Rogers Communications Inc (RCI) 2009 Q4 法說會逐字稿

Good morning, Ladies and Gentlemen. Welcome to the Rogers Communication, Inc., Fourth Quarter 2009 results Conference Call. (Operator Instructions) I would like to remind everyone this conference is being recorded today, Wednesday, February 17, 2010, at 8:00 a.m. Eastern.

I would now like to turn the conference over to Mr. Bruce Mann of Rogers Management team. Please go ahead, sir.

Good morning everyone. Thank you for joining us for Rogers Fourth Quarter '09 investment community teleconference and Webcast. Here in Toronto joining me today are a few members of the Rogers senior leadership team including Nadir Mohamed, our President and Chief Executive Officer and Bill Linton, our Chief Financial Officer. We released our Q4 and full year '09 results earlier this morning and the purpose of this call this morning is to as crisply as possible provide you with a bit of additional background up front and then to answer as many of your questions as time permits.

Today's remarks and discussion will undoubtedly touch on estimates and other forward-looking information from which our results could be different. You should review the cautionary language in the Q4 release this morning and in our full year 2008 MD&A including the various factors and risks and assumptions with respect to those types of cautionary statements, and also about how the actual results could differ. Those cautions are (inaudible) equally to our dialogue on today's conference call. If you don't already have copies of today's earnings release or of our 2008 annual report to accompany the call, they're both available on the IR section of rogers.com or find them on the EDGAR or SEDAR website. So with that, let me turn it over to Nadir Mohamed and then to Bill Linton for some brief introductory remarks and then the management team will take your questions . Over

Thanks, Bruce. Good morning everyone and thank you for joining us. As you can see from this mornings release we delivered another very solid quarter of results despite a challenging economy and increase in the competitive environment in Q4. We generated double digit EBITDA growth. Our Wireless data grew a strong 45%. We delivered meaningful cost efficiencies that drove margin expansion right across all three of our major business units. We added a healthy mix of high value customers while further reducing customer churn and importantly, we delivered another strong quarter of free cash flow growth and returned our shareholders to round off a very solid year.

Let me quickly cover off a few of the highlights of the quarter and then Bill will walk you through some of the financial nuances. On the revenue side, we delivered high single digit revenue growth of both our Wireless network and Cable operation businesses with 7% year-over-year top line growth compared to Q4 of last year. The most significant driver of our top line growth was the continued strong growth in our Wireless data revenues which in Q4 were up 45% and now represent 24% of Wireless network revenue. To put that in context for the full year 2009, Wireless data revenue was almost C$1.4 billion. I think this reflects the right focus and investments we've made not just over the past several quarters but frankly consistently over the past several years.

Our early 3G and Smartphone investments combined with our innovative product offerings, the quality of our networks and our focus on customer experience are clearly paying off. In Q4, we focused on the high end of the wireless market and were successful in activating an additional 400,000 Smartphone devices, predominantly BlackBerry, iPhone and Android devices that on average are generating almost double the ARPU of our voice only subscribers. In fact, we activated more iPhones in Q4 this year than we did in Q4 of 2008. As a result, we drove a healthy mix of higher value wireless subscriber additions in the quarter with 70% of our gross adds and 85% of our net adds being post paid subs, and importantly, even in the face of increased competition, post paid churn is once again down year-over-year to just 1.08%. Today, approximately 31% of our post paid base are on the high end Smartphones, up from the 19% level we were at this time last year. These are higher ARPU, lower churn, higher lifetime value subs, and the results are clear in our financial and operating metrics.

Our heightened focus on costs both operating costs and Capex stands out again this quarter. Anticipating moderating top line growth, we've been vigilant on the cost side driving operating efficiencies to maintain strong margins and grow earnings and cash flow. Part of that focus includes the streamlined organizational structure we put in place in the latter part of 2009, the implementation of which is reflected in integration and restructuring charge that you see in the Q4 results. We did, however, continue to see declines in discretion types of wireless usage, especially roaming and out of plan minutes. There was a significant drag on overall voice ARPU and which are to a certain extent reflective of the economy.

Roaming in particular continued to be down year-over-year in the 20% range corresponding with the recessionary decline in business travel and increases in unemployment. With our success in generating strong wireless data growth, blended ARPU was limited to a drop of just under 1%. We continue to make significant Smartphone investments during the quarter, yet at the same time we delivered strong wireless margin expansion as a result of also aggressively managing the cost side.

