ROGERS COMMUNICATIONS INC.
By:		/s/ “Anthony Staffieri”
		Name: Anthony Staffieri Title:   Chief Financial Officer

	17			MANAGEMENT’S DISCUSSION AND ANALYSIS
	19			Executive Summary
				19		About Rogers
				19		2019 Highlights
				21		Financial Highlights
	22			Understanding Our Business
				22		Products and Services
				23		Competition
				25		Industry Trends
	27			Our Strategy, Key Performance Drivers, and Strategic Highlights
				27		Our Strategic Priorities
				28		2019 Objectives
				28		Key Performance Drivers and 2019 Strategic Highlights
				30		2020 Objectives
				30		Financial and Operating Guidance
	32			Capability to Deliver Results
				32		Leading Networks
				34		Powerful Brands
				34		Widespread Product Distribution
				34		First-Class Media Content
				35		Customer Experience
				35		Engaged People
				35		Financial Strength and Flexibility
				36		Widespread Shareholder Base and Dividends
	37			2019 Financial Results
				37		Summary of Consolidated Results
				38		Key Changes in Financial Results This Year Compared to 2018
				39		Wireless
				40		Cable
				42		Media
				43		Capital Expenditures
				44		Review of Consolidated Performance
				47		Quarterly Results
				50		Overview of Financial Position

	51			Managing Our Liquidity and Financial Resources
				51		Sources and Uses of Cash
				54		Financial Condition
				56		Financial Risk Management
				59		Dividends and Share Information
				61		Commitments and Contractual Obligations
				61		Off-Balance Sheet Arrangements
	62			Governance and Risk Management
				62		Governance at Rogers
				63		Social Responsibility
				64		Income Tax and Other Government Payments
				65		Risk Management
				66		Risks and Uncertainties Affecting Our Business
				73		Controls and Procedures
	74			Regulation In Our Industry
				76		Wireless
				78		Cable
				80		Media
	82			Other Information
				82		Accounting Policies
				87		Key Performance Indicators
				89		Non-GAAP Measures and Related Performance Measures
				91		Summary of Financial Results of Long-Term Debt Guarantor
				92		Five-Year Summary of Consolidated Financial Results

 

This Management’s Discussion and Analysis (MD&A) contains important information about our business and our performance for the year ended December 31, 2019. This MD&A should be read in conjunction with our 2019 Audited Consolidated Financial Statements, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

All dollar amounts are in Canadian dollars unless otherwise stated. All percentage changes are calculated using the rounded numbers as they appear in the tables. This MD&A is current as at March 5, 2020 and was approved by RCI’s Board of Directors (the Board). This MD&A 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.

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

In this MD&A, first quarter refers to the three months ended March 31, 2019, second quarter refers to the three months ended June 30, 2019, third quarter refers to the three months ended September 30, 2019, fourth quarter refers to the three months ended December 31, 2019, this year refers to the twelve months ended December 31, 2019, and last year refers to the twelve months ended December 31, 2018. All results commentary is compared to the equivalent periods in 2018 or as at December 31, 2018, as applicable, unless otherwise indicated.

Effective January 1, 2019, we adopted the new accounting standard, IFRS 16, Leases (IFRS 16), that is discussed in “Accounting Policies” in this MD&A. The adoption of IFRS 16 had a significant effect on our reported results. Due to our selected transition method, we have not restated our prior year comparatives.

Effective January 1, 2019, we redefined free cash flow, a non-GAAP measure, such that we no longer adjust for the “net change in contract asset and deferred commission cost asset balances”. We redefined free cash flow to simplify this measure and believe removing this adjustment will make us more comparable within our industry. See “Non-GAAP Measures and Related Performance Measures” for more information.

^™ Rogers and related marks are trademarks of Rogers Communications Inc. or an affiliate, used under licence. All other brand names, logos, and marks are trademarks and/or copyright of their respective owners. ^©2020 Rogers Communications

ABOUT FORWARD-LOOKING INFORMATION

This MD&A 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 MD&A. 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:

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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;

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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, that we believe to have been reasonable at the time they were applied but may prove to be incorrect; and

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was approved by our management on the date of this MD&A.

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

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revenue;

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total service revenue;

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adjusted EBITDA;

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capital expenditures;

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cash income tax payments;

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free cash flow;

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dividend payments;

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the growth of new products and services;

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expected growth in subscribers and the services to which they subscribe;

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the cost of acquiring and retaining subscribers and deployment of new services;

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continued cost reductions and efficiency improvements;

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reduction of our debt leverage ratio; and

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all other statements that are not historical facts.

Specific forward-looking information included or incorporated in this MD&A includes, but is not limited to, our information and statements under “Financial and Operating Guidance” relating to our 2020 consolidated guidance on total service revenue, adjusted EBITDA, capital expenditures, and free cash flow. All other statements that are not historical facts are forward-looking information.

We base our conclusions, forecasts, and projections (including the aforementioned guidance) on the following factors, among others:

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general economic and industry growth rates;

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currency exchange rates and interest rates;

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product pricing levels and competitive intensity;

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subscriber growth;

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pricing, usage, and churn rates;

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changes in government regulation;

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technology deployment;

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availability of devices;

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timing of new product launches;

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content and equipment costs;

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the integration of acquisitions; and

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industry structure and stability.

 

Except as otherwise indicated, this MD&A 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:

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regulatory changes;

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technological changes;

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economic, geopolitical, and other conditions affecting commercial activity;

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unanticipated changes in content or equipment costs;

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changing conditions in the entertainment, information, and/or communications industries;

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the integration of acquisitions;

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litigation and tax matters;

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the level of competitive intensity;

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the emergence of new opportunities; and

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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 MD&A 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 in this 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.

FOR MORE INFORMATION

You can find more information about us, including our Annual Information Form, 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 document does not constitute part of this MD&A.

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

 

Rogers is a proud Canadian company dedicated to making more possible for Canadians each and every day. Our founder, Ted Rogers, purchased his first radio station, CHFI, in 1960. We have grown to become a leading technology and media company that strives to provide the very best in wireless, residential, and media to Canadians and Canadian businesses. 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).

 

Almost all of our operations and sales are in Canada. We have a highly skilled and diversified workforce of approximately 25,300 employees. Our head office is in Toronto, Ontario and we have numerous offices across Canada. We report our results of operations in three reportable segments. See “Understanding Our Business” for more information.

