Rogers Communications Inc (RCI) 2016 Q3 法說會逐字稿

Good morning, ladies and gentlemen, thank you for standing by. Welcome to the Rogers Communications third-quarter 2016 results analyst call.

(Operator Instructions)

I would like to remind everyone that this conference call is being recorded on Monday, October 17, 2016 at 9 AM Eastern time. I will now turn the conference over to Ms. Amy Schwalm with the Rogers Communications management team. Please go ahead.

Good morning, everyone, and thanks for joining us. I'm here with our Chairman and Interim President and Chief Executive Officer, Alan Horn; and our Chief Financial Officer, Tony Staffieri.

As always, today's discussion will include estimates and other forward-looking information from which our actual results could differ. Please review the cautionary language in today's report and in our 2015 annual report regarding the various factors, assumptions and risks that can cause our actual results to differ.

With that, let me turn over the call over to Alan to begin.

Thanks, Amy, and good morning, everyone. I will be brief and then pass it on to Tony to speak to the third-quarter results. Earlier this morning, we announced that President and Chief Executive Officer, Guy Laurence, has stepped down. We also announced that Joe Natale is to be appointed President and CEO as soon as is he is in a position to join Rogers. We can't be more specific on timing at present.

Most of you know Joe and we're delighted that we will have a highly respected Canadian Telecom executive to lead Rogers and to contribute to building its future over the long term. In the interim, I will act as President and CEO. First of all, on behalf of the Board, I want to thank Guy for his leadership and significant contributions that he has made to Rogers Communications.

Today, we also announced our third-quarter results. It clearly demonstrates that Rogers continues to perform well in the marketplace and delivered strong operating results in the third quarter. We have a great management team and these results are a testament to our team's ability to deliver and to the contributions of over 26,000 employees. On behalf of the Board, we are confident that our employees and our management team will continue to execute the plan and build on our momentum in the coming quarters.

So with that, I will turn it over to Tony to get into the results.

Thank you, Alan, and good morning, everyone. Overall, we are pleased with our performance this quarter. We have consistently said that our fundamental objective has been about returning Rogers to growth, and you can see we are clearly moving in the right direction. The operating results reflect progress that we have not seen from the Company in a number of years. To be clear, we will always have work to do but we have achieved some notable milestones.

Our overall revenue growth continues to show solid momentum, posting services revenue growth of 5%. We are improving our ability to translate that into increasing profits with AOP growth of 3% in the quarter. This will continue to be an important focus for us. Our performance is underpinned by strong subscriber metrics in both cable and wireless. We executed exceedingly well across the business as our operating teams are hitting their stride.

We said we would really accelerate growth by focusing on wireless first and our results this quarter reflect significant traction in our largest segment. We delivered our strongest year-on-year revenue and subscriber growth since 2010. Service revenue growth accelerated to 6% in the quarter, reflecting a combination of higher subscribers and meaningful ARPA and ARPU growth as well. Blended ARPU increased 2% as we drive growth in our premium value brands.

Postpaid net adds were up almost 50%. We've increased net adds year on year for five straight quarters on strong gross additions and consistent improvement in churn. Gross adds of 432,000 in the quarter were the highest ever for Rogers. As well, this is our lowest Q3 churn since 2013, coming in at 1.26%, and the fourth consecutive quarter of year-on-year improvement.

Turning to cable, our total service unit net adds were positive for the first time in 2.5 years, so a key achievement for us as we focus on moving this business back to growth. Internet revenue grew 11%, a fifth quarter in a row of double-digit growth in internet net adds were the highest we have seen in five years. It's clear we have a competitive advantage with Rogers Ignite, and that's not only helping us win internet customers, it's helping our cable business win back households overall.

42% of our residential internet customers are now on plans of 100 megabits per second and higher. And our fastest widely available speed is 250 megabits per second across our entire footprint, well beyond what our competitor can make widely available today. More significantly, about 85% of our footprint is eligible for Ignite gigabit internet. We're on track to deliver that service to our entire cable footprint by the end of this year.

