Rogers Communications Reports First Quarter 2014 Results

Wireless Adjusted Operating Profit Increased 3%, Margin Grew to 48.3% and Postpaid Churn Declined to 1.20% While Move to Simplified Customer Friendly Price Plans Reduced Revenue by 2%

Cable TV Subscriber Performance Continues to Improve While Revenue Growth Slowed by Promotional Activity and Timing of Price Changes Versus First Quarter of 2013

Media Top Line Growth Improved to 8%

Annualized Dividend Increased by 5% to $1.83 per Share While Average Cost of Debt Reduced to 5.24% from 5.77% at Q1 2013

TORONTO, April 21, 2014 /PRNewswire/ - Rogers Communications Inc., a leading diversified Canadian communications and media company, today announced its unaudited consolidated financial and operating results for the first quarter ended March 31, 2014, prepared in accordance with International Financial Reporting Standards (IFRS).

Financial Highlights

		Three months ended March 31
(In millions of dollars, except per share amounts)		2014	2013	% Chg
Operating revenue		$    3,020	$    3,027	-
As adjusted 1 :
	Operating profit	1,161	1,179	(2)
	Net income	340	414	(18)
	Basic and diluted earnings per share	0.66	0.80	(18)
Free cash flow 1		356	428	(17)
Net income		307	353	(13)
Basic earnings per share		0.60	0.69	(13)
Diluted earnings per share		0.57	0.68	(16)
Cash provided by operating activities		408	805	(49)

¹ Adjusted amounts and free cash flow are non-GAAP measures and should not be considered as a substitute or alternative for GAAP measures. They are not defined terms under IFRS, and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.

 

"During the first quarter, we made a significant investment in 'beachfront property' 700MHz spectrum to give our customers an unsurpassed wireless experience, building on our unprecedented NHL rights deal late in 2013" said Guy Laurence, President and Chief Executive Officer of Rogers Communications Inc. "We made these long-term strategic investments while maintaining our balance sheet at investment grade."

Laurence continued, "Over the past three months I have met with and listened to thousands of customers, stakeholders and employees across the country. I can see a number of opportunities to improve the performance of the business over time, while further enhancing our customer experience. As is apparent from our first quarter results, while there are some areas of strength, there are also areas where we clearly need to and will improve. Over the coming weeks I will be meeting with our Board and management team to lay out my plan and priorities for going forward. I remain excited about the opportunities I see in front of us for Rogers."

Quarterly Highlights

Operating revenue

• Consolidated operating revenue was nominally lower than the first quarter of 2013, reflecting a 2% decline in Wireless revenue, offset by growth at Business Solutions (up 1%) and Media (up 8%). The decline at Wireless was mainly related to pricing changes associated with new customer friendly simplified plans and lower priced roaming plans introduced mid-2013. Cable revenue was flat as continued Internet revenue growth was offset by television subscriber losses, promotional activity and the timing of pricing changes.
  
  
• Wireless data revenue grew 10% exceeding voice revenue for the first time and now represents approximately 51% of total network revenue. Activated 579,000 smartphones, of which 30% were new subscribers, and high-value smartphone customers now make up 76% of Wireless postpaid subscribers.
  
  
• Basic cable subscriber losses moderated, both sequentially from the fourth quarter of 2013 and year-over-year, to 20,000.

Adjusted operating profit and net income

• The modest decline in consolidated adjusted operating profit reflects increases in Wireless (up 3%) and Business Solutions (up 22%) which were offset by a 5% decrease at Cable and a $17 million decrease at Media. Cable's results were negatively impacted by higher investment in customer care and incremental costs associated with Mountain Cable, while Media's results were negatively impacted by increased programming costs, higher merchandise costs at The Shopping Channel and ramp-up costs for Next Issue Canada. Additionally, Cable and Media results in 2013 benefitted from one-time adjustments associated with the CRTC's Part II licence fees.
  
  
• The reductions in adjusted net income and earnings per share are primarily the result of higher depreciation and amortization expenses, finance costs, and the adjusted operating profit impacts discussed above. Net income and diluted earnings per share were 13% and 16% lower, respectively, than the first quarter of 2013.

Enhanced our leading networks to monetize rapid data growth

• Secured "beachfront" spectrum consisting of two 12 MHz blocks of contiguous, paired lower 700 MHz band spectrum covering the vast majority of the Canadian population for $3.29 billion. This prime spectrum was the most sought after and is the spectrum Rogers went into the auction intending to win for its customers. Cash investment was in line with recent 700 MHz spectrum transactions in the US.
  
  
• Deployed newly acquired 700 MHz spectrum in communities in Vancouver, Calgary and Toronto to begin providing customers with the ultimate mobile experience on Rogers' LTE network while carrying wireless signals deep into basements, elevators and in buildings with thick concrete walls.
  
  
• Expanded data centre operations to 15 locations nationwide with Business Solutions opening Alberta's first Tier III certified data centre giving business customers reliable, secure data services.

Enriched the customer experience with premium products and sports content

• Launched Rogers Next, an early upgrade program for wireless devices, offering subscribers for a monthly fee the freedom to get a new premium device every year for $0 on select 2-year plans, with no early upgrade or connection fees.
  
