Rogers Communications Inc. (ticker: RCI.B.TO, exchange: Toronto Stock Exchange (.TO))
News Release -
20-Apr-2000
Rogers AT&T Wireless Reports Dramatic First Quarter Revenue Growth
TORONTO, April 20 /CNW/ - ROGERS CANTEL MOBILE COMMUNICATIONS INC. now
operating under the co-brand ROGERS AT&T WIRELESS ("Rogers Wireless") today
announced its results for the first quarter ended March 31, 2000. Financial
highlights, which are in thousands of Canadian dollars (except per share
data), are as follows:
<<
Three Months Ended March 31
---------------------------
Percent
2000 1999 Change
---- ---- -------
Revenue $348,730 $296,225 17.7%
Operating income before depreciation,
and amortization 98,801 91,686 7.8%
Loss (10,629) (24,384) NA
Loss per share (9 cents) (26 cents) NA
>>
Commenting on the Company's results, Charles E. Hoffman, Rogers Wireless'
President and CEO said, "The Company's dramatic growth in the past year led to
a substantial increase in revenue in the first quarter of 2000. And, despite
the costs associated with high gross sales and the rebranding of the company,
operating income improved nearly 8% year over year.
In the quarter, we reached an all-time high in customer satisfaction,
launched the new customer care and billing system in Montreal and the eastern
provinces, to be followed systematically by the implementation of the system
in the rest of Canada, and proudly received the Vendor of the Year award from
one of our key distribution partners, Future Shop, verifying the continuing
strength of our distribution strategy.
Churn was unacceptably high at 2.27%; however, pricing at the low end of
the market and seasonal trends played a large role, and we have taken the
steps necessary to address this challenge."
FIRST QUARTER 2000 VS. FIRST QUARTER 1999
-----------------------------------------
Total revenue was $348.7 million, up $52.5 million or 17.7% from $296.2
million in the first quarter of the prior year. The increase in revenue was
due primarily to subscriber growth. Operating income before depreciation and
amortization was $98.8 million, up $7.1 million or 7.8% from $91.7 million in
the first quarter of the prior year, while operating income margin before
depreciation and amortization declined to 28.3%, from 31.0% in the first
quarter of the prior year.
Revenue and Subscribers
Cellular Services revenue was $293.4 million, up $43.3 million or 17.3%
from the first quarter of the prior year. Revenue was impacted by a 23.1%
increase in the average number of cellular subscribers, and partially offset
by a 4.0% decline in Average Revenue Per User or ("ARPU") compared to the
first quarter of the prior year.
Revenue from Other Operations (including Equipment Sales, Paging and Data
Services) totalled $55.4 million, an increase of $9.2 million, or 19.9% from
the first quarter of the prior year.
At March 31, 2000, Rogers Wireless had 2,650,300 total subscribers
(Digital PCS, cellular, messaging and data), an increase of 590,300 or 28.7%,
from 2,060,000 at March 31, 1999.
Gross cellular activations totalled 177,100 in the first quarter an
increase of 29,400 or 19.9%, from the prior year's first quarter. In the first
quarter Wireless added 50,100 cellular customers (net of disconnects),
compared to 62,600 in the first quarter of the prior year. At March 31, 2000,
Rogers Wireless had a total of 2,203,100 cellular subscribers. At the end of
the quarter, approximately 970,000 subscribers were on Digital PCS,
representing approximately 44% of the Rogers Wireless's total cellular
subscriber base, and 322,400 were on the prepaid cellular service, "Pay As You
Go".
The average monthly disconnect or "churn" rate was 2.27%, as compared to
1.74% in the first quarter of the prior year. Churn in the quarter was
primarily attributable to disconnects in the lower revenue market segment.
ARPU was $45.22, down $1.86 or 4.0% from $47.08 in the first quarter of
1999. The decline in ARPU was primarily due to an increase in lower revenue
pre-paid service plans in the overall customer base. ARPU in post-paid plans
increased $1.03 or 2.1% over the first quarter of the prior year to $51.00.
Average monthly usage per cellular customer during the first quarter was 227
minutes, up 23.4% from 184 minutes in the first quarter of the prior year.
Management believes these post-paid ARPU and usage results are strong leading
indicators of continued revenue growth in future periods.
The number of messaging and data customers declined by 4,900 in the first
quarter, as compared to a decline of 100 in the prior year's first quarter.