 

FINANCIAL HIGHLIGHTS

REVENUE

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Revenue remained stable this year, driven by Wireless and Cable service revenue growth of 1%, offset by a 4% decline in Media revenue.

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Wireless service revenue increased largely as a result of continuing to monetize the increasing demand for data in the first half of the year along with a disciplined approach around subscriber base management. This increase was partially offset by a decrease in overage revenue (as a result of the faster-than-expected subscriber adoption of our new Rogers Infinite™ unlimited data plans) and an elevated competitive market environment in the second half of 2019.

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Cable revenue increased by 1% as a result of the 7% increase in Internet revenue, due to the general movement of customers to higher speed and usage tiers, the impact of Internet service pricing changes, and a larger subscriber base. The increase was partially offset by lower Television and Phone revenue, primarily due to Television and Phone subscriber losses over the past year and the impact of promotional pricing provided to subscribers. We continue to see an ongoing shift in product mix to higher-margin Internet services, with 68% of our residential Internet base at the end of 2019 on plans with download speeds of 100 megabits per second or higher compared to 60% at the end of 2018.

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Media revenue decreased as a result of the sale of our publishing business during the year and lower revenue at the Toronto Blue Jays, primarily due to a distribution from Major League Baseball in 2018, partially offset by higher Sportsnet and TSC revenue. Excluding the impact of the sale of our publishing business and the distribution from Major League Baseball last year, Media revenue would have increased by 1% this year.

ADJUSTED EBITDA

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Adjusted EBITDA increased 4% this year, with a consolidated adjusted EBITDA margin of 41.2%, an expansion of 160 basis points. This increase was primarily driven by Wireless, with a 250 basis point expansion to 47.0%, and Cable, with an 80 basis point expansion to 48.5%.

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Wireless adjusted EBITDA increased 6% this year as a result of the impact of adopting IFRS 16, which contributed approximately 4% of the overall growth, and various cost efficiencies and productivity initiatives.

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Cable adjusted EBITDA increased 2% this year as a result of strong Internet revenue growth and various cost efficiencies.

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Media adjusted EBITDA decreased 29% this year primarily as a result of decreased revenue as discussed above, which led to a margin of 6.8%, down 220 basis points from last year. Excluding the impact of the sale of our publishing business and the distribution from Major League Baseball last year, Media adjusted EBITDA would have increased by 1% this year.

NET INCOME AND ADJUSTED NET INCOME

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Net income decreased 1% and adjusted net income decreased 5% primarily as a result of higher depreciation and amortization and higher finance costs, partially offset by higher adjusted EBITDA. See “Review of Consolidated Performance” for more information.

SUBSTANTIAL FREE CASH FLOW SUPPORTS FINANCIAL FLEXIBILITY

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Our substantial cash flow generation enabled us to continue making investments in our network and returning substantial capital to shareholders through dividends and our normal course issuer bid (NCIB) programs. We paid $1,016 million in dividends in 2019. In addition, we purchased 9.9 million shares under our NCIB programs for $655 million in 2019.

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Our cash provided by operating activities increased by 6% this year, primarily as a result of higher adjusted EBITDA. Free cash flow increased 7% this year to $2,278 million as a result of higher adjusted EBITDA, partially offset by higher interest on borrowings.

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Our debt leverage ratio was 2.9 as at December 31, 2019, up from 2.5 as at December 31, 2018, driven by the acquisition of 600 MHz spectrum licences in 2019 and the impact of adopting IFRS 16, which contributed 0.2 of the increase.

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Our overall weighted average cost of borrowings was 4.30% as at December 31, 2019 (2018 – 4.45%) and our overall weighted average term to maturity on our debt was 14.1 years as at December 31, 2019 (2018 – 10.7 years).

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We ended the year with approximately $2.5 billion of available liquidity (2018 – $2.4 billion), including $1.6 billion (2018 – $1.6 billion) available under our bank and letter of credit facilities, $0.4 billion (2018 – $0.4 billion) available under our $1.05 billion accounts receivable securitization program, and $0.5 billion (2018 – $0.4 billion) in cash and cash equivalents.

 

Rogers is a leading Canadian technology and media company.

THREE REPORTABLE SEGMENTS

We report our results of operations in three reportable segments. Each segment and the nature of its business are as follows:

 

Segment		Principal activities
Wireless		Wireless telecommunications operations for Canadian consumers and businesses.
Cable		Cable telecommunications operations, including Internet, television, telephony (phone), and smart home monitoring services for Canadian consumers and businesses, and network connectivity through our fibre network and data centre assets to support a range of voice, data, networking, hosting, and cloud-based services for the business, public sector, and carrier wholesale markets.
Media		A diversified portfolio of media properties, including sports media and entertainment, television and radio broadcasting, specialty channels, multi-platform shopping, and digital media.

See “Capability to Deliver Results” for more information about our extensive wireless and cable networks and significant wireless spectrum position.

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.

PRODUCTS AND SERVICES

WIRELESS

Rogers is a Canadian leader in delivering a range of innovative wireless network technologies and services. Our postpaid and prepaid wireless services are offered under the Rogers^™, Fido^™, and chatr^™ brands, and provide consumers and businesses with the latest wireless devices, services, and applications including:

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mobile high-speed Internet access, including our Rogers Infinite unlimited data plans;

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wireless voice and enhanced voice features;

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Rogers Pro On-the-Go™, a personalized service experience for device delivery and setup to a customer’s location of choice within the service area;

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device financing;

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wireless home phone;

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device protection;

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text messaging;

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e-mail;

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global voice and data roaming, including Roam Like Home™ and Fido Roam™;

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bridging landline phones with wireless phones through products like Rogers Unison™;

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machine-to-machine solutions and Internet of Things (IoT) solutions; and

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advanced wireless solutions for businesses.

In 2019, we were the first national carrier to launch unlimited data through our Rogers Infinite plans. These plans provide customers with a shareable pool of high-speed LTE data and unlimited data at reduced speeds thereafter, thereby eliminating data overage fees on these plans. The reduced speed data is fast enough to send instant messages and emails, browse the Internet, engage in social media, or stream standard definition video.

CABLE

We are one of the largest cable providers in Canada. Our cable network provides an innovative and leading selection of high-speed broadband Internet access, digital television and online viewing, phone, smart home monitoring, and advanced home WiFi services to consumers in Ontario, New Brunswick, and on the island of Newfoundland. We also provide services to businesses across Canada that aim to meet the increasing needs of today’s critical business applications.