In our cable operations, solid top line growth combined with success in capturing efficiency gains enabled good EBITDA growth and continued margin expansion. In addition to continued cable operating leverage, we're also able to drive down capital intensity which together helped to deliver unlevered free cash flow growth of C$160 million year-over-year at cable operations. I believe we're very well positioned on the cable side with our market leadership and superior broadband network. On the media side, for the first time since almost two years, we saw an acceleration in our broadcast and specialty TV along with our shopping channel revenues.

The real standout though was Citytv with very strong audience delivery metrics that drove impressive top line growth. Not only was media in Q4 able to hold the top line flat year-over-year for the first time since early 2008 but as a result of significant cost reduction work done over the past year, operating leverage was strong and adjusted operating profit was up in a healthy double digit range. Overall for 2009, we delivered on our commitments. We grew subscribers, revenue, EBITDA, and cash flow all at very respectable rates and we continue to invest at a healthy pace for the future.

Net-net, free cash flow for 2009 was up 29% to C$1.9 billion and for the full year, we repurchased 44 million shares for C$1.35 billion and paid out dividends during the year of other C$700 million, so north of C$2 billion of cash returned to shareholders in 2009 reflecting a 16% dividend increase and the execution of the largest share buyback the Company has ever done. We're well positioned with a terrific asset mix and strong market and financial positions. We are and will continue to build on our operating and financial strength by staying focused on execution.

Consistent with this outlook, we announced this morning that the Rogers' Board has approved a healthy 10% increase in our annual dividend to C$1.28 per share and also reauthorized a share buyback program for 2010 of up to C$1.5 billion. This underlines our Board's continued confidence in the strategic position and cash flow generation capabilities of this company. Let me now turn it over to Bill and then we'll take your questions.

Thank you, Nadir. A few quick comments on the financial results of the quarter. Our consolidated revenue growth was a respectable 4% for the quarter. This reflects the solid topline growth of 7% for wireless network revenue and cable operations revenue, partially offset by a decrease in the negative margin wireless equipment revenue and also from year-over-year declines at RBS and retail. Respectable topline growth aside, I think the operating leverage and free cash flow generation are real highlights.

From an EBITDA perspective, adjusted operating profit of C$1.1 billion on a consolidated basis is up a very strong 14% year-over-year and represents 310 basis points of operating profit margin expansion and this does not include any benefit from the reversal of Part II regulatory fees. Up front I want to quickly explain how and where the Part II fees reversal impacts the results for the quarter and the full year. In total, the amounts reversed were C$79 million. Of that, C$61 million related to prior years and C$18 million related to the first three quarters of 2009. In the 12 months or full year results, we reported today, you see that C$61 million is recorded below the adjusted operating profit line and the other C$18 million of the reversal is included in adjusted operating profit. However, in terms of the fourth quarter results, the 14% adjusted operating profit increase excludes the entire C$79 million reversal since it relates to earlier quarters of the year and not to Q4.

You can see this in the release where the full amount of the C$79 million reversal is recorded below the adjusted operating profit line for the fourth quarter. Versus last year, we've obviously now lapped the second half of 2008 when we first introduced the iPhone and also the time frame when the economy began cycling down at an accelerated rate. Equally as important, these results again reflect some very significant progress around cost controls. In fact, we saw margin expansion in all three of our operating businesses. At Wireless, strong wireless data growth as Nadir highlighted, but importantly good cost containment across G&A as well as sales and marketing costs. This despite the fact that we activated roughly as many Smartphones this quarter as we did in the fourth quarter of '08. We grew Wireless, adjusted operating profit by 16% and expanded wireless service margins 390 basis points to 47%.

Cable operations adjusted operating profit grew by 8% and margins expanded by a further 30 basis points to 41% representing the tenth straight quarter of year-over-year margin expansion for cable operations. At Media, revenue was flat, however, we had solid year-over-year growth at Citytv, Sportsnet and The Shopping Channel while growing overall adjusted operating profit by 13% and expanding margins by 150 basis points. Operating leverage and margin expansion at Media reflects not just very strong year-over-year ratings improvements at Citytv but also what seems to be the start of a turn in the ad market as well as significant cost reductions. Our focus on cost efficiencies extended across Capex as well, where you see year-over-year Capex reductions across all three business units. Among other things, this enabled us to pull forward the Capex to accelerate our HSPA Plus launch within our current years budget and guidance and this obviously contributed to strong free cash flow growth.