The average monthly churn rate for messaging and data was 3.11% versus 2.95%
in the first quarter of 1999. At March 31, 2000, Rogers Wireless had a total
of 447,100 messaging and data subscribers, an increase of 72.2% since March
31, 1999 due to both customer growth and the acquisition of Shaw Paging.
Wireless Operating Expenses
Rogers Wireless operating expenses before sales and marketing costs were
$101.1 million, an increase of $16.8 million or 19.9% from $84.3 million in
the first quarter of 1999. Operating expenses in the first quarter of the
current year included certain one-time costs associated with rebranding the
company, as well as training costs associated with the company's new customer
care and billing system. Average monthly wireless operating expenses before
sales and marketing costs on a per subscriber basis were $14.06, a decline of
$0.83 or 5.6% from $14.89 in the prior year's first quarter.
Sales and marketing costs were $99.0 million, an increase of $20.4
million or 26.0% from $78.5 million in the first quarter of 1999, primarily
due to increased customer retention costs and the increased number of gross
activations. Sales and marketing costs measured on a per gross addition basis
were $462, an increase of $2 from $460 in the first quarter of the prior year.
Fixed Charges
Depreciation and amortization increased 13.9% over the prior year period
due primarily to the increase in fixed assets.
Interest expense declined 34.6% over the prior year period primarily as a
result of significantly lower debt levels in the current quarter versus the
prior year's first quarter.
Net Income
The increase over the prior year's first quarter in operating income
before depreciation and amortization was offset by the increase in
depreciation and amortization, resulting in a loss of $10.6 million, or 9
cents per share in the quarter. This compares to a loss in the prior year's
first quarter of $24.4 million, or 26 cents per share.
Liquidity and Capital Resources
Rogers Wireless' cash flow from operations (before changes in working
capital) was $67.4 million, an increase of $23.3 million or 52.7% from $44.1
million in the first quarter of the prior year. Capital expenditures were
$90.1 million compared to $88.8 million in the first quarter of the prior
year.
Rogers Wireless had a cash flow shortfall (cash flow from operations less
working capital changes, capital expenditures and investments) of $19.6
million, compared to $46.5 million in the first quarter of 1999. At March 31,
2000, long-term debt net of cash on hand, was $1.418 billion, an increase of
$3.8 million from December 31, 1999.
Subsequent to the end of the quarter, Moody's Investors Services upgraded
the Company's senior debt rating to Baa3 (which is considered an investment
grade rating) and the Company's subordinate debt rating to Ba2.
Rogers Wireless is Canada's largest wireless communications services
provider, with over 2.7 million customers from coast to coast. Rogers Wireless
provides a complete range of wireless solutions including Digital PCS,
cellular, paging, Interactive Messaging, and wireless data services. Rogers
Wireless is wholly owned and operated by Rogers Cantel Mobile Communications
Inc. (TSE: RCM.B; NYSE: RCN), which in turn is 51% owned by Rogers
Communications and 33.3% owned equally by AT&T Corp. and British
Telecommunications plc.
(see attached financial tables)
<<
Rogers Cantel Mobile Communications Inc.
----------------------------------------------------
Consolidated Statements of Income
----------------------------------------------------
Three Months Ended
March 31
(in thousands of dollars
except per share data) 2000 1999
---------------------------------------------------- --------------
(Unaudited) (Unaudited)
Revenue
Cellular Services $ 293,357 $ 250,054
Equipment Sales 40,280 35,309
Messaging and Data Services 15,093 10,862
---------------------------------------------------- --------------
$ 348,730 $ 296,225
---------------------------------------------------- --------------
---------------------------------------------------- --------------
Operating income before depreciation
and amortization $ 98,801 $ 91,687
Depreciation and amortization 77,999 68,499
---------------------------------------------------- --------------
Operating income before undernoted
items 20,802 23,188
Interest expense 30,343 46,428
Other expense (income) (39) 12
---------------------------------------------------- --------------
Loss before income taxes (9,502) (23,252)
Income taxes 1,127 1,132
---------------------------------------------------- --------------
Loss for the period $ (10,629) $ (24,384)
---------------------------------------------------- --------------
---------------------------------------------------- --------------
Loss per share $ (0.09) $ (0.26)
Loss - US GAAP $ (17,950) $ (14,408)
Loss per share - US GAAP $ (0.15) $ (0.15)
Average shares outstanding
for the period (in thousands) 122,318 92,963
-------------------------------------------------------------------------
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Rogers Cantel Mobile Communications Inc.