In 2018, we launched our new Internet protocol (IP) television product, Ignite TV^™, to our entire Ontario Cable footprint; in 2019, we expanded Ignite TV to our remaining Cable footprint in New Brunswick and Newfoundland. Ignite TV, which is licensed from Comcast Corporation (Comcast), delivers a high-value, premium service with advanced features and video experiences and is the foundation to a robust product roadmap of innovation leading to a truly connected home service.

We have adopted Comcast’s new WiFi solution as a next step on our innovation roadmap. This whole-home networking solution provides customers with a simple, fast, and intuitive way to control and manage their connected devices. The cloud-based platform links to Data Over Cable Service Interface Specifications (DOCSIS) 3.1 WiFi gateway devices to deliver fast, reliable connectivity in the home and allows customers to easily add and control devices and pair Ignite WiFi^™ pods that boost signal strength, and use voice controls to see who is on the network, all in a safe and secure manner.

Internet services include:

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Internet access (including basic and unlimited usage packages), security solutions, and e-mail;

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access speeds of up to one gigabit per second (Gbps), covering our entire Cable footprint;

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Rogers Ignite™ and Fido Internet unlimited packages, combining fast and reliable speeds with the freedom of unlimited usage and options for self-installation;

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Rogers Ignite WiFi Hub, offering a personalized WiFi experience with a simple digital dashboard for customers to manage their home WiFi network, providing visibility and control over family usage; and

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Rogers™ Smart Home Monitoring, offering services such as monitoring, security, automation, energy efficiency, and smart control through a smartphone app.

Television services include:

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local and network TV, made available through traditional digital or IP-based Ignite TV, including starter and premium channel packages along with à la carte channels;

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on-demand television;

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cloud-based digital video recorders (DVRs) available with Ignite TV services;

 

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voice-activated remote controls, restart features, and integrated apps such as YouTube, Netflix, Sportsnet NOW™, and Amazon Prime Video on Ignite TV;

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personal video recorders (PVRs), including Whole Home PVR and 4K PVR capabilities;

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an Ignite TV app, giving customers the ability to experience Ignite TV (including setting recordings) on their smartphone, tablet, laptop, or computer;

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Download and Go, the ability to download recorded programs onto your smartphone or tablet to watch at a later time using the Ignite TV app;

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linear and time-shifted programming;

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digital specialty channels;

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4K television programming, including regular season Toronto Blue Jays™ home games and select marquee National Hockey League (NHL) and National Basketball Association (NBA) games; and

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televised content delivered on smartphones, tablets, and personal computers through the Rogers Anyplace TV™ app.

Phone services include:

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residential and small business local telephony service; and

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calling features such as voicemail, call waiting, and long distance.

Enterprise services include:

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voice, data networking, IP, and Ethernet services over multi-service customer access devices that allow customers to scale and add services, such as private networking, Internet, IP voice, and cloud solutions, which blend seamlessly to grow with their business requirements;

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optical wave, Internet, Ethernet, and multi-protocol label switching services, providing scalable and secure metro and wide area private networking that enables and interconnects critical business applications for businesses that have one or many offices, data centres, or points of presence (as well as cloud applications) across Canada;

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simplified information technology (IT) and network technology offerings with security-embedded, cloud-based, professionally managed solutions; and

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extensive cable access network services for primary, bridging, and back-up (including through our wireless network, if applicable) connectivity.

MEDIA

Our portfolio of Media assets, with a focus on sports and regional TV and radio programming, reaches Canadians from coast to coast.

In Sports Media and Entertainment, we own the Toronto Blue Jays, Canada’s only Major League Baseball (MLB) team, and the Rogers Centre^™ event venue, which hosts the Toronto Blue Jays’ home games, concerts, trade shows, and special events.

Our agreement with the NHL (NHL Agreement), which runs through the 2025-2026 NHL season, allows us to deliver more than 1,200 regular season games per season across television, smartphones, tablets, and personal computers, both through traditional streaming services as well as through NHL LIVE. It also grants Rogers national rights on those platforms to the Stanley Cup Playoffs and Stanley Cup Final, all NHL-related special events and non-game events (such as the NHL All-Star Game and the NHL Draft), and rights to sublicense broadcasting rights.

In Television, we operate several conventional and specialty television networks, including:

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Sportsnet’s four regional stations along with Sportsnet ONE™, Sportsnet 360™, and Sportsnet World™;

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Citytv™ network, which, together with affiliated stations, has broadcast distribution to approximately 82% of Canadian individuals;

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OMNI™ multicultural broadcast television stations, including OMNI Regional, which provide multilingual newscasts nationally to all digital basic television subscribers;

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specialty channels that include FX (Canada), FXX (Canada), and OLN (formerly Outdoor Life Network); and

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TSC™, Canada’s only nationally televised shopping channel, which generates a significant and growing portion of its revenue from online sales.

In Radio, we operate 55 AM and FM radio stations in markets across Canada, including popular radio brands such as 98.1 CHFI^™, 680 NEWS^™, Sportsnet The FAN^™, KiSS^™, JACK FM^™, and SONiC^™.

We also offer a range of digital services and products, including:

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our digital sports-related assets, including NHL LIVE, Sportsnet NOW™, and Sportsnet NOW+™;

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other digital assets including FXNOW and Citytv NOW™; and

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a range of other websites, apps, podcasts, and digital products associated with our various brands and businesses.

OTHER

We offer the Rogers^™ World Elite Mastercard, Rogers^™ Platinum Mastercard, and the Fido^™ Mastercard, credit cards that allow customers to earn cashback rewards points on credit card spending.

OTHER INVESTMENTS

We hold interests in a number of associates and joint arrangements, some of which include:

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our 37.5% ownership interest in Maple Leaf Sports & Entertainment Ltd. (MLSE), which owns the Toronto Maple Leafs, the Toronto Raptors, Toronto FC, the Toronto Argonauts, and the Toronto Marlies, as well as various associated real estate holdings; and

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our 50% ownership interest in Glentel Inc. (Glentel), a large provider of multicarrier wireless and wireline products and services with several hundred Canadian retail distribution outlets.

We also hold a number of interests in marketable securities of publicly traded companies, including Cogeco Inc. and Cogeco Communications Inc.

COMPETITION

The telecommunications industry is a highly competitive industry served by many national, regional, and reseller players giving consumers a broad choice in service providers and plan offerings. The industry is very capital intensive and requires meaningful, continual investments to implement next-generation technology and to support existing infrastructure. Given the highly regulated nature of the industry, the already competitive dynamic could be further influenced by regulatory change (see “Regulation In Our Industry”).