  
• Launched easier international wireless travel packs that offer customers voice, text and data in one all-inclusive package. Also launched a data-only daily rate for international travellers who only want wireless internet access.
  
  
• Launched suretap™ wallet, a new application that lets customers use their smartphones to safely store eligible payment cards and make payments at tens of thousands of retailers across the country.
  
  
• Following blockbuster NHL rights deal, announced broadcast anchors for coverage across all hockey programming including Hockey Night in Canada with George Stroumboulopoulos, Daren Millard, Jeff Marek and the continuation of Don Cherry and Ron MacLean. This star team will deliver with more games and more choices to fans, including the NHL Playoffs and the Stanley Cup Final, "Hometown Hockey" every Sunday night, more than 500 regular season games across 13 networks, and expanded NHL content on all Rogers broadcast, wireless, digital and print channels.
  
  
• Announced 12-year extension of our Canadian Hockey League (CHL) partnership as the exclusive broadcaster of the CHL and Memorial Cup in Canada including television, online and mobile rights through the 2025-2026 seasons.
  
  
• Introduced MLB Network, a 24-hour network dedicated to baseball, to Canada for the first time on Rogers digital cable. In addition, Sportsnet signed 8-year multi-platform broadcast rights extension with MLB Properties and MLB Advanced Media to show live and in-progress games and highlights within Canada.
  
  
• Launched FXX, a younger-focused premium programming extension of FX Canada which will deliver original FX series, acquired movies and series, and original Canadian programs.

Maintained strong balance sheet and available liquidity

• Generated $356 million of consolidated quarterly free cash flow, while cash provided by operating activities was $408 million.
  
  
• Issued $2.1 billion of debt securities at historically low rates for Rogers, consisting of $250 million of three year floating rate senior notes, $400 million of five year 2.80% senior notes, $600 million of ten year 4.00% senior notes, and US$750 million (Cdn$832 million) of thirty year 5.00% senior notes.
  
  
• Repaid or repurchased US$750 million of 6.375% senior notes due in 2014 and US$350 million of 5.50% senior notes due in 2014.
  
  
• $4.4 billion of available liquidity at March 31, 2014 includes $2.2 billion cash on hand, $2.0 billion available under the bank credit facility and $0.2 billion available under the accounts receivable securitization program.

Returning cash to shareholders

• Increased dividend by 5% to $1.83 per share effective April 4, 2014, to be paid in quarterly amounts of $0.4575 per share.

About non-GAAP measures

This earnings release contains non-GAAP measures such as adjusted operating profit, adjusted net income, adjusted basic and diluted earnings per share, adjusted net debt and free cash flow. These are non-GAAP measures and should not be considered as a substitute or alternative for GAAP measures. They are not defined terms under IFRS, and do not have standard meanings, so may not be a reliable way to compare us to other companies. See the section "Non-GAAP Measures" for information about these measures, including how we calculate them.

This earnings release contains important information about our business and our performance in the first quarter of 2014.

This earnings release is a summary of our first quarter 2014 results, and should be read in conjunction with our first quarter 2014 MD&A, our first quarter 2014 Unaudited Interim Condensed Consolidated Financial Statements and Notes thereto which have been prepared in accordance with International Financial Reporting Standards (IFRS), our 2013 Annual MD&A and our 2013 Audited Annual Consolidated Financial Statements and Notes thereto, and our other recent filings with Canadian and U.S. securities regulatory authorities, which are available on SEDAR at sedar.com or EDGAR at sec.gov.

All amounts are in Canadian dollars unless otherwise stated. All percentage changes are calculated using the rounded numbers as they appear in the tables. Information is current as of April 21, 2014 and was approved by the Audit Committee of our Board of Directors. This earnings release includes forward-looking statements and assumptions. See "About Forward-Looking Information" for more information.

We, us, our, Rogers, Rogers Communications and the Company refer to Rogers Communications Inc. and our subsidiaries: Wireless, Cable, Business Solutions and Media. RCI refers to the legal entity Rogers Communications Inc., not including our subsidiaries. RCI also holds interests in various investments and ventures.