As you look at unlevered free cash flow growth by unit and on a consolidated basis, both for the year and for the quarter, its strong double digit growth pretty much across-the-board. With interest up only modestly as we kept our leverage within our target of 2 to 2.5 times EBITDA, free cash flow on a consolidated basis for the fourth quarter which is adjusted operating profit less Capex and interest expense was up a very strong C$329 million year-over-year. On a full year basis we grew free cash flow at a very respectable 29% to C$1.9 billion as Nadir has already mentioned so it's actually above the high end of our 2009 guidance range. On a per share basis, free cash flow grew by 32% reflecting the accretive impact of the 43.8 million share buyback we executed in 2009 which reduced our shares outstanding count by about 7%.

A couple of items to note below the operating profit line on the income statement that impacted net income and earnings per share. First, I'll point out a C$90 million change on the foreign exchange line; however, this for the most part is offset by an associated change in the value of derivative instruments. The net of these two currency related shifts which relates to the increased strength of the Canadian dollar in the quarter contributed about C$10 million to the year-over-year increase in net income. Also below the operating line, depreciation and amortization is lower by C$47 million which principally reflects lower amortization of intangible assets. These items together with the growth and adjusted operating profit and lower number of shares outstanding as a result of our share buyback, resulted in adjusted earnings per share of C$0.61 which is more than double than what we reported in Q4 of last year.

Lastly, I'd point out the C$276 million swing related to goodwill impairment we recorded in the fourth quarter of last year and the C$79 million reversal of previously accrued Part II fees that I spoke about a moment ago. Those two items were partially offset by higher restructuring and integration costs this quarter reflecting severances that occurred during the latter part of Q4 associated with streamlining and reorganization of our communications group. During the fourth quarter we bought back 13.4 million RCIB shares for C$430 million under our share buyback program and we also paid out C$177 million in dividends, so we returned over C$600 million in cash to our shareholders in the fourth quarter alone. Also in the quarter we closed a C$1 billion Canadian denominated investment grade debt offering and in turn redeemed our US 400, million 8% notes at a net present value positive 102% redemption price. This served to reduce our average cost of debt and keep us within our targeted leverage range of 2 to 2.5 times debt to EBITDA.

In addition we were opportunistic in purchasing for investment purposes 3.2 million shares of Cogeco Cable and 1.6 million shares of Cogeco Inc. for C$163 million. This increased Rogers ownership investment in Cogeco Cable from 14% to 20% and in Cogeco Inc. from approximately 20% to approximately 30%. Separately in January, we acquired a municipal hydro business called Blink Communications, with revenues of about C$20 million, Blink provides on net data communication services to businesses, the majority of which are within our Rogers Cable footprint so it's a nice tuck in acquisition for our business services division. In terms of our outlook for 2010 as we said in our release this morning, we're targeting continued growth across-the-board in terms of revenue, EBITDA, and free cash flow, while at the same time our overall capital intensity continues to moderate. A little bit of slowing in top line and EBITDA growth at both Wireless and Cable operations but still some strong mid single digit growth rates which are very respectable in our industry and in this ongoing economic slowdown.

With regard to the timing and amounts of cash income taxes during 2010, we are affecting certain legal entity restructurings within the Rogers Group for corporate simplification purposes. While this won't have any impact on how we report externally on a consolidated basis from accounting perspective, several of the entities involved have different tax year-ends and the net effect of this is that we expect to be able to essentially shift out by one year into 2012 a large portion of what we previously assumed our 2011 cash income tax payments would have been. So while we had previously assumed relatively full cash taxation beginning in 2011, we're comfortable at this point saying this won't occur until out into 2012, although as you can see in our guidance today we do expect some modest cash payments to occur in the interim during 2010 and '11.