 

Traditional wireline telephony and television services are now offered over the Internet. Consumers continue to change how they choose to communicate or watch video, and this is changing the mix of packages and pricing that service providers offer and could affect churn levels.

In the media industry, there also continues to be a shift in consumer viewing habits towards digital and online media consumption and advertisers are directing more advertising dollars to those media channels. In addition, we now compete with a range of digital and online media companies, including large global companies.

WIRELESS

We compete on customer experience, price, quality of service, scope of services, network coverage, sophistication of wireless technology, breadth of distribution, selection of devices, and branding and positioning.

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Wireless technology – our extensive long-term evolution (LTE) network caters to customers seeking the increased capacity and speed it provides. We are also working to expand our 5G network to further these capabilities. We compete with BCE Inc. (Bell) and TELUS Corporation (Telus) at a national level, and with Shaw Communications Inc. (Shaw), Videotron, SaskTel, and Eastlink Inc. (Eastlink) at a regional level, all of whom operate LTE networks. We also compete with these providers on high-speed packet access (HSPA) and global system for mobile communications (GSM) networks and with providers that use alternative wireless technologies, such as WiFi “hotspots” and mobile virtual network operators (MVNO), such as Primus.

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Product, branding, and pricing – we compete nationally with Bell, Telus, and Shaw, including their flanker brands Virgin Mobile (Bell), Lucky Mobile (Bell), Koodo (Telus), Public Mobile (Telus), and Freedom Mobile (Shaw). We also compete with various regional players and resellers.

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Distribution of services and devices – we have one of the largest distribution networks in the country, and compete with other service providers for dealers, prime locations for our own stores, and third-party retail distribution shelf space.

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Wireless networks – consolidation amongst regional players, or with incumbent carriers, could alter the regional or national competitive landscapes for Wireless.

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Spectrum – we currently have the largest spectrum position in the country. Innovation, Science and Economic Development Canada (ISED Canada) has announced that flexible use licences in a 200 MHz frequency range from 3450-3650 MHz will be issued to both existing and new wireless licensees, with an auction of the 3500 MHz spectrum not retained by existing licensees to occur in December 2020. The 3500 MHz spectrum, along with other frequency bands, is essential to the deployment of 5G networks. An additional future high-frequency spectrum release is currently planned to take place in 2022. The outcome of these auctions may increase competition. See “Regulation In Our Industry” for more information.

CABLE

Internet

We compete with other Internet service providers (ISPs) that offer fixed connection residential high-speed Internet access services. Rogers and Fido high-speed Internet services compete directly with, among others:

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Bell’s Internet services in Ontario, New Brunswick, and on the island of Newfoundland; and

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various resellers using wholesale telecommunication company digital subscriber line (DSL) and cable Third-Party Internet Access (TPIA) services in local markets.

A number of different players in the Canadian market also compete for enterprise network and communications services. There are relatively few national providers, but each market has its own competitors that usually focus on the geographic areas in which they have the most extensive networks. In the enterprise market, we compete with facilities- and non-facilities-based telecommunications service providers. In markets where we own network infrastructure, we compete with incumbent fibre-based providers. Our main competitors are as follows:

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Ontario – Bell, Cogeco Data Services, and Zayo;

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Quebec – Bell, Telus, and Videotron;

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Atlantic Canada – Bell and Eastlink; and

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Western Canada – Shaw and Telus.

Television

We compete with:

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other Canadian multi-channel broadcast distribution undertakings (BDUs), including Bell, Shaw, and other satellite and IPTV providers;

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over-the-top (OTT) video offerings through providers like Netflix, YouTube, Apple, Amazon Prime Video, Crave, Google, Disney+, and other channels streaming their own content; and

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over-the-air local and regional broadcast television signals received directly through antennas, the illegal distribution of Canadian and international channels via video streaming boxes, and the illegal reception of US direct broadcast satellite services.

Phone

While Phone represents a small portion of our business, we compete with other telephony service providers, including:

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Bell’s wireline phone service in Ontario, New Brunswick, and on the island of Newfoundland;

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incumbent local exchange carrier (ILEC) local loop resellers and voice over IP (VoIP) service providers (such as Primus and Comwave), other VoIP-only service providers (such as Vonage and Skype), and other voice applications riding over the Internet access services of ISPs (such as Facebook and WhatsApp); and

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substitution of wireline for wireless products, including mobile phones and wireless home phone products.

 

MEDIA

Competition in Sports Media and Entertainment includes other:

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televised and online sports broadcasters;

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Toronto professional teams, for attendance at Toronto Blue Jays games;

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MLB teams, for Toronto Blue Jays players and fans;

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local sporting and special event venues;

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professional sports teams, for merchandise sales revenue; and

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new digital sports media companies.

Television and Radio, both of which are both focused on local and regional content, compete for audiences and advertisers with:

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other Canadian television and radio stations, including those owned and operated by the CBC, Bell Media, and Corus Entertainment;

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OTT video offerings through providers like Netflix, YouTube, Apple, Amazon Prime Video, Crave, Google, Disney+, and other channels streaming their own content;

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OTT radio offerings, such as iHeartRadio, Apple Music, Spotify, and Radioplayer Canada;

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other media, including newspapers, magazines, and outdoor advertising; and

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other technologies available on the Internet or through the cloud, such as social media platforms, online web information services, digital assistants, music downloading, and portable media players.

TSC competes with:

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retail stores and their related e-commerce websites;

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web-only e-commerce sites, including social commerce;

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infomercials that sell products on television; and

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other television channels, for channel placement, viewer attention, and loyalty.

Our digital media products compete for readership and advertisers with:

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online information and entertainment websites and apps, including digital news services, streaming services, and content available via social networking services;

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magazines, both digital and printed; and

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other traditional media, such as TV and radio.

INDUSTRY TRENDS

The telecommunications industry in Canada is very capital intensive and highly regulated. Our reportable segments are affected by various overarching trends relating to changing technologies, consumer demands, economic conditions, and, in particular, regulatory developments, all of which could limit essential future investments in the Canadian marketplace. See “Risks and Uncertainties Affecting Our Business” and “Regulation In Our Industry” for more information. Below is a summary of the industry trends affecting our specific reportable segments.

