Rogers Communications Reports First Quarter 2018 Results

• Total service revenue and adjusted EBITDA growth of 5% and 14%, respectively, under new IFRS accounting rules (or 6% and 11%, respectively, under prior accounting basis)
• Strong financial and subscriber performance in Wireless
• Service revenue and adjusted EBITDA growth of 5% and 13%, respectively, and adjusted EBITDA margin expansion of 120 basis points under new IFRS accounting rules (or 7% and 9%, respectively, and 80 basis points under prior accounting basis)
• Postpaid net additions of 95,000, up 35,000 and the highest Q1 postpaid net additions in nine years
• Postpaid churn of 1.08%, improved 2 basis points and the best Q1 postpaid churn rate in fifteen years
• Cable revenue and adjusted EBITDA growth of 1% and 4%, respectively
• Cable adjusted EBITDA margin expansion of 140 basis points
• Continued strong Internet revenue growth of 7%
• Ignite TV offered to our full employee base of 15,000 in our Cable footprint in Ontario as we prepare for a commercial launch later this year

TORONTO, April 19, 2018 /CNW/ - Rogers Communications Inc. today announced its unaudited financial and operating results for the first quarter ended March 31, 2018 in accordance with the newly adopted IFRS 15, Revenue from contracts with customers (IFRS 15), which only impacted our Wireless and Consolidated results. We have provided supplementary information, entitled "prior accounting basis", that reflects our previous revenue recognition policies, and draw attention to changes to our realigned reportable segments and adoption of adjusted EBITDA.

Consolidated Financial Highlights

"We delivered another strong quarter with really solid financial and operating results led by our largest segment, Wireless," said Joe Natale, President and Chief Executive Officer. "Our team delivered on all key Wireless metrics, growing subscribers, revenue, and adjusted EBITDA, while continuing to reduce customer churn. In Cable, we grew revenue and margins driven by our competitive advantage in Internet. At the same time, we continue to make great progress on our key long-term plan to improve the customer experience and drive margin improvements and sustainable growth."

Operational Highlights

Higher revenue
Total revenue increased 8% this quarter (or 6% under the prior accounting basis), largely driven by Wireless service revenue growth of 5% (or 7% under the prior accounting basis). Growth in Wireless was a result of our balanced approach to continue monetizing the increasing demand for data along with attracting a desirable mix of subscribers to our brands. Wireless equipment revenue grew 27% (or 8% under the prior accounting basis) as we activated more devices, driven by having our highest level of first quarter gross additions of 377,000 and lowest churn of 1.08% in 15 years.

Compared to the 7% growth under the prior accounting basis, Wireless service revenue grew 5% under IFRS 15 accounting as the device subsidy recovery component of our revenue is largely removed from our service revenue. This is offset by higher equipment revenue growth (27% vs. 8%) as more equipment revenue is recognized upon activation at its relative fair value of the total consideration expected to be received over the contract term. It is important to note that IFRS 15 has not affected the underlying economics of our business. The overall cash flow from the customer does not change and the fundamental drivers of customer lifetime value do not change.

Cable revenue increased 1% as Internet revenue growth of 7% continues to drive the Cable segment and our ability to offer Ignite Gigabit Internet over our entire Cable footprint continues to be our differentiator. This was coupled with the continuing growing demand for speed, with 56% of our residential Internet base now on speeds of 100 Mbps or higher, up from 48% in the prior year. We are excited with our roadmap to the Connected Home through Ignite TV as we have completed our Ignite TV trials and have now offered the next generation of our TV platform to our full employee base of 15,000 in our Cable footprint in Ontario as we prepare for a commercial launch later this year.

Media revenue, for which sports continues to be the primary driver of growth, increased 12% this quarter driven by a higher distribution to the Toronto Blue Jays from Major League Baseball.

Higher adjusted EBITDA and margins
Adjusted EBITDA increased 14% this quarter (or 11% under the prior accounting basis) primarily as a result of Wireless adjusted EBITDA growth of 13% (or 9% under the prior accounting basis) due to the strong growth in revenue as well as continued progress on our cost efficiency mandate, which led to margin expansion of 120 basis points (or 80 basis points under the prior accounting basis).

Cable adjusted EBITDA increased 4% this quarter primarily from the ongoing product mix shift to higher-margin Internet services and various cost efficiencies, which gave rise to a margin of 44.7% and corresponding expansion of 140 basis points.

Media adjusted EBITDA increased this quarter primarily as a result of higher revenue, including the higher distribution from Major League Baseball, which led to a margin of 4.3%.

Higher net income and adjusted net income
Net income and adjusted net income both increased this quarter, primarily as a result of higher adjusted EBITDA, partially offset by the higher related income tax expense.