Turning to customer experience, we continue to make good progress here too, especially in self-serve. We have increased self-serve transactions on the Rogers brand by 65% year on year. Last year, Rogers was the first in the world to launch customer care through Facebook Messenger.

Last month we announced another global first with Twitter, giving customers another self-serve option from which to choose. The new Twitter service gives customers direct access to a secure continuous chat with a customer care rep so they can keep track of the conversation and respond to it at their convenience.

Earlier this month we announced another innovation and we think it's going to resonate as well with the customer as Roam Like Home did. We launched a tool that will take the mystery out of understanding wireless data usage, giving families full control over the data use in real-time. It has only been two weeks and 85,000 customers have already activated the new tool. Our strategy of putting the customer first is key to our long-term financial growth.

Turning to media, we delivered double-digit growth in both revenue and AOP. The driver once again is our strong portfolio of sports assets. All season long, the Blue Jays have had more fans in the seats and more viewers watching. It has been great to see the team make another exciting playoff run.

Hockey is not usually a factor in the third quarter, but it was this year thanks to the World Cup of Hockey. The tournament attracted more than 15 million Canadian viewers and helped generate excitement for the NHL season which is already off to a great start.

With our baseball and hockey leadership, Sportsnet continued to be Canada's number one sports media brand for the second year in a row and we're pleased to see the gap is widening. This year, Sportsnet has had 112 broadcasts over the 1 million viewer mark compared to the next competitor at only 12. An average viewership is [4%] higher on Sportsnet than the next competitor. So clearly, a compelling product for advertisers and our subscription business.

Across our media business we continue to look for areas of growth while eliminating spend an areas that no longer make sense. Last month we announced the wind-down of shomi, and a new strategy for our magazine business that will see us take a major step forward in the shift to digital.

I also wanted to briefly update you on our enterprise business. In July we introduced another leapfrog technology, Rogers Unison, to small businesses. While it's early days, I'm pleased to report that sales have exceeded expectations. Our customers are saving at least 40% of what they would spend on a traditional land line.

Just last week we launched Unison for medium and large businesses. With this service, we're targeting the estimated 2 billion-plus telephony business market in Canada. Unison is the latest in a series of leapfrog technologies we will offer to grow our share in the enterprise space.

Turning now to some additional details in our financial results. Consolidated revenue increased 3%, driven by strong wireless service revenue and media growth of 6% and 13% respectively. In terms of AOP, wireless AOP grew 1% as we added 37,000 more net additions year on year to our postpaid base. We will accept short-term impacts to margin when we're successfully attracting subscribers at highly accretive values, which is what you see in our Q3 results. We expect the benefits to ARPA, ARPU and AOP to play out in the coming quarters.

In our cable business, revenue was down 1% on the decline in TV revenue as we responded to various promotions in a highly competitive back-to-school environment. Cable AOP growth of 4% in the third quarter benefited from the shift towards higher-margin internet revenue, as well as from lower service and programming costs, partially due to a vendor credit received this quarter.

Moving to overall performance below AOP, our net income was largely impacted by the loss related to the wind-down of our shomi joint venture. In comparison of the same quarter last year, you will recall we recorded investment income of almost CAD60 million, mainly related to the Mobilicity transaction.

Our leverage ratio improved again this quarter to 3 compared to 3.1 in Q2. We continue to target further improvement toward our target range of 2.5 or below.

CapEx was CAD549 million in the quarter. We expect full-year capital spending to be lower than last year. We generated operating cash flow of CAD1.2 billion, a free cash flow of CAD598 million in the quarter. That cash flow supported the payment of CAD247 million of dividends.

We maintain our solid investment-grade credit ratings at attractive rates on our outstanding debt. Our hedging strategy provides predictability over the next year with substantially all of our expected US dollar expenditures for 2017 hedged at an average of CAD1.33 per US dollar.