Consolidated Financial Results
		Three months ended March 31
(In millions of dollars, except per share amounts)			2014			2013			% Chg
Operating revenue
	Wireless	$	1,727		$	1,760			(2)
	Cable		860			861			-
	Business Solutions		94			93			1
	Media		367			341			8
	Corporate items and intercompany eliminations		(28)			(28)			-
Operating revenue			3,020			3,027			-
Adjusted operating profit
	Wireless		790			765			3
	Cable		409			429			(5)
	Business Solutions		28			23			22
	Media		(24)			(7)			n/m
	Corporate items and intercompany eliminations		(42)			(31)			35
Adjusted operating profit 1			1,161			1,179			(2)
Adjusted operating profit margin			38.4%			38.9%
Net income			307			353			(13)
Diluted earnings per share			0.57			0.68			(16)
Adjusted net income 1			340			414			(18)
Adjusted diluted earnings per share 1			0.66			0.80			(18)
Additions to property, plant and equipment		$	488		$	464			5
Free cash flow 1			356			428			(17)
Cash provided by operating activities			408			805			(49)
1	Adjusted operating profit, adjusted net income, adjusted diluted earnings per share and free cash flow are non-GAAP measures and should not be considered as a substitute or alternative for GAAP measures. These are not defined terms under IFRS, and do not have standard meanings, so may not be comparable to similar measures presented by other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.
	n/m: not meaningful
Key Changes in Financial Results from 2013
		Three months ended
(In millions of dollars)		March 31
Operating revenue changes - higher (lower):
Network revenue - Wireless								$	(47)
Equipment sales - Wireless									14
Cable									(1)
Business Solutions									1
Media									26
Lower operating revenue compared to 2013									(7)
Adjusted operating profit changes - higher (lower):
Wireless									25
Cable									(20)
Business Solutions									5
Media									(17)
Corporate items and intercompany eliminations									(11)
Lower adjusted operating profit1 compared to 2013									(18)
Lower stock-based compensation expense									53
Higher depreciation and amortization									(69)
Higher finance costs									(44)
Lower income taxes									32
Change in net income compared to 2013									(46)
1	Adjusted operating profit is a Non-GAAP measure and should not be considered as a substitute or alternative for GAAP measures. It is not a defined term under IFRS, and does not have a standard meaning, so may not be a reliable way to compare us to other companies. See "Non- GAAP Measures" for information about these measures, including how we calculate them.

Operating revenue

Wireless network revenue was lower this quarter compared to the same period last year, mainly because of pricing changes made over the past year primarily associated with our simplified plans and the introduction in 2013 of lower priced roaming plans.

Cable operating revenue this quarter was consistent with the same period last year, mainly because Internet revenue growth was offset by a decline in television and phone revenue associated with competitive TV subscriber losses and a more competitive pricing environment compared to the prior year.

Business Solutions operating revenue this quarter was in-line with the same period last year as continuing growth in on-net and next-generation services and increased revenue from the new data centre businesses was offset by a reduction in legacy revenue and infrequent equipment sales realized in 2013.

Media operating revenue was higher this quarter compared to the same period last year, mainly because of revenue growth at Sportsnet and higher sales at The Shopping Channel.

Adjusted operating profit

Wireless adjusted operating profit was higher this quarter compared to the same period last year, mainly because of lower volumes of subsidized smartphone sales, a lower per device net subsidy, and cost management and productivity initiatives implemented across various areas, offset in part by reduced network revenue as described above.

Cable adjusted operating profit was lower this quarter compared to the same period last year because of increased spending in customer care and network. Additionally, Cable results in 2013 benefitted from a one-time $8 million adjustment to licence fees payable to match the CRTC's billing period.

Media's adjusted operating profit was lower this quarter compared to the same period last year, as the increase in Media's operating revenue was more than offset by the higher TV and Sports programming and production costs and start-up costs associated with the launch of Next Issue Canada.

Results of our Business Segments

WIRELESS

Financial results

		Three months ended March 31
(In millions of dollars, except percentages)			2014			2013			% Chg
Operating revenue
	Network revenue		$	1,636		$	1,683			(3)
	Equipment sales			91			77			18
Operating revenue				1,727			1,760			(2)
Operating expenses
	Cost of equipment 1			(297)			(349)			(15)
	Other operating expenses			(640)			(646)			(1)
				(937)			(995)			(6)
Adjusted operating profit			$	790		$	765			3
Adjusted operating profit margin as a
	% of network revenue			48.3%			45.5%
Additions to property, plant and equipment			$	181		$	239			(24)
1	Includes the cost of equipment sales and direct channel subsidies.
Subscriber results 1,2
(Subscriber statistics in thousands,		Three months ended March 31
except ARPU and churn)			2014			2013			Chg
Postpaid
	Gross additions			293			319			(26)
	Net additions			2			32			(30)
	Total postpaid subscribers			8,076			7,878			198
	Monthly churn			1.20%			1.22%			(0.02 pts)
	Monthly average revenue per user (ARPU)		$	65.20		$	68.56		$	(3.36)
Prepaid
	Gross additions			76			118			(42)
	Net losses			(73)			(93)			20
	Total prepaid subscribers			1,356			1,498			(142)
	Monthly churn			3.55%			4.48%			(0.93 pts)
	ARPU		$	13.84		$	14.63		$	(0.79)
Blended ARPU			$	57.63		$	59.68		$	(2.05)
1	Does not include subscribers from our wireless home phone product.
2	ARPU, subscriber counts and subscriber churn are key performance indicators.

Lower network revenue this quarter due to price plan and roaming changes

Network revenue was down this quarter compared to last year, the net result of:

• the continued adoption of customer friendly simplified pricing plans, which often bundle in certain features like voicemail, caller ID and domestic long-distance for which we have charged separately in the past
• our introduction in mid-2013 of lower priced US and international roaming plans and rates which offer consumers more value
• partially offset by higher data revenue related to an increase in postpaid subscriber levels and higher usage of wireless data services.

Data revenue was 10% higher this quarter than the same period last year, mainly because of the continued penetration and growing use of smartphones, tablet devices and wireless laptops, which are increasing the use of e-mail, wireless, Internet access, text messaging and other wireless data services. Data revenue exceeded voice revenue for the first time this quarter, representing approximately 51% of total network revenue, compared to approximately 45% in the same period last year.