During the quarter, we continued to manage our weighted average cost of borrowings by issuing US$750 million senior notes due in 2048 at a rate of 4.3%. At the same time, we entered into debt derivatives to convert all interest and principal payment obligations to Canadian dollars. In addition, in April 2018 in connection with our announcement in March 2018, we repaid our US$1.4 billion 6.8% senior notes that were otherwise due in August 2018.

Substantial free cash flow affords financial flexibility and supports network evolution
This quarter, we continued to generate substantial cash flow from operating activities and free cash flow of $885 million and $384 million, respectively. Free cash flow increased as a result of higher adjusted EBITDA and lower cash income taxes, partially offset by our planned increase in capital expenditures compared to last year predominantly to invest in our networks. In Wireless, we continue to densify and augment our LTE network to improve quality, capacity, and coverage by adding the latest generation of 4.5G/5G-ready radio equipment to existing cell sites and adding additional macro, micro, and small cells, while redistributing 2G and 3G spectrum to build a solid 4.5G foundation primed to deliver 5G to Canadians. We recently tested and showcased several innovative use cases and applications using both 4.5G and 5G radio technologies at the Rogers Centre, a very challenging, real-world, wireless environment. We also evolved our exclusive Canadian technology partnership with Vodafone Group Plc to leverage their global expertise in R&D technology, including 5G, IT, and network across consumer and enterprise.

Our solid financial results enabled us to continue to make investments in our network, strengthen our balance sheet and liquidity, and still return substantial dividends to shareholders. We paid $247 million in dividends this quarter. We ended the first quarter with a debt leverage ratio (adjusted net debt / adjusted EBITDA) of 2.7.

We announced that the TSX has accepted a notice of our intention to commence a normal course issuer bid (NCIB) that will allow us to purchase, during the twelve-month period beginning April 24, 2018 and ending April 23, 2019, the lesser of 35.8 million RCI Class B Non-Voting common shares (Class B Non-Voting Shares) and that number of Class B Non-Voting Shares that can be purchased under the NCIB for an aggregate purchase price of $500 million.

About Rogers

Rogers is a leading diversified Canadian communications and media company that's working to deliver a great experience to our customers every day. We are Canada's largest provider of wireless communications services and one of Canada's leading providers of cable television, high-speed Internet, information technology, and telephony services to consumers and businesses. Through Rogers Media, we are engaged in radio and television broadcasting, sports, televised and online shopping, magazines, and digital media. Our shares are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI).

Quarterly Investment Community Teleconference

Our first quarter 2018 results teleconference with the investment community will be held on:

• April 19, 2018
• 4:30 p.m. Eastern Time
• webcast available at investors.rogers.com
• media are welcome to participate on a listen-only basis

A rebroadcast will be available at investors.rogers.com 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 investors.rogers.com.

For More Information

You can find more information relating to us on our website (investors.rogers.com), on SEDAR (sedar.com), and on EDGAR (sec.gov), or you can e-mail us at investor.relations@rci.rogers.com. Information on or connected to these and any other websites referenced in this earnings release is not part of, or incorporated into, this earnings release.

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

About this Earnings Release

This earnings release contains important information about our business and our performance for the three months ended March 31, 2018, as well as forward-looking information about future periods. This earnings release should be read in conjunction with our First Quarter 2018 MD&A; our First Quarter 2018 Interim Condensed Consolidated Financial Statements and notes thereto, which have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB); our 2017 Annual MD&A; our 2017 Annual Audited Consolidated Financial Statements and notes thereto, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB; and our other recent filings with Canadian and US securities regulatory authorities, including our Annual Information Form, which are available on SEDAR at sedar.com or EDGAR at sec.gov, respectively.

Effective January 1, 2018, we adopted new accounting standards, as discussed in our First Quarter 2018 MD&A and this earnings release. The adoption of IFRS 15, Revenue from contracts with customers (IFRS 15) has had a significant effect on our reported results in our Wireless segment. To assist users in understanding the effects of adopting IFRS 15, we have provided certain supplementary information in this earnings release on a basis consistent with our former revenue recognition accounting policies prior to adopting IFRS 15 ("Prior Accounting Basis" amounts; see "Non-GAAP Measures" for more information). These former revenue recognition policies are disclosed in note 5 to our 2017 Annual Audited Consolidated Financial Statements.

For more information about Rogers, including product and service offerings, competitive market and industry trends, our overarching strategy, key performance drivers, and objectives, see "Understanding Our Business", "Our Strategy, Key Performance Drivers, and Strategic Highlights", and "Capability to Deliver Results" in our 2017 Annual MD&A.