I'll finish by saying that we continue to be in a very strong financial position. We have investment grade ratings and relatively low leverage at about two times debt to EBITDA. We have C$2.4 billion of liquidity available under our fully committed multi-year bank facility and over C$380 million in cash on the balance sheet and we have no material debt maturing until mid 2011. This strong financial position combined with our strategic position and cash flow generation enables the continued growth in returns of capital to shareholders including the 10% dividend increase in the renewed share buyback program we're announcing this morning. With that I'll pass it back to Bruce and the operator so we can take your questions.

Thank you, Bill and Operator, we'll be ready to take questions from the participants in a couple of seconds. Quickly, before we begin we're going to request as we do on each of these calls that those participants that ask questions be as courteous as possible to the other participants and limit the questions to one topic and one part 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 with that, Operator, would you quickly explain how you'd like to organize the Q&A polling and then we'll dive in.

Thank you. (Operator Instructions) Your first question today comes from Mahar Yaghi of Desjardins Securities

Yes, thank you for taking my questions. I just wanted to ask you a quick question on the wireless side. I notice that you signed up about 400,000 Smartphones in the quarter. How much of that increased your cost of equipment sales and when you're looking forward into 2010, how do you see the market reacting to the new wireless players on the market? Are you seeing them grabbing more than expected market share in the Smartphone market or more into the low end priced subs?

Good morning, it's Rob Bruce. Thanks for your question. In terms of speculating about what the new entrants are going to do, I think at this point it's fairly hard. It's early days and I think the Wind guys have launched now and are focused mainly on flat rate, slightly higher value customers, although they do have Smartphone offerings. Others have commented that they too will have Smartphone offerings. It's unclear to me whether Public will but again this is all speculation. We'll really have to wait and see. Our investment in Smartphones as Nadir touched on on the call is that we're very happy with.

The Smartphone investment is driving almost half of the growth we're seeing in wireless data, although as you know, the investment in subsidy up front continues to be high and has been a source of discussion in the past. We are seeing those ARPU's flowing through almost double what we see on normal phones so I think C$100 for a Smartphone customer versus roughly C$50 for a non-smartphone customer and as well, we're seeing very significantly lower churn so the economics of Smartphones really work for us and the investment that we're making in subsidy seems to be paying off and I think the proof of that is in the great data growth that we're seeing, so--

This is Nadir, maybe I'll add to what Rob said. I think in terms of understanding the P&L impacts, important to note that we had 400,000 as I mentioned this quarter. Last quarter I believe that same number was about 370,000 so we really were focused on the high end of the market in Q4 and that's been our strategy and I thought it was very important particularly for the team given the competitive environment that we stay focused on the customers that we value the most.

Can I just a follow-up on this exact question, more on the pricing side, are you seeing pricing impact from the new competition on your customers and the willingness of the customers to stick with Rogers instead of going to another player?

It's very early days in the life of new entrants we're not seeing kind of material changes in the landscape.

Okay, thank you.

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

Yes, thanks very much. I had a couple of questions on capital expenditure. First, in your guidance could you give us a sense of how much Capex is in there at the corporate line and also what the EBITDA loss you're expecting at corporate would be roughly speaking, and then just broadly on Capex, you did a lot in 2009 with the acceleration of the HSPA Plus buildout. You're guiding for flat to up spending for 2010. Could you talk about what you're hoping to do in 2010 and whether there's some chance you could even bring Capex below 2009 levels? Thanks.

Glenn, it's Nadir. I'll let Bill answer some of the specific questions on numbers but I did think that you were going to start with congrats on actually getting capital intensity down as a preface to your comments but anyway, we'll look for it some other time. In terms of the plans for 2010, on the wireless side obviously we're looking to continue to buildout for capacity both voice and data, increasingly data. We have HSPA rolled out as you know at 21 and 7.2. The 7.2 will extend to the full footprint and we'll continue to buildout the HSPA on 21.

As we go we aren't putting a number out there but we will, we have that obviously included. Beyond that we're not looking at if the questions around LTE. That's not something we see in the near term so that's not factored in and then on the cable side, same sort of thing, capacity and RGU growth related expenditures, the two strategic initiatives would be the continuation of DOCSIS 3.0 and some investment in more switching, but beyond that I think a fairly straightforward year in terms of Capex. On the corporate side, the one initiative that we continue to invest in is as I think people know, we've been looking at changing out our billing and front end systems that feed into billing. That's factored into 2010 and is a significant part of our investment.