WIRELESS TRENDS

The ongoing extensive investment made by Canadian wireless providers has created far-reaching and sophisticated wireless networks that have enabled consumers and businesses to utilize fast multimedia capabilities through wireless data services. Consumer demand for mobile devices, digital media, and on-demand content is pushing providers to build networks that can

support the expanded use of applications, mobile video, messaging, and other wireless data. Mobile commerce continues to increase as more devices and platforms adopt secure technology to facilitate wireless transactions.

Wireless providers are investing in the next generation of broadband wireless data networks, such as Licensed Assisted Access and 5G technologies, to support the growing data demand and new products and applications.

In 2019, we were the first national carrier in Canada to launch unlimited data plans. Along with Rogers, certain other wireless carriers in Canada have introduced new unlimited wireless data plans that are simpler for customers to understand, allow for increased consumer data usage, and eliminate overage fees that were being incurred on legacy plans.

To help make the cost of new wireless devices more affordable for consumers, Rogers and other Canadian wireless carriers have also introduced wireless device financing, whereby consumers can finance the full cost of the device over a 24-month term at 0% interest. We believe being able to finance devices over 24 months will reduce subscriber churn.

In addition to the wireless device financing plans now available, subscribers are increasingly bringing their own devices or keeping their existing devices longer and therefore may not enter into term contracts for wireless services. This may negatively impact subscriber churn, but may also create gross addition subscriber opportunities as a result of increased churn from other carriers. This trend may also negatively impact the monthly service fees charged to subscribers as they shop for plans that best meet their needs.

Wireless market penetration in Canada is approximately 89% of the population and is expected to continue growing, per the Bank of America Merrill Lynch October 2019 Global Wireless Matrix.

CABLE TRENDS

Technology advancement, non-traditional competitors, consumer behaviours, and regulatory developments are key areas influencing Cable. This market is very capital intensive, and a strong Internet offering is the backbone to effectively serving this market. Applications on the Internet are increasingly being used as a substitute for wireline telephone services, and televised content is increasingly available online. Downward television tier migration (cord shaving) and television cancellation with the intent of substitution (cord cutting) have been growing with increased adoption of OTT services. The Canadian Radio-television and Telecommunications Commission’s (CRTC) decision to lower wholesale Internet access rates may also adversely affect companies that wholesale Internet services (see “Regulation In Our Industry” for more information).

Cable and wireline companies are expanding their service offerings to include faster broadband Internet. Canadian companies, including Rogers, are increasingly offering download speeds of 1 Gbps or higher and Internet offerings with unlimited bandwidth. Consumers are demanding faster-than-ever speeds for streaming online media, uploading personal content, and playing online video games, and for their ever-growing number of connected devices. In order to help facilitate these speeds, cable and wireline companies are shifting their networks towards higher speed and capacity DOCSIS 3.1 and fibre-to-the-home (FTTH) technologies.

 

These technologies provide faster potential data communication speeds than earlier technologies, allowing both television and Internet signals to reach consumers more quickly in order to sustain reliable speeds to address the increasing number of Internet-capable devices.

Our business customers use fibre-based access and cloud computing to capture and share information in more secure and accessible environments. This, combined with the rise of multimedia and Internet-based business applications, is driving exponential growth in data demand.

Businesses and all levels of government are transforming data centre infrastructure by moving toward virtual data storage and hosting. This is driving demand for more advanced network functionality, robust, scalable services, and supportive dynamic network infrastructure.

Canadian wireline companies are dismantling legacy networks and investing in next-generation platforms and data centres that combine voice, data, and video solutions onto a single distribution and access platform. As next generation platforms become more popular, our competition will begin to include systems integrators and manufacturers.

Devices and machines are becoming more interconnected and there is more reliance on the Internet and other networks to facilitate updates and track usage.

Broadcast television technology continues to improve with 4K TV broadcasts and high dynamic range (HDR) for higher resolution and improved video image colour and saturation.

The CRTC Basic Telecommunications Services decision in 2016 established several criteria to improve Internet access for Canadian residents and businesses. As a result, the CRTC believes fixed broadband subscribers should have access to speeds of at least 50 Mbps download and 10 Mbps upload, and access to a service with an unlimited data allowance.

The CRTC has created a new code of conduct for Internet services, which came into effect on January 31, 2020, in order to establish guidelines for consumer interactions with their ISPs.

MEDIA TRENDS

Consumer viewing behaviours are continually evolving and the industry continues to adjust to these changes. Access to live sports and other premium content has become even more important for acquiring and retaining audiences that in turn attract advertisers and subscribers. Therefore, ownership of content and/or long-term agreements with content owners has also become increasingly important to media companies. Leagues, teams, networks, and new digital entrants are also experimenting with the delivery of live sports content through online, social, and virtual platforms, while non-traditional sports are also growing in mindshare.

Consumer demand for digital media, content on mobile devices, and on-demand content is increasing and media products, such as magazines, have experienced significant digital uptake, requiring industry players to increase their efforts in digital content and capabilities in order to compete. This trend is also causing advertisers to shift their spending from conventional TV and print publishing to digital platforms.

Competition has changed and traditional media assets in Canada are increasingly being controlled by a small number of competitors with significant scale and financial resources in order to compete with digital competitive factors. Technology has allowed new entrants and even individuals to become media players in their own right.

Some players have become more vertically integrated across both traditional and emerging platforms. Relationships between providers and purchasers of content have become more complex. Global aggregators have also emerged and are competing for both content and viewers.

 

Our long-term vision builds on our many strengths, including our unique mix of network and media assets. Our focus is clear: deliver best-in-class engagement, a best-in-class customer experience, and industry-leading shareholder value.

To achieve this vision, our strategic priorities are as follows:

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Create best-in-class customer experiences by putting our customers first in everything we do;

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Invest in our networks and technology to deliver leading performance and reliability;

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Deliver innovative solutions and compelling content that our customers will love;

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Drive profitable growth in all the markets we serve;

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Develop our people and a high performance culture; and

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Be a strong, socially responsible leader in our communities across Canada.

CREATE BEST-IN-CLASS CUSTOMER EXPERIENCES BY PUTTING OUR CUSTOMERS FIRST IN EVERYTHING WE DO

Everything starts and ends with our customers, so improving their experience is core to our strategy. We obsess over our customers’ end-to-end service experiences by listening carefully to the voice of our customers and to the voice of our frontline. We will continue to focus on making things clear, simple, and fair for our customers while we evolve our channel strategy and continue to build our digital capabilities so our customers have reliable and consistent experiences across our channels.