All dollar amounts are in Canadian dollars unless otherwise stated and are unaudited. All percentage changes are calculated using the rounded numbers as they appear in the tables. Information is current as at April 19, 2018 and was approved by the Audit and Risk Committee of RCI's Board of Directors (the Board) on that date. 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 its subsidiaries. RCI refers to the legal entity Rogers Communications Inc., not including its subsidiaries. Rogers also holds interests in various investments and ventures.

In this earnings release, this quarter, the quarter, or the first quarter refer to the three months ended March 31, 2018, unless the context indicates otherwise. All results commentary is compared to the equivalent periods in 2017 or as at December 31, 2017, as applicable, unless otherwise indicated.

Reportable Segments

Effective January 1, 2018, we report our results of operations in three reportable segments. Each segment and the nature of its business is as follows:

Wireless and Cable are operated by our wholly-owned subsidiary, Rogers Communications Canada Inc. (RCCI), and certain of our other wholly-owned subsidiaries. Media is operated by our wholly-owned subsidiary, Rogers Media Inc., and its subsidiaries.

Effective January 1, 2018, we redefined our reportable segments as a result of technological evolution and the increased overlap between the various product offerings within our legacy Cable and legacy Business Solutions reportable segments, as well as how we allocate resources amongst, and the general management of, our reportable segments. Effective January 1, 2018, the results of our legacy Cable segment, legacy Business Solutions segment, and our Smart Home Monitoring products are presented within a redefined Cable segment. Financial results related to our Smart Home Monitoring products were previously reported within Corporate items and intercompany eliminations. We have retrospectively amended our 2017 comparative segment results to account for this redefinition.

Additionally, effective January 1, 2018, we commenced using adjusted EBITDA as the key measure of profit for the purpose of assessing performance for each segment and to make decisions about the allocation of resources. As such, we have introduced adjusted EBITDA as a new non-GAAP measure in our financial reports this year. This measure replaced our previous adjusted operating profit non-GAAP measure. We believe adjusted EBITDA more fully reflects segment and consolidated profitability. The difference between adjusted operating profit and adjusted EBITDA is that adjusted EBITDA includes stock-based compensation expense. We also believe that our decision-making processes will not be significantly affected through the use of adjusted EBITDA. Use of this measure changed our definition of free cash flow. Adjusted EBITDA and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These 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.

Summary of Consolidated Financial Results

As discussed above, we have made several significant changes to our reporting effective January 1, 2018. We have adopted IFRS 15, which significantly affects revenue recognition in our Wireless segment (see "Critical Accounting Policies and Estimates"). We have realigned our reportable segments such that our Cable reportable segment includes the results of our legacy Cable segment, our legacy Business Solutions segment, and the results related to our Smart Home Monitoring products (see "Reportable Segments"). We have adopted adjusted EBITDA as our key profit measure, which includes stock-based compensation expense (see "Reportable Segments" and "Non-GAAP Measures"). All affected results presented in this earnings release (including the prior accounting basis results) have been retrospectively amended to incorporate the reportable segment and profit measure changes.

Results of our Reportable Segments

WIRELESS

Wireless Financial Results

Wireless Subscriber Results ¹

Service revenue
The 5% increase in service revenue (or 7% under the prior accounting basis) this quarter was a result of:

• higher blended ARPU, primarily as a result of the increased mix of subscribers on higher-rate plans from our various brands; and
• larger postpaid and prepaid subscriber bases.

In our business model on term plans, we usually provide a device subsidy by charging for only a portion of the device value upfront. Economically, the device subsidy is recovered as part of the monthly service fees. Under the prior accounting basis, we recorded the total monthly fees as service revenue. Under IFRS 15, the value of the device subsidy recovery component is now substantially removed from our service revenue, and as such, service revenue growth was lower compared to the prior accounting basis. Consequently, blended ARPU is lower than under the prior accounting basis and does not fully reflect the average amount to be paid by a customer each month. To assist in understanding the underlying economics, we are now disclosing blended average billings per user (ABPU), which approximates blended ARPU under the prior accounting basis and also reflects the same growth rate year on year.

The 5% increase in blended ABPU and 3% increase in blended ARPU this quarter were a result of the increased service revenue, as discussed above.

We believe the increases in gross and net additions to our postpaid subscriber base and the lower postpaid churn this quarter were a result of our strategic focus on enhancing the customer experience by improving our customer service and continually increasing the quality of our network.

Equipment revenue
The 27% increase in equipment revenue (or 8% under the prior accounting basis) this quarter was a result of:

• higher postpaid gross additions; and
• an increase in device upgrades by existing subscribers.

Under IFRS 15, equipment revenue was higher and is recognized upon device activation at its relative portion of the fair value of the total consideration expected to be received over the contract term. Previously under the prior accounting basis, only the cash received upfront for the device would be recognized as equipment revenue.