Okay, that is good news on the Capex. Just a quick follow-up on tax. I just wanted to clarify. Is the low cash tax rate for 2011, does that simply reflect a deferral of cash tax into 2012 so that your effective cash tax rate in 2012 would be higher than the statutory rate or do you expect 2012 to have a cash tax rate no higher than the statutory rate?

Glenn, it's Bill. We'll be fully taxable in '12 which actually has a lower statutory rate if all of this legislation goes through then in '11 and it's just we're deferring the taxable income until that year. And you can do that by the use of losses and the use of year-ends, et cetera, et cetera. So we will be taking advantage of the lower rate that we get in 12.

And your next question comes from Bob Beck of CIBC. Please go ahead.

Thanks good morning. I want to start by saying thanks for keeping your prepared comments tight. Appreciate getting the time to get the questions in on the call. My question is on media if Tony is there. Obviously a nice balance in the quarter and ad market seems to be turning. Can you talk about the details, television obviously a key but radio looks to be moderating but perhaps a bit light in the bounce back so any commentary on the overall market and radio in particular would be helpful.

Sure, Bob. Radio is coming back. It hasn't come back as strongly as television but as Nadir pointed out in his comments, there's been a modest rebound in demand but it's been pretty modest. The real growth in revenue in over-the-air television is a result of frankly exceptional growth we've had in our primetime ratings. Across the country it's up by about 57% and in Toronto, which is our most important market, obviously they're up about 142%. With respect to radio, we are closing the gap quickly, so I would say that television has come back quickly, more quickly, but it's followed by radio.

That's helpful and your guidance is quite solid for 2010. Can you talk a bit about, I guess the first quarter is how much should we see from some of the Olympics coverage? You obviously have a great deal of exposure in the market. Any thoughts on how that might bump Q1?

Well remember we're part of the Olympic Consortium so both our revenues and expenses are-- which will be generated over the 17 days are included in that consortium so the results will flow from that consortium. But listen, I've been around for a long time and if you're not the Olympic broadcaster, you don't do much revenue, so any foregone revenue as a result of contributing to the consortium is more than made up for the fact that there's lessened demand if you aren't an Olympic broadcaster.

That's helpful, thanks very much.

Bob, I think the other probable impact on our business from the Olympics is it's clearly one of the other key players in the Olympics is Bell and no doubt you've seen the advertising and the requisite push that's going on in their stores so we expect it to be a big quarter for Bell as well particularly on the Wireless side.

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

Thank you, good morning. I think you touched on Nadir on the iPhone having a stronger quarter than a year ago in terms of adds. Perhaps we could just talk through that a little bit more. You think there's a real association of Rogers with the iPhone so even though other people now have it that people will still when they think of iPhone they think of you, and any comment you could make on the iPad as well would be appreciated, thanks.

Simon, it's Rob. Listen, absolutely. We think that our reputation for the iPhone both in terms of the savvy of selling it in stores and the comments and compliments we get in terms of how we service the device I think have helped us have another terrific quarter on iPhone. In terms of the iPad obviously it's early days and like most things around Apple we have NDAs in place that prevent us from commenting on the iPad, but just as a consumer obviously a really exciting device and we'll look forward to hearing more about that in the future.

Simon, the only thing I'd add and it is very early so I wouldn't want to read too much into it but we're certainly very encouraged and pleased our post paid churn is down again at 1.08 even with all of the stuff going on with more intense competition and the economy.

Thanks.

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

Yes, thanks very much. Given there seems to be a lot of fears out there about not what you did in Q4 but what may be coming down the pipe in terms of wireless competition and market share. Given that I'm wondering if you can break your subs into some buckets for us to try to give people some comfort. If there's anything you can give us in terms of percentage of subs that are in bundled contracts with video or other products percentage of subs on three year contracts and I think most importantly for people these days given the Bell Telus, HSPA, and their power in the enterprise market some context on what your market share might look like among large business customers or government customers and if you see any risk in that over the next year or so from not the new entrant which is I think are irrelevant but Bell and Telus.