----------------------------------------------------
Consolidated Statements of Cash Flows
----------------------------------------------------
Three Months Ended
March 31
(in thousands of dollars) 2000 1999
---------------------------------------------------- --------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Loss for the period $ (10,629) $ (24,384)
Adjustments to reconcile
net income to net cash flow:
Depreciation and amortization 77,999 68,499
---------------------------------------------------- --------------
67,370 44,115
Changes in:
Accounts receivable 18,750 16,424
Other assets (29,098) (37,847)
Accounts payable, accrued
liabilities and unearned revenue 11,482 28,798
Amounts due to/from related
companies, net 2,037 (9,117)
---------------------------------------------------- --------------
70,541 42,373
---------------------------------------------------- --------------
Cash flows from financing activities:
Issue of long-term debt - 34,331
Repayment of notes payable to parent - (26,000)
Repayment of long-term debt (345) -
Issue of capital stock 5,736 98
---------------------------------------------------- --------------
5,391 8,429
---------------------------------------------------- --------------
Cash flows from investing activities:
Additions to fixed assets (90,129) (88,839)
---------------------------------------------------- --------------
Increase (decrease) in cash (14,197) (38,037)
Cash deficiency, beginning of period (8,711) (5,779)
---------------------------------------------------- --------------
Cash deficiency, end of period $ (22,908) $ (43,816)
------------------------------------------------------------------------
------------------------------------------------------------------------
Cash is defined as cash and short-term deposits less bank advances.
Rogers Cantel Mobile Communications Inc.
----------------------------------------------------
Consolidated Balance Sheets
----------------------------------------------------
March 31 December 31
(in thousands of dollars) 2000 1999
------------------------------------------------------------------------
(Unaudited) (Audited)
Assets
Fixed assets $ 1,793,862 $ 1,778,545
Goodwill 11,417 12,040
Accounts receivable 160,295 179,045
Due from parent and affiliated
companies - 514
Deferred charges and other assets 177,129 146,473
------------------------------------------------------------------------
$ 2,142,703 $ 2,116,617
------------------------------------------------------------------------
------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Liabilities:
Bank advances $ 22,908 $ 8,711
Long-term debt 1,417,569 1,413,792
Accounts payable
and accrued liabilities 330,031 325,474
Due to parent and affiliated companies 1,523 -
Unearned revenue 68,184 61,259
------------------------------------------------------------------------
1,840,215 1,809,236
Shareholders' equity 302,488 307,381
------------------------------------------------------------------------
$ 2,142,703 $ 2,116,617
------------------------------------------------------------------------
------------------------------------------------------------------------
>>
See attached note to interim financial statements.
This news release may include certain forward-looking statements that
involve risks and uncertainties. The Company cautions that actual future
performance will be affected by a number of factors, including technological
change, regulatory change, and competitive factors many of which are beyond
the Company's control. Therefore future events and results may vary
substantially from what the Company currently foresees. Additional information
identifying risks and uncertainties is contained in the Company's most recent
Annual Information Form filed with the Ontario Securities Commission.
Rogers Cantel Mobile Communications Inc.
Note to Interim Financial Statements
Effective January 1, 2000, the Company adopted new accounting
recommendations related to income taxes.
Under this new accounting standard, future tax assets and liabilities are
recognised for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Future tax assets and liabilities are measured
using enacted or substantively enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.
The new accounting standard requires that the recording of deferred tax
assets meet certain realisation criteria. Where the criteria for realisation
is not met, a valuation allowance is recorded to offset the deferred tax
asset. When circumstances change and realisation criteria are met, a
previously unrecognised deferred tax asset will be recorded and the valuation
allowance appropriately adjusted.
The Company has determined that the realisation of its net deferred
income tax asset of $258,592,000, arising from income tax loss carryforwards
and temporary differences related to fixed assets and long term debt does not
currently meet the criteria of realisation of the new standard. Therefore, a
valuation allowance has been recorded against this deferred income tax asset
at January 1, 2000. Prior years' financial statements have not been restated
to apply the new accounting standard.
%SEDAR: 00003770EB
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Rogers Communications Inc.