Excluding the decline in roaming revenue this quarter compared to the same period last year, network revenue would have been approximately flat and data revenue would have increased 16%.

Postpaid churn improved to 1.20% this quarter, compared to 1.22% for the same period last year. We believe the improved churn rate is partly attributable to the simplified pricing plans and higher value roaming plans we introduced.

Gross postpaid subscriber additions were 293,000 this quarter or 8% lower than the same period last year, which reduced net postpaid subscriber additions to 2,000, despite lower postpaid churn. The industry transition from three year to two year plans as a result of the recent adoption of the Canadian Radio-television and Telecommunications Commission (CRTC) Wireless Code appears to have slowed overall wireless subscriber growth over the past three quarters.

We activated and upgraded approximately 579,000 smartphones this quarter, compared to approximately 673,000 in the same period last year. The decrease was mainly because there was a 14% reduction in hardware upgrades by existing subscribers this quarter, which we also believe is partly due to the move from three to two year contracts and the associated pricing changes.

The percentage of subscribers with smartphones increased this quarter to 76% of our total postpaid subscriber base, compared to 71% last year. Smartphone subscribers typically generate significantly higher ARPU and are less likely to churn.

Higher equipment sales

Revenue from equipment sales was higher this quarter, mainly due to a shift in the mix of smartphones activated to higher priced devices, partially offset by fewer existing subscribers upgrading their devices and fewer gross activations.

Lower operating expenses

The cost of equipment sales was 15% lower this quarter compared to the same period last year, mainly because 14% fewer existing subscribers upgraded their hardware and there were 8% fewer gross activations, as described above.

Total customer retention spending (including subsidies on handset upgrades) was $212 million this quarter compared to $247 million in the same period last year. The reduction was mainly because of the 14% lower number of existing subscribers who upgraded their hardware.

Other operating expenses (excluding retention spending) were down by 2% this quarter due to a continued focus on cost productivity initiatives we are implementing across various functions.

Higher adjusted operating profit

Adjusted operating profit was 3% higher this quarter compared to the same period last year because of:

• continued growth of wireless data
• our improvements in cost management and efficiency
• lower volumes of hardware sales and upgrades
• partially offset by the decrease in network revenue.

CABLE

Financial results

			Three months ended March 31
(In millions of dollars, except percentages)				2014			20131			% Chg
Operating revenue
		Television		$	431		$	458			(6)
		Internet			305			277			10
		Phone			121			123			(2)
	Service revenue				857			858			-
	Equipment sales				3			3			-
Operating revenue					860			861			-
Operating expenses
	Cost of equipment				(2)			(2)			-
	Other operating expenses				(449)			(430)			4
					(451)			(432)			4
Adjusted operating profit				$	409		$	429			(5)
Adjusted operating profit margin					47.6%			49.8%
Additions to property, plant and equipment				$	251		$	181			39
1	Results of operations exclude Mountain Cable's operating results, as it was acquired on May 1, 2013.
Subscriber results 1
				Three months ended March 31
(Subscriber statistics in thousands)				2014			2013			Chg
Cable homes passed					3,990			3,828			162
Television
	Net losses				(20)			(25)			5
	Total television subscribers 2				2,107			2,189			(82)
Internet
	Net additions				20			26			(6)
	Total Internet subscribers 2				1,981			1,890			91
Phone
	Net additions				10			17			(7)
	Total phone subscribers 2				1,163			1,091			72
Total service units 2,3
	Net additions				10			18			(8)
	Total service units				5,251			5,170			81
1	Subscriber count is a key performance indicator.
2	On May 1, 2013, we acquired 40,000 television subscribers, 38,000 digital cable households, 34,000 cable high-speed Internet subscribers and 37,000 cable telephony lines from our acquisition of Mountain Cable. The acquisition also increased homes passed by 59,000.
3	Includes television, Internet and phone subscribers.

Operating revenue

Overall cable revenue this quarter was consistent with the first quarter last year, the net result of:

• continued growth in subscribers for our Internet and phone products
• the May 2013 acquisition of Mountain Cable
• offset by television subscriber losses and retention related discounting.

Lower television revenue

Revenue from television was down this quarter as a result of:

• the year-over-year decline in television subscribers (although losses moderated this quarter)
• the impact of promotional and retention pricing activity associated with heightened pay TV competition from IPTV offerings
• timing of pricing changes
• partially offset by the acquisition of Mountain Cable.

The digital cable subscriber base represented 85% of our total television subscriber base at the end of the quarter, compared to 81% at March 31, 2013. We believe that the larger selection of digital content, video on-demand, HDTV and PVR equipment, combined with the ongoing analog to digital conversion initiative, continues to contribute to the increasing penetration of the digital subscriber base as a percentage of our total television subscriber base.

Higher Internet revenue and growing subscriber base

Internet revenue was 10% higher this quarter compared to last year as a net result of a larger Internet subscriber base, general movement to higher end speed and usage tiers and changes in Internet service pricing.

Our Internet customer base is approximately 2.0 million subscribers, and Internet penetration represents:

• 94% of our television subscribers, compared to 86% at March 31, 2013
• 50% of the homes passed by our cable network, compared to 49% at March 31, 2013.