Operating expenses
Cost of equipment
The 26% increase in the cost of equipment this quarter was a result of:

• a continued shift in the product mix of device sales towards higher-cost smartphones;
• the increase in device upgrades by existing subscribers as discussed above; and
• higher postpaid gross additions.

Other operating expenses
The 4% decrease in other operating expenses this quarter was a result of various cost efficiencies and productivity initiatives.

Under IFRS 15, compared to the prior accounting basis, bad debt expense was higher and is associated with higher upfront equipment revenue. In addition, commission expense is now deferred and amortized over the contract term rather than expensed as incurred under the prior accounting basis.

Adjusted EBITDA
The 13% increase in adjusted EBITDA this quarter (or 9% under the prior accounting basis) was a result of the strong flow-through of service revenue growth discussed above.

CABLE

Cable Financial Results

Cable Subscriber Results ¹

Revenue
The 1% increase in revenue this quarter was a result of:

• the movement of Internet customers to higher speed and usage tiers;
• the impact of service pricing changes; and
• a larger Internet subscriber base; partially offset by
• a lower subscriber base for our Television products.

Internet revenue
The 7% increase in Internet revenue this quarter was a result of:

• general movement of customers to higher speed and usage tiers of our Internet offerings, with 56% of our residential Internet base on plans of 100 megabits per second or higher (2017 - 48%);
• a larger Internet subscriber base; and
• the impact of Internet service pricing changes; partially offset by
• promotional pricing provided to subscribers.

Television revenue
The 3% decrease in Television revenue this quarter was a result of:

• the decline in Television subscribers over the past year; partially offset by
• the impact of Television service pricing changes, net of promotional pricing provided to subscribers.

Phone revenue
The 9% decrease in Phone revenue this quarter was a result of promotional pricing provided to subscribers.

Operating expenses
The 1% decrease in operating expenses this quarter was a result of:

• relative shifts in product mix to higher-margin Internet offerings from conventional Television broadcasting; and
• various cost efficiencies and productivity initiatives.

Adjusted EBITDA
The 4% increase in adjusted EBITDA this quarter was a result of the revenue and expense changes discussed above.

MEDIA

Media Financial Results

Revenue
The 12% increase in revenue this quarter was a result of:

• a higher distribution to the Toronto Blue Jays from Major League Baseball and the earlier start to the regular season this year; and
• higher Sportsnet subscription revenue.

Excluding the incremental year on year difference pertaining to distributions to the Toronto Blue Jays from Major League Baseball, revenue would have increased by 4% this quarter.

Operating expenses
The 1% increase in operating expenses this quarter was a result of:

• higher Toronto Blue Jays costs, driven by the earlier start to the regular season this year; and
• higher programming costs.

Adjusted EBITDA
The increase in adjusted EBITDA this quarter was a result of the revenue and expense changes discussed above.

CAPITAL EXPENDITURES

Wireless
The increase in capital expenditures in Wireless this quarter was a result of investments made to upgrade our wireless network to continue delivering reliable performance for our customers. We have continued augmenting our existing LTE network with 4.5G technology investments that are also designed to migrate to a 5G environment.

Cable
The increase in capital expenditures in Cable this quarter was a result of higher investments in customer premise equipment and higher investments in information technology infrastructure and network, partially related to our forthcoming Ignite TV product and to enhance the quality of our cable network. We continued upgrading our hybrid fibre-coaxial infrastructure with additional fibre deployments and further DOCSIS technology enhancements. These deployments and enhancements will lower the number of homes passed per node and incorporate the latest technologies to help deliver more bandwidth and an even more reliable customer experience.

Media
The increase in capital expenditures this quarter reflects higher investments in our broadcast infrastructure and the Rogers Centre, partially offset by lower investments in information technology.

Corporate
Corporate capital expenditures were stable this quarter and primarily reflect investments in premise improvements and information technology.

Proceeds on disposition
We sold certain vacant land assets this quarter for net proceeds of $15 million.

Capital intensity
Capital intensity increased this quarter as a result of higher capital expenditures as discussed above, partially offset by higher total revenue.

Critical Accounting Policies and Estimates

See our 2017 Annual MD&A and our 2017 Annual Audited Consolidated Financial Statements and notes thereto for a discussion of the accounting policies and estimates that are critical to the understanding of our business operations and the results of our operations.

New accounting pronouncements adopted in 2018
We adopted new amendments to the following accounting standards effective for our interim and annual consolidated financial statements commencing January 1, 2018. These changes did not have a material impact on our financial results.