We remain confident in our ability to achieve our financial guidance for 2016. We're on track to grow revenue and AOP by 1% to 3%. We expect CapEx to be in the range of CAD2.3 billion to CAD2.4 billion and free cash growth of 1% to 3%.

In summary, we delivered a quarter of solid performance and meaningful improvements that sets us up for continued momentum going forward. With that, we will open the call to any questions on our third-quarter results.

(Operator Instructions)

Drew McReynolds, RBC.

Thanks very much. Good morning. Two questions for me. Maybe for you Alan, to ask the obvious. Is there anything in addition you could provide us with respect to the timing of the CEO transition? And could you speak to any changing course strategically or priorities under Rogers 3.0 that would potentially change in the near term until Joe arrives?

Thanks, Drew. On the first one, I think we, as I said, we can't be more specific on timing at present. There are obviously some complications resulting from Joe's firewalls. Those are things that we are working through, we're working hard to get in as soon as possible.

On the second part, which is the more important part, is there will be no change in direction. I met with DLT team this morning along with Edward Rogers and the message was clear. The Board has complete confidence in the DLT, the direction that's been set and we will continue to focus on the customer first, the customer experience aspects of 3.0. So from that perspective, it is business as usual. Obviously we have confidence that the team is in place and they can keep on delivering.

Thanks, Alan. Tony, just for you operationally. With respect to the postpaid net additions, obviously another good quarter of high wireless activity. Can you speak to some of the key drivers of gross additions? And can you provide us any granularity on the contribution that you had in the quarter from Unison and wireless home phone? Thank you.

Okay, thanks, Drew. Let me start with the postpaid market. Generally, I think we continue to see a healthy market. You may recall from Q2 that we saw the overall market increase beyond what we would've seen in previous levels. We'll have to see what everybody reports, but our sense is that we probably see a continuation of that overall heightened market size. So with respect to that, we are pleased with what we think is the relative share that we have.

It's been a competitive quarter from the perspective certainly on handset pricing. So some of the attractive offers we think is feeling some of that growth. Other factors as well, but we think that is an important one.

I think overall we have gotten a lot better in terms of our tactical promotional activity in wireless, and as well in our execution at the channel level. So all of that came together well in the third quarter and some of the big drivers for the postpaid net performance that you see.

On your question of Unison, it's still early days. I think it should clarify a couple things, to the extent that it comes on board without, and completely substitutes the land line. Those results would be -- we intend to include them in our wireless numbers. But the numbers are extremely small, as I said in my comments, since we launched the product. So it didn't have any material impact on our wireless, either postpaid, nets or revenues.

Thank you.

Simon Flannery, Morgan Stanley.

Great, thank you very much. Tony, I note that you have made good progress on the leverage side of the equation. Can you remind us again of how you're thinking about dividend policy and also perhaps in the context of the CEO change? You are still well above the top end of the range, but if you get down to the high CAD2s early next year, does that put you in a position to perhaps revisit dividend growth? And then if you can comment briefly on anything on iPhone 7 impact in the quarter, that will be great. Thank you.

Thanks for the question, Simon. On dividend, and my messaging here is going to be consistent with what you've heard in the past. We are focused on growing the business and growing top line and translating that to cash flow growth. We like the momentum we're seeing but it's still early days.

We will continue to focus on using the excess cash to pay down debt and improve our leverage as we work our way towards 2.5 times. And so I would say it's early days. We're going through the process now of finalizing our plans for 2017. As we approach the end of the year, we will be reviewing that, as you'd expect, with the Board. So, still early days but long-term, no change in direction in how we're thinking about it.

Great, thanks. And on the iPhone 7?