Vince, the challenge with talking about I'm getting a bit of an echo on the line, the challenge with giving you the bundled customers is they aren't really that meaningful because obviously we only bundle in the cable base so if I gave you the combinations of one, two, and three, they actually aren't that helpful. In terms of percentage of our customers in contract, most of our customers are post paid customers are in three year contracts. In quarter about 90% of the subscribers come in on contract and about 85% of our base are on contracts, again most of those being three year contracts so some significant goodness there, so you talked about three things. I talked about contracts, I responded on the bundles. What was the third one, Vince?

Business.

Business customers. Vince, our share of business customers, we've always acknowledged that Bell and Telus have been stronger in this space. We've been gaining share. Our focus has been on the small and medium business and we're working hard to leverage across both cable and wireless but continue to grow that share. We've seen some success in both wireless and cable and we hope to build on that going forward. Again, we would be a smaller player on the government and large account space compared to Bell and Telus.

Vince, obviously you were talking both about Bell and Telus in terms of them having HSPA but also new players. I think sometimes it's important, I should state what we take for granted but others tend to not remember and that is, this is particularly important vis-a-vis new players is it takes a long time and a huge investment to get networks to the quality that we have so we are very confident in terms of our quality of the networks both on the wireless side specific to your question on cable.

We would like our device line up, I think it's unparalleled. Our distribution has been built over 20 some odd years, not something one can replicate right away, not for many years. Our brand that resonates with customers early on we talked about iPhones being associated with Rogers, to me we're known as a company that always has the latest to bring to the market and to your point, we have multiple products to bundle and package and bring to the market so I think those are capabilities and strengths that obviously we'll look to bring to the market every single day and yes there will be new competition but we're confident in terms of what we bring to the table.

The last point maybe to add on business customers, Vince, is that the amount of effort to scale up and serve business customers, particularly the medium to large business customers we think it's an area that will probably be less affected by the actions of new entrants.

Your next question comes from Ric Prentiss of Raymond James.

Thanks, good morning. Appreciate all the time you spent on the Q&A side. Sell-side analysts are like snowboard crossers, we like to get our answers in there. Where I'd like to probe my question is on the 2010 wireless revenue guidance. As you think about the increase in data subs, data ARPU, Rob, I think you mentioned about C$100 on the Smartphone versus C$50. As you look at your guidance on 2010, what are your thoughts as far as the Smartphone sales, share of gross adds and how the ARPU plays out as we look in 2010?

Listen, Ric, over time as we dig deeper into the Smartphone base, I think it should be a logical conclusion to think that that ARPU is probably going to go down gradually as it has as we penetrated other layers with other kinds of devices so first and foremost, our mix right now of our total devices has kind of hovered in the 43 to 48, 49 range.

I think that that has the potential to kind of creep up at least 10 basis points in terms of the mix and it could be more than that depending on the availability and pricing of devices so I think the devices Android and other things coming along that are less expensive, I think we will see a penetration of Smartphone that goes even deeper into the base of customers out there who are looking for cell phones which I think bodes well for the business and will help us continue to grow our revenue and as always as Nadir has highlighted a couple of times, we're determined to keep on the edge of those innovative devices and deliver them for our customers and build their revenue along with it.

And on share of gross adds?

In terms of gross adds, growing that share of gross adds, the share of Smartphones is a percentage of gross adds, Ric.

Okay. As far as your guidance on high versus low end, what would it take to hit the high end? What would it take to hit the low end and just kind of as you look at your initial guidance how do you feel about how you've laid out from a conservative achievable kind of sense?

We're committed to hitting our guidance every year so the guidance that we've put out there, Ric, we're comfortable that we can hit with our assumptions with respect to Smartphones.

Great, thanks.

Your next question comes from Jeff Fan of Scotia Capital. Please go ahead

Thanks very much and good morning. I want to ask a question regarding the cyclical factors that's impacting the wireless ARPU. I think Nadir, you mentioned earlier in your comments there was a significant drag in roaming ARPU still down about 20%. A couple related questions, one perhaps you can walk us through how that has trended over the last several quarters and when we saw the first dip over the past year as the recession started and then also, where there's any factors, where the cyclical factors are being included in how you look at 2010 guidance and also just to look at the roaming ARPU impact just to distinguish between whether roaming ARPU is impacted by the number of roamers or whether people are changing their behavior and spending less as they roam?

Okay,Jeff, it's Rob Bruce.