• IFRS 2, Share-based payment
• IFRIC 22, Foreign currency transactions and advance consideration

Additionally, we adopted IFRS 15 and IFRS 9, Financial instruments (IFRS 9) effective January 1, 2018. The effects these two new pronouncements have on our results and operations are described below.

IFRS 15

Effective January 1, 2018, we adopted IFRS 15. IFRS 15 supersedes previous accounting standards for revenue, including IAS 18, Revenue (IAS 18) and IFRIC 13, Customer loyalty programmes (IFRIC 13).

IFRS 15 introduced a single model for recognizing revenue from contracts with customers. This standard applies to all contracts with customers, with only some exceptions, including certain contracts accounted for under other IFRSs. The standard requires revenue to be recognized in a manner that depicts the transfer of promised goods or services to a customer and at an amount that reflects the consideration expected to be received in exchange for transferring those goods or services. This is achieved by applying the following five steps:

IFRS 15 also provides guidance relating to the treatment of contract acquisition and contract fulfillment costs.

The application of this new standard has significant impacts on our reported Wireless results, specifically with regards to the timing of recognition and classification of revenue, and the treatment of costs incurred in acquiring customer contracts. The timing of recognition and classification of revenue is affected because, at contract inception, IFRS 15 requires the estimation of total consideration over the contract term and the allocation of that consideration to all performance obligations in the contract based on their relative stand-alone selling prices. This affects our Wireless arrangements that bundle equipment and service together into monthly service fees, which results in an increase to equipment revenue recognized at contract inception and a decrease to service revenue recognized over the course of the contracts. The application of IFRS 15 does not affect our cash flows from operations or the methods and underlying economics through which we transact with our customers.

The treatment of costs incurred in acquiring customer contracts is affected as IFRS 15 requires certain contract acquisition costs (such as sales commissions) to be recognized as an asset and amortized into operating expenses over time. Previously, such costs were expensed as incurred.

In addition, new assets and liabilities have been recognized on our Consolidated Statements of Financial Position. Specifically, a contract asset and contract liability is recognized to account for any timing differences between the revenue recognized and the amounts billed to the customer.

Significant judgment is needed to determine whether a promise to deliver goods or services is considered distinct and in determining the costs that are incremental to obtaining a contract with a customer.

We have retrospectively applied IFRS 15 to all contracts that were not complete on the date of initial application. We have made a policy choice to restate each prior period presented and have recognized the cumulative effect of initially applying IFRS 15 as an adjustment to the opening balance of equity as at January 1, 2017, subject to certain practical expedients we adopted that are described in note 4 to our First Quarter 2018 Interim Condensed Consolidated Financial Statements.

Effect of IFRS 15 Transition
Below is a summary of the IFRS 15 adjustments on our key financial information for the three months ended March 31, 2017, all of which pertain to our Wireless segment.

Below is a summary of the IFRS 15 adjustments on certain key financial metrics from our Consolidated Statements of Financial Position as at January 1, 2017 and December 31, 2017.

The application of IFRS 15 will not affect our cash flows from operating, investing, or financing activities.

i) Contract assets and liabilities
Contract assets arise primarily as a result of the difference between revenue recognized on the sale of a wireless device at the onset of a term contract and the cash collected at the point of sale. Revenue recognized at point of sale requires the estimation of total consideration over the contract term and the allocation of that consideration to all performance obligations in the contract based on their relative stand-alone selling prices. For Wireless term contracts, revenue is recognized earlier than previously reported, with a larger allocation to equipment revenue. Prior to the adoption of IFRS 15, the amount allocated to equipment revenue was limited to the non-contingent consideration received at the point of sale when recovery of the remaining consideration in the contract was contingent upon the delivery of future services.

We record a contract liability when we receive payment from a customer in advance of providing goods and services. We account for contract assets and liabilities on a contract-by-contract basis, with each contract being presented as a single net contract asset or net contract liability accordingly.

All contract assets are recorded net of an allowance for expected credit losses, measured in accordance with IFRS 9.

ii) Deferred commission cost assets
Under IFRS 15, we defer incremental commission costs paid to internal and external representatives as a result of obtaining contracts with customers as deferred commission cost assets and amortize them to operating expenses over the pattern of the transfer of goods and services to the customer, which is typically evenly over either 12 or 24 consecutive months.

iii) Inventories and other current liabilities
Under IFRS 15, we determine when the customer obtains control of the distinct good or service. For affected transactions, we have defined our customer as the end subscriber and determined that they obtain control when they receive possession of a wireless device, which typically occurs upon activation. For certain transactions through third-party dealers and other retailers, the timing of when the customer obtains control of a wireless device will be deferred in comparison to our previous policy, where revenue was recognized when the wireless device was delivered and accepted by the independent dealer. This results in a greater inventory balance and a corresponding increase in other current liabilities.