On the iPhone 7 it was a good quarter. I think it is doing well. I think it is on par with what we would have seen in terms of last year's volumes, not necessarily with the next phase of the device. So that piece of it is fine. I think what you saw in the third quarter is the competitive intensity in pricing around the iPhone 6 and 6s was high. What we saw is a disproportionate amount of volumes going to those models instead of the iPhone 7.

Okay, thank you.

Aravinda Galappatthige, Canaccord Genuity.

Good morning, thanks for taking my question. If I may start with a question on the transition. Can you talk to the reasoning behind the transition at this point? Clearly a strong quarter. A lot of initiatives that have been put in place appeared to be yielding results at this point. In that backdrop, I just wanted to understand the timing here. Was that to do with the contract of Guy Laurence?

To give a perspective, we're looking at some of the context of Joe Natale, who I think is a unique individual in terms of the Canadian telecom landscape. And there's an opportunity with Joe at this time. Timing is never perfect on these things in terms of various things lining up. But we did feel it was important that our organization and employees know what the long-term CEO plan is. That is what the move -- the timing on this -- it was a confluence of those two items.

Great, thank you. A quick operational question for Tony. Clearly, from a market perspective, it does appear that we're heading towards a higher COA phase, regardless of the double cohort. Can you talk to that and how that can affect margins down the road? Or do you feel like this trend that you're seeing in ARPU would offset that on a go-forward basis?

Aravinda, I think it's fair to say that our COA is up. I would say what you've seen generally in the market is a pivoting of promotional activity towards handset subsidies as opposed to MSF-type discounts. That has naturally increased COA.

I think you should take some comfort in that on the flip side, it is driving strong ARPU in, as an example. And so what we see is a rally good mix of premium brands. This quarter in particular, we're pleased with the split that we saw between the Rogers brand and the other ones. So while it is a higher cost, it is driving higher returns as well for us.

Great, thank you. I'll pass the line.

Jeff Fan, Scotiabank.

Thanks, good morning. This is a question for Alan. I think over the years one debated issue is professional management, whether there is no right answer. Wondering with this change of CEO, is there a change in how the Board or how you think about that for Rogers? And then I have a follow-up on the operations.

No, Jeff. I think the view of the Board and controlling shareholder being that we should have the best management possible at RCI and that continues to be the case. RCI, being a controlled Company, we are looking to the management to take a long-term view in terms of generating long-term growth for the Company. I think that's what we saw in Joe in terms of his track record. I think this is absolutely consistent with the view of the Board and the controlling shareholder, that we should have the absolutely best management possible.

Great. And on the operations, there's a few things that -- a couple of things in particular that the Company was pushing hard on. One is the gigabit internet services. Wondering if you can tell us a little bit about whether things are on track and whether you are still hoping to hit the target going into 2017 in terms of your footprint and the strategy and push along that front. And then secondly, on the IP video service, if you can give us a little bit of an update there in terms of the introduction later this year or early next year.

Sure, thanks, Jeff, I'll take that one. A couple of things. On gigabit internet, that is proceeding on track. We intend -- we have said we were going to have that done and cover our entire footprint with gigabit internet by end of the year. And we're track for that. As of today, we are 85% complete in terms of that coverage. So we have good coverage of it today and things are moving well there.

As I talked about in my opening comments, the demand for the higher speeds is certainly there. 42% of our base is sitting at 100 megabit speeds or higher. Obviously you see a disproportionate amount of new additions coming in at 100 or 250 today.

So I think our focus on internet and our competitive advantage there continues to prove well for us. And you saw that in the third quarter and we think that continues to play out. As we augment our cable offering with internet TV, then that will be an added bonus. Right now, we continue to be focused on getting the product ready.

As you have heard previously, when the product is ready, we will launch and we won't do it before we think it is ready. So we are focused on getting that ready. No change on that.

Great, thank you.

Maher Yaghi, Desjardins Securities.

Thank you for taking my question. In the Telus information circular it's mentioned that there is a two-year non-compete restriction after termination. Can you confirm that this is what applies in this case or you see it differently?