INVEST IN OUR NETWORKS AND TECHNOLOGY TO DELIVER LEADING PERFORMANCE AND RELIABILITY

We believe that networks are the lifeblood of our business and world-class performance is critical to our future. Our plan is to deliver high-performing network services with a focus on core performance and reliability. Our investments in our cable network will allow us to continue to improve Cable Internet performance and reliability. Accelerated investments in our wireless network are necessary to keep up with our customers’ growing data demands while launching 5G in Canada.

DELIVER INNOVATIVE SOLUTIONS AND COMPELLING CONTENT THAT OUR CUSTOMERS WILL LOVE

Innovation has always been a part of our DNA. We strive to deliver compelling products and innovative solutions to our customers that make their lives easier. We will do this by leveraging proven technologies and remarkable innovations from across the globe, making them more cost-effective for us.

Rogers has some of the most sought-after media assets in Canada, including a deep roster of leading sports assets, top radio stations, and award-winning television programming. Canadians expect to be able to consume the content they want, when and where they want. We will continue to invest in delivering the content our audiences value and want most, delivered on their screens of choice.

DRIVE PROFITABLE GROWTH IN ALL THE MARKETS WE SERVE

The overarching goal of our plan is to accelerate revenue growth in a sustainable way and to translate it into strong margins, profit, free cash flow, return on assets, and returns to shareholders. Our focus is on our core growth drivers with a strong capability in cost management to support future investments.

DEVELOP OUR PEOPLE AND A HIGH PERFORMANCE CULTURE

Our people and our culture are the heart and soul of our success, and their passion for our customers and our company is remarkable. A high-performing culture is integral to our success and that starts by investing in our team and their experience as employees. We are working to strengthen our employment brand and to make Rogers a top employer known for attracting and retaining the best talent. This means fostering an open, trusting, and diverse workplace grounded in accountability and performance.

BE A STRONG, SOCIALLY RESPONSIBLE LEADER IN OUR COMMUNITIES ACROSS CANADA

Giving back where we live and work is an important part of who we are. Our goal is to be a relevant and respected community leader in each region of our country. This means leveraging our strong local teams to be active and engaged volunteers in our communities and to deliver a strong, regionally empowered program.

 

CREATE BEST-IN-CLASS CUSTOMER EXPERIENCES BY PUTTING OUR CUSTOMERS FIRST IN EVERYTHING WE DO

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Increased our customer likelihood to recommend scores across all business units.

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Improved service levels in our call centres and reduced the average handle time.

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Grew online digital adoption and reduced call volume into our call centres.

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Launched Rogers Infinite unlimited data plans with no overage charges, the first national Canadian carrier to introduce such plans.

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Introduced 24-month $0 down, interest-free wireless device financing on Rogers Infinite plans.

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Attracted 1.4 million customers to our new Rogers Infinite unlimited data plans.

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Announced a new customer solutions centre in Kelowna, BC, to better serve our customers across time zones.

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Launched Rogers Pro On-the-Go, a new, personalized retail service that delivers and sets up new wireless devices to the customer’s location of choice within the service area.

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Launched Fido Data Overage Protection, which pauses data usage when a customer’s limit is reached so they can enjoy their wireless services worry-free.

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Ended the year with over 325,000 subscribers on Ignite TV, the foundation of our Connected Home future.

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Invested in our IT infrastructure to improve system stability, decreasing customer-impacting minutes by over 80%.

INVEST IN OUR NETWORKS AND TECHNOLOGY TO DELIVER LEADING PERFORMANCE AND RELIABILITY

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Secured 20-year 600 MHz spectrum licences covering all provinces and territories across the country for a total price of $1.7 billion to give our customers the best wireless experience. This low-frequency spectrum is a critical foundation for deploying 5G technology across Canada.

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Announced our initial rollout of Canada’s first 5G network in downtown Vancouver, Toronto, Ottawa, and Montreal in preparation for the commercial availability of 5G devices in 2020; we expect to expand the Rogers 5G network to over 20 more markets in 2020.

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Became a founding member of the 5G Future Forum, which will collaborate to develop interoperable 5G standards for Mobile Edge Computing across key geographic regions, including the Americas, Asia-Pacific, and Europe.

 

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Turned on Canada’s first 5G-powered campus at the University of British Columbia to facilitate pre-commercial research and testing of 5G applications and announced a three-year partnership agreement with the University of Waterloo to advance 5G research.

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Announced the launch of a 5G innovation hub that will test 5G applications and use cases at Communitech in Waterloo.

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Awarded “Best in Test” for overall wireless customer experience nationally by Umlaut, a global mobile network benchmarking leader, based on measurement testing conducted between May 6 and July 15, 2019.

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Awarded, in October 2019, the 2019 Speedtest® Award for Canada’s Fastest Internet by Ookla, a global leader in fixed broadband mobile network testing.

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Announced a reciprocal roaming arrangement with AT&T to extend LTE-M coverage for IoT customers throughout Canada and the United States.

DELIVER INNOVATIVE SOLUTIONS AND COMPELLING CONTENT THAT OUR CUSTOMERS WILL LOVE

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Launched Sportsnet Now and Amazon Prime Video on Ignite TV.

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Launched Ignite TV in Newfoundland and New Brunswick.

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Invested $683 million during the 2019 broadcast year to create and produce compelling Canadian content.

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Launched the Ignite WiFi Hub app and introduced Wall-to-Wall WiFi pods to manage home WiFi networks and enhance WiFi connectivity in homes.

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Partnered with the Aboriginal Peoples Television Network to broadcast the first-ever NHL game in Plains Cree.

DRIVE PROFITABLE GROWTH IN ALL THE MARKETS WE SERVE

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Achieved our revised 2019 guidance targets.

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Grew adjusted EBITDA by 4%.

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Attracted 334,000 net new wireless postpaid subscribers and 104,000 net new Internet subscribers.

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Returned $1.7 billion to shareholders through dividend payments and share repurchases.

DEVELOP OUR PEOPLE AND A HIGH PERFORMANCE CULTURE

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Achieved a company-wide engagement score of 85%, five points above global best-in-class companies.

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Recognized, in November 2019, as one of Canada’s Top 100 employers by MediaCorp Canada Inc. for the 7th year in a row.

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Recognized, in November 2019, as one of Canada’s Most Admired Corporate Cultures by Waterstone.