IFRS 9
Effective January 1, 2018, we adopted IFRS 9. In July 2014, the IASB issued the final publication of the IFRS 9 standard, which supersedes IAS 39, Financial Instruments: recognition and measurement (IAS 39). IFRS 9 includes revised guidance on the classification and measurement of financial instruments, new guidance for measuring impairment on financial assets, and new hedge accounting guidance. We have adopted IFRS 9 on a retrospective basis; however, our 2017 comparatives were not restated because it was not possible to do so without the use of hindsight.

Under IFRS 9, financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 contains three primary measurement categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVTOCI), and fair value through profit and loss (FVTPL). Under IFRS 9, we have irrevocably elected to present subsequent changes in the fair value of our equity investments that are neither held-for-trading nor contingent consideration arising from a business combination in other comprehensive income with no reclassification of net gains and losses to net income. For these equity investments, any impairment on the instrument will be recorded in other comprehensive income, and cumulative gains or losses in other comprehensive income will not be reclassified into net income, including upon disposal.

Under IFRS 9, the loss allowance for trade receivables must be calculated using the expected lifetime credit loss and recorded at the time of initial recognition. A portion of our trade receivables required an incremental loss allowance in order to comply with the requirements of IFRS 9; as a result, we recognized a $4 million decrease to accounts receivable and a corresponding decrease to retained earnings within shareholders' equity effective January 1, 2018. In addition, the expected loss allowance using the lifetime credit loss approach is applied to contract assets under IFRS 15. There is no significant effect on the carrying value of our other financial instruments under IFRS 9 related to this new requirement.

The new hedge accounting guidance aligns hedge accounting more closely with an entity's risk management objectives and strategies. IFRS 9 does not fundamentally change the types of hedging relationships or the requirement to measure and recognize ineffectiveness; however, it allows more hedging strategies used for risk management to qualify for hedge accounting and introduces more judgment to assess the effectiveness of a hedging relationship, primarily from a qualitative standpoint. This is not expected to have an effect on our reported results and will simplify our application of effectiveness tests going forward.

Financial Guidance

There are no changes at this time to the consolidated guidance ranges for revenue, adjusted EBITDA, free cash flow, or capital expenditures, which were provided on January 25, 2018. The below table reconciles the impact of transition to IFRS 15 on our 2017 results. See "About Forward-Looking Information" in this earnings release and "Financial and Operating Guidance" in our 2017 Annual MD&A. Adjusted EBITDA and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives 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.

The purpose of our 2018 guidance ranges is to assist investors, shareholders, and others in understanding certain financial metrics relating to expected 2018 financial results for evaluating the performance of our business. This information may not be appropriate for other purposes. Information about our 2018 guidance ranges, including the various assumptions underlying it, is forward-looking and should be read in conjunction with "About Forward-Looking Information" in this earnings release and in our 2017 Annual MD&A and the related disclosure and information about various economic, competitive, and regulatory assumptions, factors, and risks that may cause our actual future financial and operating results to differ from what we currently expect.

Key underlying assumptions
Our 2018 guidance ranges above are based on many assumptions including, but not limited to, the following material assumptions for the full-year 2018:

• continued intense competition in all segments in which we operate, consistent with our experience during the full-year 2017;
• a substantial portion of our US dollar-denominated expenditures for 2018 is hedged at an average exchange rate of $1.30/US$;
• key interest rates remain relatively stable throughout 2018;
• no significant additional legal or regulatory developments, shifts in economic conditions, or macro changes in the competitive environment affecting our business activities. We note that regulatory decisions expected during 2018 could materially alter underlying assumptions around our 2018 Wireless, Cable, and/or Media results in the current and future years, the impacts of which are currently unknown and not factored into our guidance;
• Wireless customers continue to adopt, and upgrade to, higher-value smartphones at similar rates in 2018 compared to 2017 and a similar proportion of customers remain on term contracts;
• overall wireless market penetration in Canada grows in 2018 at a similar rate as in 2017;
• our relative market share in Wireless and Cable is not negatively impacted by changing competitive dynamics;
• continued subscriber growth in Wireless and Cable Internet; a decline in Cable Television subscribers; and a relatively stable Phone subscriber base;
• Ignite TV launches in 2018;
• in Media, continued growth in sports and declines in certain traditional media businesses; and
• with respect to the increase in capital expenditures:
• we continue to invest appropriately to ensure we have competitive wireless and cable networks through (i) building a 4.5G to 5G wireless network and (ii) upgrading our hybrid fibre-coaxial network to lower the number of homes passed per node, utilize the latest technologies, and deliver an even more reliable customer experience; and
• we continue to make expenditures related to the launch of Ignite TV in 2018.

