part of what we do in Q4. You may have noticed our strong push on mobile internet sticks and all of these are investments in the future which we believe is data. And those will be things that color the results in Q4 and as a consequence color our guidance.

Your next question comes from Vince Valentini of TD Newcrest.

One clarification, Nadir. You said the ARPU on the iPhone is 150% above your average. Are you talking about blended average or post paid when you say that?

Sorry. The reference to 150 percent would be blended for wireless customers.

I think Nadir said more than.

Your next question comes from James Breen of Thomas Weisel Partners.

Thanks. In question, for the iPhone sales we seen and here with AT&T, they had a big push and expectation over time and the sales declined. Would you think you are more capacity constrained from a handset perspective and could see a longer tail in respect to the product?

There were some capacity restraints or inventory restraints at the beginning of the quarter. IPhone was trying to ship the world out of one plant. Probably for the first month, we were constrained on mix between the 8 and 16. And had the brief charger issue which caused Apple to hold inventory. We were conned for the first 30 days and evened out in the latter part of the quarter.

Great, thank you.

Your next question comes from Peter Mcdonald of GMP Securities.

I didn't catch when you talked about the iPhone. Did you give NAV per customer? Like AT&T said more than two-times for iPhone.

We have not given, if you are talking about Lifetime Value, no.

My question, Mr. Rogers spoke about the resilience of Rogers business as a whole and difficult economic times and given that Ontario has faced those times already. Are there any areas where you have seen more exposure than others? And are you surprised by the resill?

You could tell we have a good subscriber load on the wireless side and made reference to the slower RGU growth on cable. A large piece of that was our decision early in the year to curtail the investment in circuit switch home phone sales outside our territory. To the extent we have seen any signs, it would be on usage. We made reference last quarter to roaming not growing on the robust rate that it had been previously. That trend has continued, usage generally has been flattish and we haven't seen anything beyond that. It is pretty resilient across the board and we will wait and see. Obviously, concerned about the economy, Ted made reference to restraint. At this point it is more in anticipation that they get worse. We are actually getting ahead of the curve some what.

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

Thanks very much. Can you talk about the ARPU lift you are getting on the iPhone from specific customers upgrading. He mean, I know you talked about the data plan take up. And can you give us an update on that. And also talk about what you are seeing on up grades generally. Self selection of better customers into the iPhone or net benefits overall here? Thanks.

Complicated question. And obviously there is lots of granularity and detail. Let me give you a couple of things you can take away. First and for most, we are seeing. Strong ARPU on the iPhone and importantly on all Smart Phones. And significantly more. Nadir talked about iPhones specifically being 1.5 times or better. And when you think about it, Glen, at a minimum, these people are walking away with between 25 and $30 in a data bucket and possibly depending on which tranche of customers. A chunk of SMS messaging and other things. The device clearly attracts a higher ARPU customer, who can pay the bill in the long-term. And it drags along with it, more LD and more roaming and more other things that characterize a very attractive customer from our perspective. We think the iPhone is a healthy contributor to the business. We are delighted with the results you have seen. And the results we have seen overall with Smart Phones. Where a year ago, 14% of our gross ads were from Smart Phones now as I said before were up to 40%. Almost 17% of our base is now Smart Phones, again, pulling much higher revenue and we are happy with the direction we are going.

Okay. Thanks for that.

Your next question comes from Dvai Ghose of Genuity Capital Markets.

Nadir, about the future wireless margins, obviously in this quarter you were unusually impacted by the iPhone, which seemed to be accretive in the future. My question is really as you look out when do you think the dilution from the iPhone is going to become accretive, clearly it's on a one quarter event. AT&T reduced all of the 2009 guidance because of the iPhone and also, as you start going forward. You get the storm and the instinct and other devices from your CDMA competitors to compete against you, which could lead to higher subsidies and outside the PDA market, such as CUDOS and Virgin , now charging lower prices and FIDO and could lead to a reprise. My overall question is. I understand the quarter was unusual and generated by one item. When do you think they can recover to 50% plus back into

There are multi parts in the question. And I will try to adjust as I think. Without recognizing that we haven't given guidance for next year. Let me step back and point out something I have been staying for some time. That is, when you look at the business as part of the communications profile. Our view is to expect 50% plus margins going forward given some of the things you have mentioned would not make since to us. And so, from that perspective, if you look back, within achieving those numbers. We wouldn't see that going forward. Clearly, the impact on the iPhone is the primary reason for margin compression this this quarter. Troughing device, looking out ahead the big driver is what's the volume. In many ways the more successful we are the more the depressed the short-term EBITDA looks for the investor. By the way it is good news when we have the kind of success we had this quarter. It is hard without talking about the (inaudible) expectation.