Lower cable telephony revenue and growing subscriber base

Phone revenue was 2% lower this quarter compared to last year. This was the net result of:

• higher promotional pricing activity for new subscribers on bundle products
• partially offset by a higher phone subscriber base.

There were 7% more phone subscribers this quarter compared last year. They represent:

• 55% of our television subscribers, compared to 50% last year
• 29% of the homes passed by our cable network, consistent with last year.

Higher operating expenses

Operating expenses were 4% higher this quarter compared to last year mainly due to:

• an $8 million positive one-time adjustment in the first quarter of 2013 related to licence fees payable to match the CRTC's billing period
• higher investments in customer care and weather related network maintenance costs
• incremental costs associated with Mountain Cable which was acquired in May 2013
• partially offset by various cost efficiency and productivity initiatives.

Lower adjusted operating profit

Adjusted operating profit was 5% lower this quarter compared to the same period last year, mainly the net result of service revenue levels consistent with the prior year and higher operating expenses as discussed above.

BUSINESS SOLUTIONS

Financial results

				Three months ended March 31
(In millions of dollars, except percentages)				2014		2013 1		% Chg
Operating revenue
			Next generation	$	64	$	44		45
			Legacy		29		40		(28)
		Service revenue			93		84		11
		Equipment sales			1		9		(89)
Operating revenue					94		93		1
Operating expenses					(66)		(70)		(6)
Adjusted operating profit				$	28	$	23		22
Adjusted operating profit margin					29.8%		24.7%
Additions to property, plant, and equipment				$	26	$	15		73

¹ Results of operations exclude Blackiron's and Pivot Data Centres' operating results as they were acquired on April 17, 2013 and October 1, 2013, respectively.

Business Solutions continues to focus mainly on next generation IP-based services, and on leveraging higher margin on-net and near-net service revenue opportunities, using existing network facilities to expand offerings to the medium and large sized enterprise, public sector and carrier markets. Following our recent data centre acquisitions, Business Solutions is also focused on data centre colocation, hosting, cloud and disaster recovery services. Next generation services now represent 69% of total service revenue. Revenue from the lower margin off-net legacy business generally includes local and long-distance voice services and legacy data services which often use facilities that are leased rather than owned.

Higher operating revenue

Service revenue was 11% higher this quarter compared to the same period last year, the net result of:

• growth from the acquisitions of Blackiron and Pivot Data Centres in 2013
• continuing execution of our plan to grow higher margin on-net and next-generation IP-based services revenue
• partially offset by the continuing decline in the legacy voice and data business, a trend we expect to continue as we focus the business on on-net opportunities and customers move to faster and more reliable IP services.

Equipment sales were lower this quarter as the first quarter of 2013 included a non-recurring equipment sale.

Lower operating expenses

Operating expenses were 6% lower this quarter compared to the same period last year, the net result of:

• lower legacy service costs related to lower volumes and customer levels, as expected, and ongoing initiatives to improve costs and productivity
• higher cost of sales in 2013 associated with a non-recurring equipment sale
• partially offset by incremental expenses related to our data centre acquisitions.

Higher adjusted operating profit

Adjusted operating profit was 22% higher this quarter compared to the same period last year, because of the contribution of the new data centres, the ongoing growth in higher margin on-net and next-generation business and cost efficiency and productivity improvements.

MEDIA

Financial results

		Three months ended March 31
(In millions of dollars, except percentages)			2014			2013 1		% Chg
Operating revenue		$	367		$	341		8
Operating expenses			(391)			(348)		12
Adjusted operating loss		$	(24)		$	(7)		n/m
Adjusted operating loss margin			(6.5%)			(2.1%)
Additions to property, plant and equipment		$	14		$	11		27

1	Results of operations exclude Sportsnet 360's (formerly theScore) operating results as it was acquired on April 30, 2013.
	n/m: not meaningful

Higher operating revenue

Operating revenue was 8% higher this quarter compared to the same period last year, mainly because of:

• higher subscription and advertising revenue generated by the Sportsnet properties, including the increase resulting from the acquisition of Sportsnet 360 in April 2013
• higher sales at The Shopping Channel.

Higher operating expenses

Operating expenses were 12% higher this quarter compared to the same period last year, the net result of:

• higher programming costs due to contractual rate increases, the acquisition of Sportsnet 360 and our investment to secure premium and exclusive content
• higher merchandise costs at The Shopping Channel driven by the increased sales
• $5 million of costs associated with the growth of Next Issue Canada which was launched in late 2013
• a $3 million positive one-time adjustment in the first quarter of 2013 related to licence fees payable to match the CRTC's billing period.

Higher adjusted operating loss

Adjusted operating loss increased this quarter compared to last year, reflecting the revenue and expense changes described above.

ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT

		Three months ended March 31
(In millions of dollars, except percentages)			2014		2013		% Chg
Additions to property, plant and equipment
Wireless		$	181	$	239		(24)
Cable			251		181		39
Business Solutions			26		15		73
Media			14		11		27
Corporate			16		18		(11)
Total additions to property, plant and equipment		$	488	$	464		5
Capital intensity 1			16.2%		15.3%

¹ Capital intensity is a key performance indicator.