Key Performance Indicators

We measure the success of our strategy using a number of key performance indicators that are defined and discussed in our 2017 Annual MD&A and this earnings release. We believe these key performance indicators allow us to appropriately measure our performance against our operating strategy and against the results of our peers and competitors. The following key performance indicators are not measurements in accordance with IFRS and should not be considered alternatives to net income or any other measure of performance under IFRS. They include:

• subscriber counts;
• Wireless;
• Cable; and
• homes passed (Cable);
• subscriber churn (churn);
• blended average billings per user (ABPU);
• blended average revenue per user (ARPU);
• capital intensity; and
• total service revenue.

Commencing this quarter, we are disclosing blended ABPU (Wireless) as a key performance indicator. Additionally, as a result of our redefined Cable segment, we have amended the definition of our subscriber count key performance indicator to include Smart Home Monitoring subscribers as part of Internet.

Subscriber counts
We determine the number of subscribers to our services based on active subscribers. When subscribers are deactivated, either voluntarily or involuntarily for non-payment, they are considered deactivations in the period the services are discontinued. We use subscriber counts to measure our core business performance and ability to benefit from recurring revenue streams. We use homes passed (Cable) as a measure for our potential market penetration within a defined geographical area.

Subscriber count (Wireless)

• A wireless subscriber is represented by each identifiable telephone number.
• We report wireless subscribers in two categories: postpaid and prepaid. Postpaid and prepaid include voice-only subscribers, data-only subscribers, and subscribers with service plans integrating both voice and data.
• Usage and overage charges for postpaid subscribers are billed a month in arrears. Prepaid subscribers cannot incur usage and/or overage charges in excess of their plan limits or account balance.
• Wireless prepaid subscribers are considered active for a period of 180 days from the date of their last revenue-generating usage.

Subscriber count (Cable)

• Cable Television and Internet subscribers are represented by a dwelling unit; Cable Phone subscribers are represented by line counts.
• When there is more than one unit in a single dwelling, such as an apartment building, each tenant with cable service is counted as an individual subscriber, whether the service is invoiced separately or included in the tenant's rent. Institutional units, such as hospitals or hotels, are each considered one subscriber.
• Cable Television, Internet, and Phone subscribers include only those subscribers who have service installed and operating, and who are being billed accordingly.
• Subscriber counts exclude certain enterprise services delivered over our fibre network and data centre infrastructure, and circuit-switched local and long distance voice services and legacy data services where access is delivered using leased third-party network elements and tariffed ILEC services.

Homes passed (Cable)
Homes passed are represented by the total number of addresses that either are Cable subscribers or are non-subscribers, but have the ability to access our cable services, within a defined geographical area. When there is more than one unit in a single dwelling, such as an apartment building, each unit that is a Cable subscriber, or has the ability to access our cable services, is counted as an individual home passed. Institutional or commercial units, such as hospitals or hotels, are each considered one home passed.

Subscriber churn
Subscriber churn (churn) is a measure of the number of subscribers that deactivated during a period as a percentage of the total subscriber base, usually calculated on a monthly basis. Subscriber churn measures our success in retaining our subscribers. We calculate it by dividing the number of Wireless subscribers that deactivated (usually in a month) by the aggregate numbers of subscribers at the beginning of the period. When used or reported for a period greater than one month, subscriber churn represents the sum of the number of subscribers deactivating for each period incurred divided by the sum of the aggregate number of subscribers at the beginning of each period incurred.

Blended average billings per user (Wireless)
We use blended ABPU as a measure that approximates the average amount we invoice an individual subscriber on a monthly basis. This measure is similar to blended ARPU under previously issued results prior to the adoption of IFRS 15 (see "Critical Accounting Policies and Estimates"). Blended ABPU helps us identify trends and measure our success in attracting and retaining higher-value subscribers. We calculate blended ABPU by dividing the sum of service revenue and the amortization of contract assets to accounts receivable by the average total number of Wireless subscribers for the same period.

Blended average revenue per user (Wireless)
Blended ARPU helps us identify trends and measure our success in attracting and retaining higher-value subscribers. We calculate blended ARPU by dividing service revenue (monthly) by the average total number of Wireless subscribers for the same time period.

Capital intensity
Capital intensity allows us to compare the level of our capital expenditures to that of other companies within the same industry. Our capital expenditures do not include expenditures on spectrum licences. We calculate capital intensity by dividing capital expenditures by revenue. We use it to evaluate the performance of our assets and when making decisions about capital expenditures. We believe that certain investors and analysts use capital intensity to measure the performance of asset purchases and construction in relation to revenue.