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Recognized, in July 2019, as one of the 50 Most Engaged Workplaces in North America by Achievers for our leadership and innovation in engaging our employees and workplaces.

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Named to the 2019 Bloomberg Gender-Equality Index in January 2019, which named 230 companies committed to transparency in gender reporting and advancing women’s equality in the workplace.

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Recognized, in March 2019, as one of Canada’s Best Diversity Employers by MediaCorp Canada Inc.

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Named, in May 2019, to the LGBT Corporate Canadian Index, an index that recognizes companies advancing equality.

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Announced a $10 million investment to support a new cybersecurity centre at Ryerson University focused on building diverse digital skills of the future and to help fulfill our ongoing demand for skilled cybersecurity professionals.

BE A STRONG, SOCIALLY RESPONSIBLE LEADER IN OUR COMMUNITIES ACROSS CANADA

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Contributed $14 billion in economic value to the Canadian economy.

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Contributed over $60 million through cash and in-kind investments to help our communities thrive.

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Made a meaningful difference in the lives of youth through the Ted Rogers Scholarship Fund, Jays Care Foundation, and the Ted Rogers Community Grants program.

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Expanded our Connected for Success affordable broadband program to 335 community housing partners.

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Raised over $2 million for over 1,100 charities during Give Together Month, with Rogers matching employee donations up to $1,000.

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Volunteered 20,000 hours to support 80 volunteer events across Canada for our second annual Give Together™ Volunteer Days.

 

The above table outlines guidance ranges for selected full-year 2020 consolidated financial metrics. These ranges take into consideration our current outlook and our 2019 results. The purpose of the financial outlook is to assist investors, shareholders, and others in understanding certain financial metrics relating to expected 2020 financial results for evaluating the performance of our business. This information may not be appropriate for other purposes. Information about our guidance, including the various assumptions underlying it, is forward-looking and should be read in conjunction with “About Forward-Looking Information”, “Risks and Uncertainties Affecting Our Business”, the material assumptions listed below under “Key underlying assumptions”, 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.

Any updates to our full-year financial guidance over the course of the year would only be made to the consolidated guidance ranges that appear above.

Key underlying assumptions

Our 2020 guidance ranges presented in “2020 Full-Year Consolidated Guidance” are based on many assumptions including, but not limited to, the following material assumptions for the full-year 2020:

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continued increase in competitive intensity in all segments in which we operate;

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a substantial portion of our 2020 US dollar-denominated expenditures is hedged at an average exchange rate of $1.30/US$;

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key interest rates remain relatively stable throughout 2020;

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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 issued during 2020 could materially alter underlying assumptions around our 2020 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;

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specifically, we continue to charge the interim rates, as set in March 2016, to resellers of our high-speed Internet access services;

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Wireless customers continue to adopt, and upgrade to, higher-value smartphones at similar rates in 2020 compared to 2019;

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an overall shift in the market dynamics to unlimited data wireless service plans and wireless device financing;

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lower overage revenue, most notably in the first half of 2020, as a result of the introduction of our Rogers Infinite plans late in the second quarter of 2019;

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overall wireless market penetration in Canada grows in 2020 at a similar rate as in 2019;

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our relative market share in Wireless and Cable is not negatively impacted by changing competitive dynamics or accelerated shifts in consumer video and/or data consumption;

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continued subscriber growth in Wireless and Internet; stable to declining Television subscribers, including the impact of customers migrating to Ignite TV from our legacy product; and a decline in our Phone subscriber base;

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in Media, continued growth in sports and declines in certain traditional media businesses; and

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with respect to the increase in capital expenditures:

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we continue to invest appropriately to ensure we have competitive wireless and cable networks through (i) building a 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

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we continue to make expenditures related to our Connected Home roadmap in 2020.

 

WIRELESS

Rogers has one of the most extensive and advanced wireless networks in Canada, which:

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is the only national network in Canada fully owned by a single carrier;

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was the first LTE high-speed network in Canada;

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was the first 5G network in Canada;

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reached 96% of the Canadian population as at December 31, 2019 on our LTE network alone;

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is supported by voice and data roaming agreements with international carriers in more than 200 destinations, including a growing number of LTE roaming operators; and

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includes network sharing arrangements with three regional wireless operators that operate in urban and rural parts of Canada.

We are continuously enhancing our IP service infrastructure for all our wireless services. Advances in technology have transformed the ways in which our customers interact and use the variety of tools available to them in their personal and professional lives. Technology has also changed the way businesses operate.

We are augmenting our existing LTE network with 4.5G technology investments that are designed to migrate to a 5G environment. We increased our 5G-related trials across key applications and multiple frequencies in 2019. A number of investments will be required to successfully launch and maintain a 5G network, including:

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refarming spectrum currently used for 2G and 3G to LTE and for 5G;

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densifying our wireless network with macro and small cells in key markets; and

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purchasing 5G-ready radio network equipment with lower unit and operational costs, the ability to aggregate more radio carriers, and greater spectral efficiency.

In early 2020, we launched our 5G network commercially in downtown Vancouver, Toronto, Ottawa, and Montreal. We expect to expand to over 20 more markets by the end of the year. We also announced we are the exclusive Canadian member of the global 5G Future Forum, a first-of-its-kind 5G and mobile edge computing forum that includes Verizon, Vodafone, Telstra, KT, and América Móvil.

Our 5G network currently uses 2500 MHz spectrum in the downtown cores of Vancouver, Toronto, Ottawa, and Montreal. In 2020, we will expand the network to use the 600 MHz spectrum licences we acquired in 2019. 600 MHz spectrum is best suited to carry wireless data across long distances and through dense urban buildings, creating more consistent and higher-quality coverage in both remote and urban areas and in smart cities. In the future, we will deploy 3.5 GHz spectrum and dynamic spectrum sharing, which will allow our existing spectrum supporting 4G to also be used for 5G networks.

Significant spectrum position

Our wireless services are supported by our significant wireless spectrum licence holdings in both high-band and low-band frequency ranges. As part of our network strategy, we expect to continue making significant capital investments in spectrum to:

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support the rapidly growing usage of wireless data services;

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support the expansion of our 5G network; and

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introduce new innovative network-enabled features and functionality.