The second question I have is on the cable side. You have a pretty good result in terms of EBITDA growth. However, you mentioned in the MD&A that some of the cost decline was due to vendor credits received in the quarter. Can you quantify that, please?

On the first one, I think I can. I should comment on Telus's information circular. We're working hard on the issue of the timing for Joe to join Rogers. I think that is what we're focused on.

Second?

On the cable side, the good improvement in AOP year on year, you saw that growth of 4%. As I noted, there was a one-time vendor credit that we received. If you were to think about -- generally on the revenue line, cable has been about a break-even business. And as the shift moves more to internet and internet making a bigger portion of that, then you see that margin flow through.

So I think if you were to normalize our third-quarter results on cable and what you might expect to see going forward, I think you ought to expect AOP growth in cable normalized in the 1% to 2% range, compared to the 4% that you saw there.

So when I look at your outlook for 2016, if we look at the fourth quarter and assume a more normalized cost reduction due to the switch and the mix, you are still seeing the guidance of 1% to 3% as doable?

We do, Maher. I think if you were to look at -- I don't want to get ahead of ourselves and talk too much about the fourth quarter, but I think as you look through each of the business segments, the momentum is there. We continue to see wireless performing well.

As I said, some of the net additions that we saw in Q3 will translate to continued performance at both the revenue and ARPU, ARPA lines into Q4. Then as you move to cable, I just talked about that. Of course, in media, we are entering what looks to be a good start of the NHL, but we also have the baseball season that continues to do well.

And then finally, on business, we are starting to see traction there. So I think overall what you're seeing is a continuation. And I would expect to see that continuation of momentum into the fourth quarter. So with that, as I said we are reiterating that we are on track to meet our guidance targets that we set out earlier this year.

Okay, thank you.

Phillip Huang, Barclays Capital.

Hi, thanks, good morning. First question for Alan, just a question regarding the transition period until Joe officially joins Rogers. Given the team that Guy has put in place over the last few years, I was wondering, to the extent that you can comment, any process that you guys might have put in place in order to mitigate any potential increase in execution risk during this transition phase? I have a follow-up for Tony on the operations side as well.

As I said mentioned, our view is setting up a great management team. The team has been delivering. I met with them this morning and have got the commitment that the team is focused and they'll have their teams focused on delivering the results for Q4 and beyond, if necessary, in terms of the transition. So that is the focus. These guys are professionals, as to the point before and their goal is to deliver results for shareholders.

Great.

Hope you had an operational question.

Yes, and on the operations side. Was wondering, because, as you mentioned, you guys are focused on building some more self-serve initiatives in order to help lower turnover time and also to lower costs as well as a benefit of that. I was wondering, to what extent are the costs this quarter related to those initiatives as opposed to just the seasonal increase in COA and COR?

Let me see if I understand your question in both -- when you look at our focus on wireless and cable, as you look at those margins, those are inclusive of our customer service costs. So with the self-serve options increasing, we see a decline in call center volumes which is probably single-based driver of costs. So in the quarter, the calls in to the call center were down almost 10%, came in actually 9%. So we continue to see that coming down.

And some of these other options, as you move to self-serve, sometimes have some initial start-up costs, if you will, that end up being OpEx. I would say overall you see productivity improvements continuing to feather in. But there really isn't any lumpiness in the third quarter that I would highlight or call out.

I see, okay. And then one last one, if I could squeeze in, on the cable side. Certainly very strong momentum on the broadband. I was wondering if this the new normal for the next several quarters, given the momentum that you're seeing in terms of upgrades to higher-speed plans. Thanks.

So few things on that. Keep in mind the third quarter is relatively busy in terms of volumes because of the back-to-school. So you see that and we have that every year in terms of seasonality. We do think in terms of the momentum, even prior to Q3, we continue to see good volumes and it continues to ramp even as we head into Q4. We're seeing good traction with the internet and, as I mentioned, it is doing a good job of pulling the whole household as well. And so we like the traction that we're seeing on household metrics as well.