Hi, Rob.

How are you today?

Good.

The key driver of course on the positive is that the number as Nadir already alluded to, strong growth probably not cyclical, definitely not cyclical on data but voice ARPU is where we see the effects of the cyclical impacts of the recessionary pressures. Our voice ARPU is off about C$5.83 to be exact. Roaming has been a pretty significant contributor -- a couple of dollars of that, about say C$1.25 of that is from our customers just doing a lot less roaming and about C$0.75 of that is from customers around the world also feeling the impacts of recessionary pressure not roaming into Rogers. The other impacts that we've seen are again impacts that we think are recessionary driven that affect MSF Air, and now with some of the changes we made to SAF kind of rolled SAF into that as well and that's about C$3.50 worth of impact in terms of that voice ARPU and lastly a much more minor impact which is LD.

Now, you asked how we were thinking about it as we go forward in 2010. I think we're cautiously optimistic that we will gradually emerge from some of the recessionary pressure we're seeing but I think it's fair to say that as we emerge almost simultaneously we'll see a continuous acceleration in new competition which will likely offset some of the positives of the emergence from recession, so that's how I would sort of tie it together, Jeff.

Your next question comes from Randal Rudniski of Credit Suisse. Please go ahead.

Thanks. A question on wireless retention activity. The retention expense obviously down in the quarter on a year-over-year basis. The question pertains to the outlook for that, that element, so I was hoping you could provide us with a bit of an outlook as to how you'll approach retention activity in 2010 and what that might mean for retention expense, thank you.

Hi, Randal it's Rob Bruce. Randal, as you know, churn has been one of the hallmarks of our success. It's an area we focus and Nadir pointed out we were at 1.08 this year but down another four basis points in an industry leading position. We feel strongly that continuing to do our best to mitigate churn and do the best job at retention is the best investment we can make so we'll continue to be aggressive in that space.

We're happy with where we are. We managed to spend slightly less on retention in Q4. I think we were off about C$23 million on a year-over-year basis or 13% but we have hovered in the range of nine to about 12% of revenue for retention and we expect that going forward will continue to be roughly in that range but of course, given the leverage that retention brings us we'll do what we think is appropriate to drive the business in a profitable fashion.

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

Yes, thanks very much. A question on Rogers business solution if I may, for Edward or Nadir, not sure if Edward is on the call, but if we look at both the organic as well as the acquisition environment, in terms of organics, again you saw significant revenue and EBITDA declines this quarter because you're weaning off from some of the unprofitable businesses you acquired in 2005. Is that done because it's been three and a half years and as far as acquisitions are concerned, can you give us some sort of idea of the rationale behind Blink and the valuation because I've had terms as high as a C$100 million plus C$10 million of EBITDA, and also finally, I think Nadir answered the question regarding Allstream quite clearly on the Q3 call but there's a lot of follow-up questions regarding potential interest in Allstream. I'm wondering if you wouldn't mind revisiting that topic?

Yes, Dvai, it's Nadir. Just on the RBS ongoing business, there's no question that we had to recall about C$0.5 billion of legacy business or business that we picked up from CallNet. A reasonable amount of that I would consider legacy as opposed to the business we want to be in which is much more on the IP side, so that base we're working through frankly one of the things we are trying to even within that basis keep the good stuff, the relatively higher margin so don't think of it as a something that we want to exit from in terms of seeing that disappear.

At the same time as we're trying to mitigate the reductions on the legacy side, we are obviously investing to grow the new IP. The inflection point takes a bit as you know because you start with half a billion and a very small number on the new, so that's work in progress. More to come and you'll see more of the upside in 2010. On the acquisition side with Blink, small tuck in acquisition fits our strategy of being on that IP based small medium, so those are the three criteria that the three criteria reminded everybody when questions came up on Allstream which would obviously not be consistent with our criteria, so hopefully that puts Blink in context. Not something I want to get into in terms of specifics of valuation but very much in line I'd say with some of the other deals on the call it the hydro transactions that you probably are familiar with.

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

Yes, thanks. Could you talk a little bit about what your expectations are for digital transition in 2011 and what I'm thinking of is how if you have anymore thoughts on how it will impact the cable group if you still expect the analog spectrum to be shut off in August 2011 and any insight you have regarding spectrum auctions? Have you heard any messaging (inaudible) from industry Canada on timing of the actions? Thank you.