Wireless

Wireless additions were 24% lower this quarter compared to the same period last year largely due to lower HSPA capacity investments and timing of our continued deployment of the LTE network, which reached approximately 76% of Canada's population at March 31, 2014. This was partially offset by higher site build activity to further enhance network coverage and quality.

Cable

Cable additions were 39% higher compared to the same period last year. The higher investments this quarter were to improve the reliability and capacity of our Internet platforms, develop new services and capabilities on our video platform and to reduce the number of homes passed per node in our access network. We also invested in customer premise equipment related to the continued roll out of our next generation NextBox digital set-top boxes and for the analog to digital subscriber migration, various network components to enhance the reliability and quality of the network and the integration of the Mountain Cable network we acquired last year.

Business Solutions

Business Solutions additions were higher this quarter compared to the same period last year because we spent more on expanding customer specific networks and capital investments made by Blackiron and Pivot Data Centres, which we acquired last year.

Media

Media additions were 27% higher this quarter compared to the same period last year due to strategic investments made to our IT infrastructure, digital and broadcast facilities.

FINANCIAL GUIDANCE

We have no changes to the 2014 annual consolidated guidance ranges for adjusted operating profit, additions to property, plant and equipment, and free cash flow that we provided on February 12, 2014. See the sections entitled "About Forward-Looking Information" in this earnings release and in our 2013 Annual MD&A.

NON-GAAP MEASURES

We use the following Non-GAAP measures. These are reviewed regularly by management and our Board in assessing our performance and making decisions regarding the ongoing operations of our business and its ability to generate cash flows. These measures are also used by investors, lending institutions and credit rating agencies as an indicator of our operating performance and our ability to incur and service debt, and as a measurement to value companies in the telecommunications sector. These are not recognized measures under GAAP and do not have a standardized meaning under IFRS, so they may not be a reliable way to compare us to other companies.

Non-GAAP measure	Why we use it	How we calculate it	Most comparable IFRS financial measure
Adjusted operating profit or loss and related margin	To evaluate the performance of our businesses, and when making decisions about the ongoing operations of the business and our ability to generate cash flows. We believe that certain investors and analysts use adjusted operating profit to measure our ability to service debt and to meet other payment obligations. We also use it as one component in determining short-term incentive compensation for all management employees.	Net income add back income tax expense, other income (expense), finance costs, depreciation and amortization, impairment of assets, stock-based compensation expense (recovery) and restructuring, acquisition and other expenses.	Net income
Adjusted net income Adjusted basic and diluted earnings per share	To assess the performance of our businesses before the effects of these items, because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring.	Net income from continuing operations add back stock-based compensation expense (recovery), restructuring, acquisition and other expenses, impairment of assets, gain on spectrum distribution, gain on sale of investment, loss on repayment of long-term debt, and income tax adjustments on these items including adjustments due to legislative change.	Net income Earnings per share
Free cash flow	An important indicator of our financial strength and performance because it shows how much cash we have available to repay debt and reinvest in our company. We believe that some investors and analysts use free cash flow to value a business and its underlying assets.	Adjusted operating profit minus spending on property, plant and equipment, interest on long-term debt net of interest capitalized, and cash income taxes.	Cash flows from operating activities
Adjusted net debt	To conduct valuation-related analysis and make decisions about capital structure. We believe this helps investors and analysts analyze our enterprise and equity value and assess various leverage ratios as performance measures.	Total long-term debt plus current portion of long-term debt, deferred transaction costs, net Debt Derivative assets or liabilities, and short-term borrowings minus cash and cash equivalents.	Long-term debt

 

Reconciliation of Adjusted Operating Profit
			Three months ended March 31
(In millions of dollars)				2014		2013
Net income			$	307		$	353
Add (deduct):
	Income tax expense			106			138
	Other income			(10)			(10)
	Finance costs			225			181
	Depreciation and amortization			519			450
	Stock-based compensation expense			5			58
	Restructuring, acquisition and other expenses			9			9
Adjusted operating profit			$	1,161		$	1,179
Reconciliation of Adjusted Net Income
			Three months ended March 31
(In millions of dollars)				2014		2013
Net income			$	307		$	353
Add (deduct):
	Stock-based compensation expense			5			58
	Restructuring, acquisition and other expenses			9			9
	Loss on repayment of long-term debt			29			-
Income tax impact of above items				(10)			(6)
Adjusted net income			$	340		$	414
Reconciliation of Free Cash Flow
			Three months ended March 31
(In millions of dollars)			2014			2013
Cash provided by operating activities			$	408		$	805
Add (deduct):
	Property, plant and equipment expenditures			(488)			(464)
	Interest on long-term debt expense, net of capitalization			(183)			(172)
	Restructuring, acquisition and other expenses			9			9
	Interest paid			236			222
	Change in non-cash working capital			309			47
	Other adjustments			65			(19)
Free cash flow			$	356		$	428
Reconciliation of Adjusted Net Debt
(In millions of dollars)				March 31, 2014			March 31, 2013
Long-term debt			$	13,536		$	10,409
Current portion of long-term debt				918			1,473
Deferred transaction costs				113			82
				14,567			11,964
Add (deduct):
	Net Debt Derivatives (assets) liabilities			(315)			512
	Short-term borrowings			650			400
	Cash and cash equivalents			(2,181)			(1,434)
Adjusted net debt			$	12,721		$	11,442
How we Calculate Adjusted Earnings Per Share
(In millions of dollars, except per share amounts;			Three months ended March 31
number of shares outstanding in millions)				2014			2013
Adjusted basic earnings per share:
	Adjusted net income		$	340		$	414
		Divided by: weighted average number of shares outstanding		515			515
Adjusted basic earnings per share			$	0.66		$	0.80
Adjusted diluted earnings per share:
	Adjusted net income		$	340		$	414
	Divided by: diluted weighted average number of shares outstanding			517			518
Adjusted diluted earnings per share			$	0.66		$	0.80
Basic earnings per share:
	Net income		$	307		$	353
	Divided by: weighted average number of shares outstanding			515			515
Basic earnings per share			$	0.60		$	0.69
Diluted earnings per share:
	Net income		$	307		$	353
		Effect on net income of dilutive securities		(13)			-
		Diluted net income	$	294		$	353
	Divided by: diluted weighted average number of shares outstanding			517			518
Diluted earnings per share			$	0.57		$	0.68