Great, thanks very much.

Vincent Valentini, TD Securities.

Thanks very much. First, Tony, I don't think you answered Drew's question earlier on the wireless home phone, if there was any material net adds that came from source this quarter.

Oh, okay, sorry, Vince, I missed that question. I would say on wireless home phone, it is a very small part of the total number. This quarter, wireless home phone actually was a smaller number than you would have seen in last quarter. So it was not an impact in the quarter.

Excellent. My real question was the upgrade activity. You said in the release they were down 5% year over year. Does that imply that retention costs would have been down a similar 5%?

When we look forward to Q4, should we bake into our expectations that you might have more iPhone 7 supply and there may be a bit more of a mix of upgrade activity versus COA for new subs if a lot of your existing subs can finally get an iPhone 7?

A couple of things. I would say when you look at retention costs, while the volumes are down 5%, the cost per hub was up year on year, commensurate with what you see in COA. As a principle, our existing customers get roughly the same offers that are out there in the marketplace. So overall on retention spending as a percentage of network revenue, it stayed flat to what you saw in previous quarters. So that piece of it on balance continues to stay in check.

Second part of your question on the iPhone 7, I would say the supply constraints have largely been around a specific model or color of the iPhone 7. And that has been constrained across the board. As that continues to come in, don't know what impact it will have on volumes. We will just have to wait and see, tough to guess. Not a lot more color I can provide on that one, Vince.

Thank you very much.

Adam Shine, National Bank Financial.

Thanks a lot, good morning. I will do one again for Alan and one for Tony. So, Alan, when Guy was first hired, I had the impression it might be for, let's call it, a three-year tenure. Then things were looking as though it might be fourth or fifth year dynamic. Should we be thinking about this as a 10-year cut short? Or potentially as one that was destined to run its three-year course, albeit arguably six years shy of that three-year mark?

I think it's going back to the previous comments. You should look at this as the opportunity to secure the services in due course, of Joe Natale, and that's a unique situation. That's the one we moved on that had the melt-down effects in terms of the longer-term plan for the CEO. It was not related to the items you mentioned.

Okay. If I flip over to Tony. Tony, one item we have not talked about but it's certainly something that I think arguably would have helped you along in terms of some of this momentum we have seen in the Q3. That is some of the pricing moves. Certainly one that we've heard about since mid June in the context of a very basic triple offer at CAD100 for a 24-month period. Can you speak to that? Obviously that's one of the elements in your overall tool kit that helping you succeed here. But speak to pricing and some of the geographic myths in the market.

Sure, Adam. When you say that, it sounds like your triple play, you're specifically talking about the cable side. I will have my comments on that. We've always seen competitive intensity go in and out of the market on that. As you would expect, back-to-school, with the heightened size of the market that happens then.

It was a competitive marketplace. We competed with triple plays that you saw in the marketplace. I highlight, though, a lot of that is limited time in terms of promotional offers. But having said that, the promotional activity is predominantly centered around more so the TV product and internet.

One of the things we like is the pricing, and if you, in looking at internet ARPU, it continues to move well. We like what we are seeing on internet pricing but it is important to highlight that is really being pulled forward by the up-tier demand that we're seeing. So, as customers want a better product, that's generally moving that piece of it up. As I said, we like what we are seeing from an ARPU perspective there.

Thanks a lot. If I could just throw in one more. In the context of the CAD190 million write-down, obviously CAD140 million of that was well telegraphed in the context of shomi. Maybe there are a few filler elements, but did anything else stand out worth noting in terms of the CAD50 million extra?

Adam, there were a few items on our balance sheet that we went through the process of disposing of. And so they ended up some with some small gains and some with losses. And so it's really an accumulation of a number of items that are included in there. So other than shomi, there isn't one that I would necessarily call out.