Yes, it's Nadir. We've got Ken Engelhart who heads up our regulatory group. Ken, if you want to address the question?

Yes, we expect a proceeding from Industry Canada fairly soon on where people will be allowed to comment on the timing of the auction so look forward to that I think in the next few weeks. In terms of the television cutover date, no, we don't expect any change there although some television broadcasters say they will not be ready and we expect the CRTC to give them a bit of latitude to complete the transition.

Ladies and Gentlemen, we have time for two more questions today. Your next question comes from Phillip Huang, please go ahead.

Good morning, thanks very much. Just going back to wireless, in Q3 last year I think you guys introduced two big bucket minute plans, the city (inaudible) plan I think came in at C$40 and C$60 for 2000 and 4000 minutes and recently there was a C$45 prepaid version offering 1000 minutes. Now my initial sense is that I don't think you guys have pushed these plans very hard but nonetheless they're in the market to address new entrants pricing plans out there but how significant are these types of plans contributing to the erosion of voice ARPU through repricing and do you see your voice ARPU decline maintained at a steady pace in 2010 or further acceleration going forward? Thanks.

Hi, Phillip, it's Rob. Listen, thank you for your question. You're right. We do have C$40 , 2,000 C$60 , 4,000 minutes and again it's important to remember it's in a very restricted footprint and unlike new entrants it's all you need, not all you can eat so it's a capped plan. These plans are very modest in terms of the impact on our gross loads in the quarter. In fact they would be roughly two to 3% of our gross loads for the quarter so again very modest. If you took the entire impact of the things that we've done on FIDO and the associated impact on voice ARPU, it would be in the range of around C$0.50 in terms of voice ARPU over

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

Thanks very much. Looking at the 2010 Wireless guidance on EBITDA, I think you're looking at was it 2 to 6% EBITDA growth, fairly wide range and I'm wondering, there seems to be a lot of factors that are going on in 2010. You've got the economy which Rob you already discussed, potential pricing war or whatever happens with Bell and Telus on the HSPA network, new entrants launching and on cost cutting, and I'm curious just with the wide range of EBITDA guidance, what would it take or what are you assuming at the lower and the high end there? In particular, what are you assuming as far as timing and intensity of some of the new wireless entrants and what has been your experience so far with the Bell Telus HSPA competition?

So first and foremost, we're not expecting a pricing war between Bell Telus and Rogers. Listen, our focus is and I'll speak for Rogers, highest quality network, best distribution, really strong brand. Our focus is not going to be about driving price down on a super high quality brand like Rogers. The timing of new entrants obviously you know that Winds in market has talked about expanding those markets over the course of the year. It looks like the other new entrants are more likely to arrive in the latter part of Q2 or early parts of Q3.

That's kind of what's built into our focus. Our focus is also that we're going to continue to do a lot of the work that we've done round cost control. We'll continue to feel the benefit of the restructuring that we put in place but we'll have an impact in the range of C$100 million plus. We've talked about the work we've done to outsource IT. We renegotiated a lot of contracts, continued to grind out our operating costs, reducing the reasons that our customers are calling us and there by reducing calls to our call centers and doing a lot of process reengineering work. We think all of those things will work hard for us to keep us strong on the EBITDA front.

Mr. Mann, this concludes our question and answer session for today. Please continue.

Well thanks very much Operator. Jonathan, I'm not sure we answered 100% of your question. I'd be happy to take it off line afterwards but maybe I'll add quickly, we're looking at a range of maybe 100 to C$120 million on adjusted operating profit at wireless on a base of C$6.5 billion. If you were sitting at this side of the table, I think you'd feel like that was a real wide range to work with but nonetheless I want to thank everybody for their participation. This morning we appreciate everyone's interest and your support.

If you have questions that weren't answered on the call if you can please give myself or my colleagues, [Dan Coombs], a call both of our contact information is on today's release. If there's anyone that was stuck in the queue that didn't get a chance to ask questions, we apologize for that but please contact us and we'll get your questions answered, so this concludes today's call. Thank you very much.

Ladies and Gentlemen, this concludes the conference call for today. Thank you for your participation and you may now disconnect your lines.