Total service revenue
We use total service revenue to measure our core business performance from the provision of services to our customers separate from revenue from the sale of equipment we have acquired from device manufacturers and resold. Included in this metric is our retail revenue from TSC and the Toronto Blue Jays, which are also core to our business. We calculate total service revenue by subtracting equipment revenue from total revenue.

Non-GAAP Measures

We use the following non-GAAP measures. These are reviewed regularly by management and the Board in assessing our performance and making decisions regarding the ongoing operations of our business and its ability to generate cash flows. Some or all of these measures may also be used by investors, lending institutions, and credit rating agencies as indicators of our operating performance, of our ability to incur and service debt, and as measurements to value companies in the telecommunications sector. These are not recognized measures under GAAP and do not have standard meanings under IFRS, so may not be reliable ways to compare us to other companies.

Effective January 1, 2018, we commenced using adjusted EBITDA as the key measure of profit for the purpose of assessing performance for each segment and to make decisions about the allocation of resources. As such, we have introduced adjusted EBITDA as a new non-GAAP measure in our financial reports this year. This measure replaced our previous adjusted operating profit non-GAAP measure. We believe adjusted EBITDA more fully reflects segment and consolidated profitability. The difference between adjusted operating profit and adjusted EBITDA is that adjusted EBITDA includes stock-based compensation expense. We also believe that our decision-making processes will not be significantly affected through the use of adjusted EBITDA. Use of this measure changed our definition of free cash flow.

Reconciliation of adjusted EBITDA

Reconciliation of adjusted EBITDA margin

Reconciliation of adjusted net income

Reconciliation of adjusted earnings per share

Reconciliation of free cash flow

Reconciliation of adjusted net debt and debt leverage ratio

Reconciliation of prior accounting basis
Throughout this earnings release, we have presented certain 2018 figures on a "prior accounting basis". We have provided these figures to assist users in understanding the differences between our GAAP reporting under IFRS 15 and our results applying our previous accounting policies prior to adoption of IFRS 15 (the "prior accounting basis" results). Prior accounting basis 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. These results are calculated under the assumption that we were not required to adopt IFRS 15 and we had continued reporting under previous IFRS. Certain non-GAAP measures presented under a prior accounting basis have been retrospectively amended as a result of our use of adjusted EBITDA.

Wireless

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

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

Rogers Communications Inc.
Interim Condensed Consolidated Statements of Cash Flows
(In millions of dollars, unaudited)

About Forward-Looking Information

This earnings release includes "forward-looking information" and "forward-looking statements" within the meaning of applicable securities laws (collectively, "forward-looking information"), and assumptions about, among other things, our business, operations, and financial performance and condition approved by our 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

• typically includes words like could, expect, may, anticipate, assume, believe, intend, estimate, plan, project, guidance, outlook, target, and similar expressions, although not all forward-looking information includes them;
• includes 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 have been reasonable at the time they were applied but may prove to be incorrect; and
• was approved by our management on the date of this earnings release.

Our forward-looking information includes forecasts and projections related to the following items, some of which are non-GAAP measures (see "Non-GAAP Measures"), among others:

• revenue;
• total service revenue;
• adjusted EBITDA;
• capital expenditures;
• cash income tax payments;
• free cash flow;
• dividend payments;
• the growth of new products and services;
• expected growth in subscribers and the services to which they subscribe;
• the cost of acquiring and retaining subscribers and deployment of new services;
• continued cost reductions and efficiency improvements;
• traction against our debt leverage ratio; and
• all other statements that are not historical facts.

Specific forward-looking information included or incorporated in this document includes, but is not limited to, our information and statements under "Financial Guidance" relating to our 2018 consolidated guidance on revenue, adjusted EBITDA, capital expenditures, and free cash flow, which were provided on January 25, 2018.

Our conclusions, forecasts, and projections (including the aforementioned guidance) are based on the following factors, among others:

• general economic and industry growth rates;
• currency exchange rates and interest 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; and
• industry structure and stability.

Except as otherwise indicated, this earnings release and our forward-looking information 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 on which 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 as a result of risks, uncertainties, and other factors, many of which are beyond our control, including, but not limited to:

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

These factors can also affect our objectives, strategies, and intentions. Many of these factors are beyond our control or our current expectations or knowledge. 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 making 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 2018 MD&A entitled "Updates to Risks and Uncertainties" and "Regulatory Developments" and fully review the sections in our 2017 Annual MD&A entitled "Regulation in Our Industry" and "Governance and Risk Management", as well as our various other filings with Canadian and US securities regulators, which can be found at sedar.com and sec.gov, respectively. Information on or connected to our website is not part of or incorporated into this earnings release.

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SOURCE Rogers Communications Canada Inc. - English