Great, thanks for that, Tony.

Greg MacDonald, Macquarie.

Thanks, welcome back, Alan. Nostalgic to hear your voice again. I'm going to ask a strategic question as well. Is it fair to say that the strategic changes necessary to address the customer service challenges have largely been made?

Is that one you wanted, Greg, specifically Alan or I take?

Either would be fine. I'm looking at the list of strategic imperatives right now. Where does customer service stand? Looks like the numbers are getting better. It looks like churn is coming down. I'm looking for some insight on that.

I think I'll (inaudible), I don't think there's any change in strategic direction there at all. I think the focus on the customer, the customer-first approach is one that we believe at Rogers is a requirement in this business. And it will be a focus and will continue to be a focus. I think it's one of those things that it's always a journey.

If you ever think you've got to a perfection, you get whacked in the face pretty quickly. So I think we've got still, as Tony said, lots of challenges there. It's Clearly still one of the main focuses of this Company.

I might add that -- Greg, I'd add as we've said in the opening comments, we said we would have sustainable growth and a key ingredient to that is focusing on the customer. That is long-term, we think, key to building a business.

Yes, and I'm recognizing that you referenced that, Tony. You described the business as growing the business, which implies an offensive approach as opposed to defensive. Both are options in a market that's maturing. Maybe you could help out by saying what are the two or three strategic imperatives today?

I'm getting the sense that customer service is something that was very, very important two years ago, three years ago. You've done a lot as a Company to address that. Are there other issues that have percolated to the top of the strategic list?

Greg, I would say there's a couple of things you touch on in your comments. In both cable and wireless, the size of the market continues to grow. In both of those markets, that consumers have choice, so it's competitive. In order to compete in both of those markets and get what we think is our fair share, we have got to have a number of things covered up, certainly, in terms of the product, the pricing, but customer experience is always going to be a key part of it.

I think If you think about the fundamentals of those businesses, those really aren't going to change. So on the wireless side, clearly maintaining a strong network is going to be key to that, as well as a number of other items. And on cable, as we've said, it's really more and more going to be focused around internet augmented by a compelling video product. That hasn't changed.

And on media, we think that having the right content is going to be key to media long term. We've said that right content for Canada and for us is sports. That's what we're focused on, as well as some of the other businesses in there. We will continue to migrate those as the market evolves, like you saw in publishing, for example, as we moved that business to the digital age.

Okay. So I think what I'm hearing is you don't want us to draw any conclusions on changing strategic imperatives. It remains what it has been for the past year or two years, right?

No, I think that clearly is the message. You look at guidance and Rogers 3.0, the customer experience, the innovation network leadership, investing in people, being a strong Canadian growth Company. They continue to be the strategic imperatives. The management team that's been delivering on those that are strong plays.

Got it. Okay, thanks, guys.

Michael Rollins, Citi.

Thank you, this is Adam Mickiewicz sitting in for Mike. First question, to continued to talk about the CEO transition unfortunately. When you do have a CEO transition where the CEO is known and available, we usually like to see perhaps a transition period where the old CEO hands off to the CEO. Can you step through what happened in this situation unfortunately wasn't able to see that take place?

I think on CEO transitions, generally I think it tends to be unique, it tends to be peculiar to the circumstances. I think sometimes transitions work, sometimes they don't. I think in this case, it was just the actual fact situation meant that this was the way this transition had to take place. As I say, I don't think there's a one-size-fits-all for CEO transitions.

Sure. And then a follow-up to that. Joe obviously comes with a lot of history and a lot of good experiences that we have seen him do through the industry. Assuming he comes on when he does, is he free to revise strategy when he does come on? Or has he stated, perhaps privately, that he would like to continue the path of Rogers 3.0 as it currently stands?