To be helpful, the best way to look at it is to look at the profile of an individual customer and most people know what the cost of acquisition is. And Rob made reference that in average were are getting 25 to $30 attach on data and hopefully higher as we go forward when people take more than internet access. The variables that are left are like churn improvement and we know these people take three year contracts. So if look at a profile of a customer, it's very healthy and the trick is determine what the load looks like next year. I wouldn't presuppose what the margins look like, clearly within the individual customer as you back into the back of the end of the year you start seeing positive flow through on an EBITDA level for an individual customer. So that's kind of on the iPhone side but we should look at this market as strictly an iPhone market. There is lots of other stuff going on, you made reference to discount brands, I think, by the time you look at '09 and '10, we will have the impact of new players coming in. So we clearly see pressure on the pricing front on the ARPU, which in turn we will have pressure on margins. Having said that, we are positioned we believe better than anyone to address that, we have been attacking the cost structure. We will continue to focus on that because we recognize that as the revenue side of it starts to get more compressed that we have opportunities on the cost side to keep margins healthy and growing.

On the FIDO, you referenced the discount brands, do you see a need to reprice FIDO down given the fact that CUDOS and Virgin don't charge SAF don't offer contracts... et cetera.

Dvai, at this point, we are happy with where FIDO is. And at some point in the future, we may make some fine tuning to FIDO but nothing we are prepared to discuss today. On a separate note and picking up on the first question with Nadir. On device pricing as a bit of input for your model , what we are seeing out will is segmentation amongst the Smart Phone devices. We are seeing a new class of qwerty devices coming in at the low end to facilitate SMS which is a lot cheaper. Starting to see some of the players in the Smart Phone category following those prices down to make sure they don't feed that part of the market to these players with these simpler, more segmented devices so I see some downward pressure. The one other thing I would love to pick up on, I think, and we said it before and I want to say again, that we do see in the longer-term, more downward pressure on voice pricing that will no doubt put some pressure on margin as we go forward. And it is something we said before, but as you are rolling up all the inputs to that question, you asked Nadir, I think it is something that we would like to

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

Thank you very much. I want to ask about, when we look at the US trends, one of the areas where they are seeing a lot of pressure from a macro standpoint is the local access line and the area where wireless in Canada has not taken advantage of the wireless substitution, and you see that as an opportunity to go through a slow down period here?

Hi, Jeff, this is Rob.

Hi, Rob.

Jeff, clearly we do see it as an opportunity. And I think there has been a lot of research done recently as we look at a turn down in the economy. And as we look at what people will shed, wireless falls towards the bottom of the list. It has become one of those essential services. We have worked and I think you know, last quarter, we launched UMA, which creates a capability to make wireless and home phone combination a very enticing substitution, a way that people can cut the cord effortlessly. We continue to believe that is going to afford more opportunities going forward. There is some technical innovations on the horizon, probable more than a year away right now that are going to make that even more enticing. But, absolutely we think it is a real big opportunity and particularly, a big opportunity outside our cable footprint. I said that for Edward.

Next question comes from Bob Bek of the CIBC World Markets.