Rogers Communications Inc.
Unaudited Interim Condensed Consolidated Statements of Income
(In millions of Canadian dollars, except per share amounts)

		Three months ended March 31
			2014			2013
Operating revenue		$	3,020		$	3,027
Operating costs			1,864			1,906
Restructuring, acquisition and other expenses			9			9
Depreciation and amortization			519			450
Finance costs			225			181
Other income			(10)			(10)
Income before income taxes			413			491
Income tax expense			106			138
Net income for the period		$	307		$	353
Earnings per share
	Basic	$	0.60		$	0.69
	Diluted		0.57			0.68

Rogers Communications Inc.
Unaudited Interim Condensed Consolidated Statements of Financial Position
(In millions of Canadian dollars)

				March 31			December 31
				2014			2013
Assets
Current assets:
Cash and cash equivalents			$	2,181		$	2,301
	Accounts receivable			1,313			1,509
	Other current assets			537			438
	Current portion of derivative instruments			105			73
Total current assets				4,136			4,321
Property, plant and equipment				10,268			10,255
Goodwill				3,759			3,751
Intangible assets				3,195			3,211
Investments				1,636			1,487
Derivative instruments				310			148
Other long-term assets				1,012			397
Deferred tax assets				45			31
Total assets			$	24,361		$	23,601
Liabilities and shareholders' equity
Current liabilities:
	Short-term borrowings		$	650		$	650
	Accounts payable and accrued liabilities			1,839			2,344
	Income tax payable			52			22
	Current portion of provisions			6			7
	Current portion of long-term debt			918			1,170
	Current portion of derivative instruments			52			63
	Unearned revenue			403			350
Total current liabilities				3,920			4,606
Provisions				37			40
Long-term debt				13,536			12,173
Derivative instruments				20			83
Other long-term liabilities				226			328
Deferred tax liabilities				1,704			1,702
Total liabilities				19,443			18,932
Shareholders' equity				4,918			4,669
Total liabilities and shareholders' equity			$	24,361		$	23,601
Rogers Communications Inc. Unaudited Interim Condensed Consolidated Statements of Cash Flows (In millions of Canadian dollars)
				Three months ended March 31
				2014			2013
Cash provided by (used in):
Operating activities:
	Net income for the period		$	307		$	353
	Adjustments to reconcile net income to net cash flows from operating activities:
	Depreciation and amortization			519			450
	Program rights amortization			16			13
	Finance costs			225			181
	Income tax expense			106			138
	Pension contributions, net of expense			(85)			(3)
	Stock-based compensation expense			5			58
	Other			(6)			(1)
				1,087			1,189
	Change in non-cash operating working capital items			(309)			(47)
				778			1,142
	Income taxes paid			(134)			(115)
	Interest paid			(236)			(222)
Cash provided by operating activities				408			805
Investing activities:
	Additions to property, plant and equipment			(488)			(464)
	Change in non-cash working capital items related to
	property, plant and equipment			(17)			(52)
	Acquisitions and other strategic transactions			(658)			(241)
	Additions to program rights			(7)			(14)
	Other			(3)			(24)
Cash used in investing activities				(1,173)			(795)
Financing activities:
	Issuance of long-term debt			2,082			1,030
	Repayment of long-term debt			(1,221)			-
	Payment on settlement of cross-currency interest rate
	exchange agreements and forward contracts			(2,115)			-
	Proceeds on settlement of cross-currency interest rate
	exchange agreements and forward contracts			2,150			-
	Transaction costs incurred			(27)			(15)
	Proceeds received on short-term borrowings			-			400
	Dividends paid			(224)			(204)
Cash provided by financing activities				645			1,211
Change in cash and cash equivalents				(120)			1,221
Cash and cash equivalents, beginning of period				2,301			213
Cash and cash equivalents, end of period			$	2,181		$	1,434
The change in non-cash operating working capital items is as follows:
	Accounts receivable		$	199		$	173
	Other current assets			(100)			(45)
	Accounts payable and accrued liabilities			(461)			(183)
	Unearned revenue			53			8
			$	(309)		$	(47)

About Forward-Looking Information 

This earnings release includes "forward-looking information" within the meaning of applicable securities laws, and assumptions about, among other things, our business, operations and financial performance and condition approved by management on the date of this earnings release. This forward-looking information and these assumptions include, but are not limited to, statements about our objectives and strategies to achieve those objectives, and about our beliefs, plans, expectations, anticipations, estimates or intentions.