I think obviously the CEO's the best thing of the strategy for approval by the -- recommended strategy for approval by the Board, and that will be the same situation here. I think Joe's experience has been focused on operational excellence, has been focused on customer experience. I think those are the areas I'd say we'd see him be focused on here. As I say from an overall strategic perspective, the items that I went through before in terms of 3.0 still the strategic imperatives of the Company. I'm sure Joe will have some modifications, possibly, but that's the direction we're in.

Sure. And then, Tony, in the quarter, media had a very strong profitability and obviously helped by the World Cup of Hockey. Can you piece through how much the quarter was impacted by the World Cup? And obviously the profitability is stable at these levels, is this where you are hoping, with the, call it circa 15% AOP margins, is that what media is attempting to deliver here?

A couple things I'd probably help clarify for you. Third quarter is generally not a big hockey impact. What you see in the third quarter is really as a result of the Jays.

As we continue to see in the third quarter the improvements in, not only attendance and all that brings in terms of revenue, but also viewership and the associated revenue with that. So that's what you're largely seeing in the third quarter. World Cup of Hockey is certainly something that came through in September, but it is secondary to the performance of the Jays for the full quarter. That's that piece of it.

In terms of media overall, we continue to balance the portfolio in terms of where we want to invest and take out costs. Generally, it is a relatively low CapEx business so we continue to see longer-term prospects for growth there. That will translate generally to margins, as you have seen in the past, of 10% to 15%. But I think the overall key metrics is the return on investment that we see in there and that continues to improve.

Thank you so much.

David McFadgen, Cormark Securities.

Thank you. I have a question on the wireless business. On the Q2 call you indicated that you expected the wireless service margin for 2016 to be comparable to 2015. Given the results year to date, it doesn't look like that will be achieved. Maybe that's just a reflection of the competitive environment increasing COA.

I was wondering if you can give us an outlook on the margin. Do you expect that will go back to 2015 in 2017? Or are we just in a more competitive market going forward?

David, on the margins, again, I want to make sure that we're not getting ahead of ourselves and don't want to provide too much forward looking. But I think if you get a sense of the impact on wireless margins, I think as you look at that business for a full year, I would reiterate I would not expect a lot of change in what you see in wireless margins. And we'd probably leave it at that.

Okay. And then just one follow up, if I may. Is Guy Laurence's severance reflected in the Q3 restructuring? Or will that come in in Q4?

No, it's not reflected in Q3. So that is the short answer to your question.

All right, thank you.

Rob Goff, Echelon Wealth Partners.

Good morning and thank you for taking my questions. It would actually be two questions on two outperforming units. The first one on the wireless postpaid adds, could you talk to the trending in device per account? And then secondly, on the outperformance of the broadband, can you talk to the year-over-year impact of [SMEE] or wholesale demand?

Sure, Rob. On the wireless postpaid, you had a specific question on connected user per accounts. As we measure ARPA and that's up, as you would expect. So we continue to see that come in nicely and clearly the Share Everything construct is having the effect that you would expect it to have. That continues to move up, so that is that piece of it.

In terms of broadband, we're seeing good growth across all segments, including enterprise and in particular on the SMEE side. So that is moving well and that's incorporated in the numbers. Our numbers do include wholesale, although I would say it's obviously a very small part of it and not a contributor to the net add growth that you saw in the quarter. So that is how you should think about the wholesale piece of it.

Thanks. And, Tony, actually the wireless question was not so much about ARPA, but rather what sort of trending you're seeing in device per account. Are you seeing increased iPad demand coming through, or if there are any trends there?

As I said, device per account is up, so it continues to move up. It is largely the Share Everything. Unless I continue to misunderstand your question, it's the Share Everything that's driving that. Add a line is steadily moving up and it's a trend we've seen for many quarters.

Thank you.

Ladies and gentlemen, our question-and-answer session has now come to a close. This concludes today's conference. Thank you for your participation. You may now disconnect your lines.

Thank you, everyone.