Thank you very much. I know on the cable SIDE know we have been taking about the economy and potential effects on some of the products within cable, specifically on competitors issues. Can you give us bit, perhaps, Edward a commentary on what looks to be more of a resilient or renewed offering from Bell in some of the cable areas. . In particular were seeing some pretty aggressive pricing on the DTH product. Is this a short-term blip here or do you foresee some more aggressive tactics

Thank you for asking a cable question. [Laughter] And when you look at Bell, they are tougher in the market than they were a year or two years ago. But if you look at where they are fighting, it is more on the offer pricing. And more around pricing keeping their own customer base. Their poor pricing has been pretty steady and continue to implement usage base on their side. And rate increase it is on the satellite side. It is more on the offer pricing. And they have been better in the market place. I think for cable, just a couple of other things. In the three years in the quarter and being in the phone business, we have reached 34.5%, of our cable base having our phone product, if you look at it that way. Our 500,000 high-definition customer. So, there is obviously as you push penetration rates up you have to be smarter in the market to continue to get the next 10% of penetration. Cable is feeling some pressure by other speakers on on the economy and more of a hesitation by customers to want to buy TV sets and new lap tops. , we wrap products say round. And just as they (inaudible) . And for a company, most people wants to keep firm. And let the storm weather and not move as much as they have. Splitting up the difference, on circuit. Our circuit business is important, because (inaudible) cable revenue driven in the units About 164,000 for the quarter, 198,000 a year ago. So down, when you look at the combining the circuit business, you don't see the impact even though we are losing subs on the EBITDA and that was the point of changing where we are putting our focus

Thank you.

Your next question comes from Scott Malat from Goldman Sachs.

Just wanted to get back on the wireless and on post paid ARPU, obviously very strong growth there. And on the voice side, aside from plan pricing, which you have hit on well. Are you seeing any evidence of pressure on the roaming revenue or overage charges or any of voice extras and then just quickly on a second. Just nit picking here, but the post paid churn did kick up a little bit. Can you help us think through where the pressure is coming from, how much is CUDOS having an impact on your post paid base or how much is macro?

Let me do the revenue piece first, Scott. And highlight some of the elements on the revenue front. The thing you should take away is a the key growth drivers from a revenue perspective, obviously, first and foremost, have been data. The more discretionary ones, and Nadir, alluded to this, particularly, when you are looking at ARPU, so your stripping at the influence of adding the subscribers.. We are seeing a real flattening out of air time, LD, we continue to some growth on the essential services line. And that is a good sales people continuing to meet our customer needs, in terms of enhanced services. The well over all revenue of roaming is growing up with the base, the ARPU for roaming is relatively flat. Would you remind us. I couldn't hear your question on churn. Would you mind repeating it.

Post paid churn did kick up a little bit. Can you help us think through where some the pressure is coming from and how much is CUDOS is having a impact on your post paid base versus how much macro is playing a part.

Scott, the numbers in front of me suggest that churn went down one basis point. We would like to have seen it go down little bit more than one. So churn is typically seasonably up. Were you looking at it from a sequential perspective.

It was down year-over-year basis more last quarter than it was this quarter. It was more even with last year, as you noted. But I guess we had expected it just on the trend rate that it would be more toward 1.05. It is a small difference.

There is not anything going on there. We are making continued improvements in churn and continues to be an area of focus of ours. We work and try to highlight the advantages of being with Rogers, and that is that we have larger and better quality coverage. We continue to work on our credit adjudication processes. We sign our customers to term and we work hard to make sure we keep them in hardware that is working. And we expect to continue to see improvements on churn overtime and come back to the CUDOS thing, no obvious change in trajectory that is a result of CUDOS.

Is CUDOS more of a prepaid competitor, is what you are saying.

Not specifically. I was responding to the question. Is CUDOS on the radar screen for producing churn from Rogers. And the answer is no.

You meant to say way to go Rob for maintaining the churn levels as low as they are.

Exactly.

One thing on the roaming. If you were to split up the roaming, it is the US - Canada roaming as opposed to International. And that points to the economy, what is going on with the markets as much as anything.

That and to inbound and out bound to the US, all seem to be significantly softer with inbound and out bound to International in terms of traffic. Looking fairly robust.

Thank you.

Next question is from John Henderson from Scotia Capital.

Wondering on usage stats, after a quarter of iPhone and increased look at other Smart Phone broadband type usage activity. How do you feel about your positioning of backhaul and CapEx profile today and going forward. Also, if you have any follow up comments you wanted to share on this Bell and Telus HSP overlay?

Well, we feel real great. Don't now if he wants to say anything. We worked very hard.