Forward-looking information and statements

• typically include words like could, expect, may, anticipate, assume, believe, intend, estimate, plan, project, guidance, outlook and similar expressions, although not all forward-looking information and statements include them
• include conclusions, forecasts and projections that are based on our current objectives and strategies and on estimates, expectations, assumptions and other factors, most of which are confidential and proprietary and that we believe to be reasonable at the time they were applied but may prove to be incorrect
• were approved by our management on the date of this earnings release.

Our forward-looking information and statements include forecasts and projections related to the following items, among others:

• revenue
• adjusted operating profit
• property, plant and equipment expenditures
• cash income tax payments
• free cash flow
• dividend payments
• expected growth in subscribers and the services they subscribe to
• the cost of acquiring subscribers and deployment of new services
• continued cost reductions and efficiency improvements
• the growth of new products and services
• all other statements that are not historical facts.

We base our conclusions, forecasts and projections on the following factors, among others:

• general economic and industry growth rates
• currency exchange rates
• product pricing levels and competitive intensity
• subscriber growth
• pricing, usage and churn rates
• changes in government regulation
• technology deployment
• availability of devices
• timing of new product launches
• content and equipment costs
• the integration of acquisitions
• industry structure and stability.

Except as otherwise indicated, this earnings release and our forward-looking statements do not reflect the potential impact of any non-recurring or other special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations or other transactions that may be considered or announced or may occur after the date the statement containing the forward-looking information is made.

Risks and uncertainties

Actual events and results can be substantially different from what is expressed or implied by forward-looking information because of risks, uncertainties and other factors, many of which are beyond our control, including but not limited to:

• new interpretations and new accounting standards from accounting standards bodies
• economic conditions
• technological change
• the integration of acquisitions
• unanticipated changes in content or equipment costs
• changing conditions in the entertainment, information and communications industries
• regulatory changes
• litigation and tax matters
• the level of competitive intensity
• the emergence of new opportunity

These factors can also affect our objectives, strategies and intentions. Many of these factors are beyond our control or our current expectations. Should one or more of these risks, uncertainties or other factors materialize, our objectives, strategies or intentions change, or any other factors or assumptions underlying the forward-looking information prove incorrect, our actual results and our plans could vary significantly from what we currently foresee.

Accordingly, we warn investors to exercise caution when considering statements containing forward-looking information and caution them that it would be unreasonable to rely on such statements as creating legal rights regarding our future results or plans. We are under no obligation (and we expressly disclaim any such obligation) to update or alter any statements containing forward-looking information or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law. All of the forward-looking information in this earnings release is qualified by the cautionary statements herein.

Before you make an investment decision

Before making any investment decisions and for a detailed discussion of the risks, uncertainties and environment associated with our business, fully review the sections of our first quarter MD&A entitled "Updates to Risks and Uncertainties" and "Regulatory Developments", and also fully review the sections Annual MD&A. Our 2013 Annual MD&A can be found online at rogers.com/investors, sedar.com and sec.gov or is available directly from Rogers.

About Rogers Communications Inc.

Rogers Communications is a leading diversified public Canadian communications and media company. We are Canada's largest provider of wireless communications services and one of Canada's leading providers of cable television, high-speed Internet and telephony services to consumers and businesses. Through Rogers Media, we are engaged in radio and television broadcasting, televised shopping, magazines and trade publications, sports entertainment, and digital media.

We are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange RCI.

For further information about the Rogers group of companies, please visit rogers.com/investors. Information in or connected to our website is not part of or incorporated into this earnings release.

Quarterly Investment Community Teleconference

The first quarter 2014 results teleconference will be held on:

• April 21, 2014
• 4:30 p.m. Eastern Time
• webcast available at rogers.com/webcast

A rebroadcast will be available at rogers.com/investors on the Events and Presentations page for at least two weeks following the teleconference. Additionally, investors should note that from time to time Rogers management presents at brokerage sponsored investor conferences.  Most often, but not always, these conferences are webcast by the hosting brokerage firm, and when they are webcast, links are made available on Rogers' website at rogers.com/events and are placed there generally at least two days before the conference.

For More Information

You can find additional information relating to us, including our Annual Information Form on our website (rogers.com/investors), on SEDAR (sedar.com) and on EDGAR (sec.gov), or by e-mailing your request to investor.relations@rci.rogers.com. Information on or connected to these and other websites referenced above is not part of or incorporated into this earnings release.

You can also go to rogers.com/investors for information about our governance practices, corporate social responsibility reporting, a glossary of communications and media industry terms, and additional information about our business.

SOURCE Rogers Communications Inc.