Sure, this is Bob Berner here. You picked up on a key point for the industry which is backhaul and as we move into broadband services, the amount of capacity everyone has to put in to connect themselves back into the core networks is going to be one of the factors that CapEx is being spent on going forward.

Just picking up on the other part of your question with respect Bell and Telus HSP overlay. We have said publicly before, not a huge surprise. It is HSPA network only. As you know, most of the roaming occurs on GSM. And you know, we feel that our network reliability and advantage doesn't derive directly from the technology of GSM or HSPA it is a direct result of having a lot more cell site density in the areas of the country that matter. These are things that are hard to duplicate over time. We also have great respect for the challenge of changing technology. As most of you know we changed from TDMA to GSM and shut down the last of the last of our TDMA networks. And it is a real significant period to run all the networks and parallel am and he guess our competitors are going to go through the same kind of growing pains like we did. And we look forward at the opportunities that will present for us.

Just back on the CapEx question, would you say, you think CapEx to revenue ratios maybe trending higher in the future or flat or lower.

I think we are in the cycle. And we are in the cycle of investing in HSPA and at this point we are not ready to give guidance for next year.

We currently have time for two more questions. The next one is from Rob Goff of Haywood Securities.

Thank you very much. On the wireless side we can all look to the Smart Phone as a driver gor going ahead. What would you say would be the parallel on the cable side, increasing data speeds or HD content as we look into '09?

You are asking in terms of what our focus is but I think Mike Warner was trying to get the better quality customer in terms of revenue. In terms of being a bundle customer. And buying multiple cable products and focusing on getting the higher quality customer. So on data as you mentioned, it is a focus of getting people to take higher tiers of data. (inaudible) And then Q3. And take the higher tier products. We are better than they were in Q3 and and have a split mix. And the packages we are sell being. Trying to focus on the higher end. Continue to invest ,to draw customers so on the internet our messages in the market place. And it is the best internet product and showing the most HD choice, host the most television thorough BRP. And continue to spend money to differentiate ourselves so we can take share and more importantly, take the higher quality of share.

Thank you.

Your last question comes from Randall Rudniski from Credit Suisse. Please proceed.

I have a question on the cable operating expenses. Because, a few times in the release, the release refers to the low down and the question is. In such an environment, where economic growth is a bit subdued, do you feel that you need to or you have the capacity to continue to hold back on selling and marketing expenses which looks like it is going to be flat this year. And accelerate that expense line. And this is a sort of related follow on. Going back to iPhone. And I was hoping you might be able to outline what the data usage is for them.

When you look and exactly measure. It is some counts and in the past. And grade and research our customer's hesitation to move forward in purchases and we look at our marketing and sales evens and you don't see the efficiency gains that we brought. And so, the purchasing on the advertising we have got and we have got synergies working between wireless and cable. Synergies on selling in a multi product way. They didn't generate as many sales in the earlier part of the year as we like but they did drive some efficiencies on the marketing and sales end. You might see flatter numbers there is more activity and anecdotal spending that way and we will continue to push hard to drive penetration up as we go forward.

Hey, Randall, it is Rob with the iPhone data usage. Right around October 1, when we launched the revised data bundles and our new data rate card. We came out with a lot of facts and figures about the amount of usage we were seeing on iPhone. I would send back to look at some of the data. Let my give you some sound bytes from it now. One of the simple facts was over 92% of iPhone users use less than 300 K of data. And you remember during the period of time, we had noted journalists who we gave devices to, who worked extremely hard to use as much data as they possibly could. And struggled to get over 100 K. And a lot of that stuff was well do you meaned during that period of team. Again, the usage was a whole lot less significant than we thought and again, we should highlight the people that were looking at in the first couple of months were the real data zealous, the people coming through that were very excited about the prospect of the iPhone. And I said K, I meant mega bytes.

Great. Thank you.

Operator, Bruce Mann here, we wanted to take a moment to thank everybody for participating this morning. We appreciate everyone's interest and certainly coverage. If you have questions that weren't answered on the call. Give my colleague Dan Coombes or myself a call our contact info is on the release this morning. Every have a good day, that concludes our call. Thank you.

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