 

CABLE

Our expansive fibre and hybrid fibre-coaxial (HFC) infrastructure delivers services to consumers and businesses in Ontario, New Brunswick, and on the island of Newfoundland. We also operate a transcontinental, facilities-based fibre-optic network with 76,000 kilometres of fibre optic cable that is used to service business customers, including government and other telecommunications service providers. We also use our extensive fibre network for backhaul for wireless cell site traffic. In Canada, the network extends coast-to-coast and includes local and regional fibre, transmission electronics and systems, hubs, points of presence, and IP routing and switching infrastructure. The network also extends to the US from Vancouver south to Seattle; from the Manitoba-Minnesota border through Minneapolis, Milwaukee, and Chicago; from Toronto through Buffalo; and from Montreal through Albany to New York City and Ashburn, allowing us to connect Canada’s largest markets, while also reaching key US markets for the exchange of data and voice traffic.

The network is structured to optimize performance and reliability and to allow for the simultaneous delivery of video, voice, and Internet over a single platform. It is generally constructed in rings that interconnect with distribution hubs, providing redundancy to minimize disruptions that can result from fibre cuts and other events.

Homes and commercial buildings are connected to our network through HFC nodes or FTTH. We connect the HFC node to the network using fibre optic cable and the home to the node using coaxial cable or fibre. Using 860 MHz and 750 MHz of cable spectrum in Ontario and Atlantic Canada, respectively, we deliver video, voice, and broadband services to our customers. HFC node segmentation reduces the number of homes passed per HFC node, thereby increasing the bandwidth and capacity per subscriber.

We continually upgrade the network to improve capacity, enhance performance and reliability, reduce operating costs, and introduce new features and functionality. Our investments are focused on:

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uplifting our HFC network to 1.2 GHz while at the same time improving network performance, quality, and reliability by deploying digital fibre optics, removing radio frequency amplifiers, and reducing homes passed per node to an average of 60;

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increasing capacity per subscriber by enabling the 1.2 GHz of spectrum with additional DOCSIS 3.1 downstream and upstream capacity and deploying DOCSIS 4.0 that, over time, are expected to support downstream speeds up to 10 gigabits per second (Gbps);

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improving video signal compression by moving to more advanced video protocols;

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improving channel and on-demand capacity through switched digital video; and

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increasing the FTTH footprint by connecting more homes and multiple dwelling unit buildings directly to fibre.

Broadband Internet service is provided using a DOCSIS CCAP 3.0/3.1 platform, which combines multiple radio frequency channels onto one access point at the customer premise, delivering exceptional performance. Over the last 20 years, HFC node segmentation, along with DTV spectrum repurposing and evolution from DOCSIS 1.0 to DOCSIS 3.1, has increased downstream and upstream capacity by approximately 1,000 and 200 times, respectively. This track record of investing in our networks and demonstrating the capability to cost-effectively deploy best-in-class service is one of our key strategies for ensuring that we stay competitive with other service providers that provide Internet service into homes and businesses over copper facilities. By the end of 2016, 100% of our cable network had been upgraded to DOCSIS CCAP technology supporting DOCSIS 3.1 and Ignite Gigabit Internet.

 

We have been deploying 1 GHz fibre-to-the-curb (FTTC) in new development areas and transitioning to FTTH since 2005. In 2018, we began upgrading our HFC network to a mix of 1.2 GHz FTTC and FTTH. FTTC provides the foundation for subsequent generations of DOCSIS, including Remote PHY and DOCSIS 4.0, which will improve high-speed Internet accessibility, quality, and tier speed attainability, while increasing the capacity of our HFC network. FTTH will be based on gigabit passive optical network (GPON) technology that is expected to support symmetrical downstream/upstream speeds up to 10 Gbps per node in select neighbourhoods.

We continue to invest in and improve our cable network services; for example, with technology to support gigabit Internet speeds, Ignite TV, Rogers 4K TV, our 4K PVR set-top box, and a significant commitment to live broadcasting in 4K, including regular season Toronto Blue Jays home games for 2020 and numerous NHL and NBA games.

Voice-over-cable telephony services are also served using the DOCSIS network. Our offerings ensure a high quality of service by including geographic redundancy and network backup powering. Our phone service includes a rich set of features, such as TV Call Display (available on our NextBox^™ set-top boxes), three-way calling, and advanced voicemail features that allow customers to be notified of, and listen to, their home voicemail on their wireless phone or over the Internet.

We own and operate some of the most advanced networks and data centres in Canada. We leverage our national fibre, cable, and wireless networks and data centre infrastructure to enable businesses to deliver greater value to their customers through proactive network monitoring and problem resolution with enterprise-level reliability, security, and performance. Our primary and secondary Network Operation Centres proactively monitor Rogers’ networks to mitigate the risk of service interruptions and to allow for rapid responses to any outages.

Our data centres provide guaranteed uptime and expertise in collocation, cloud, and managed services solutions. We own and operate 12 state-of-the-art, highly reliable, certified data centres across Canada, including:

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Canada’s first Tier III Design and Construction certified multi-tenant facility in Toronto;

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Alberta’s first Tier III certified data centre; and

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a third Tier III certified data centre in Ottawa.

POWERFUL BRANDS

The Rogers brand has strong national recognition through our:

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established networks;

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extensive distribution;

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recognizable media content and programming;

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advertising;

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event and venue sponsorships, including the Rogers Cup;

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community investment, including the Ted Rogers Scholarship Fund; and

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naming rights to some of Canada’s landmark buildings.

We also own or utilize some of Canada’s most recognized brands, including:

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the wireless brands of Rogers, Fido, and chatr;

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the residential brands of Rogers and Fido;

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23 TV stations and specialty channels, including Sportsnet, Omni, Citytv, FX (Canada), and FXX (Canada);

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55 radio stations, including 98.1 CHFI™, 680 NEWS™, Sportsnet The FAN™, KiSS™, JACK FM™, and SONiC™;

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major league sports teams, including the Toronto Blue Jays, and teams owned by MLSE, such as the Toronto Maple Leafs, the Toronto Raptors, Toronto FC, and the Toronto Argonauts;

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an exclusive 12-year agreement with the NHL, which runs through the 2025-2026 season, that allows us to deliver coverage of professional hockey in Canada; and

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TSC, a premium online and TV shopping retailer.

WIDESPREAD PRODUCT DISTRIBUTION

WIRELESS

We have an extensive national distribution network and offer our wireless products nationally through multiple channels, including:

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company-owned Rogers, Fido, and chatr retail stores;

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customer self-serve using rogers.com, fido.ca, chatrwireless.com, and e-commerce sites;

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an extensive independent dealer network;

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major retail chains and convenience stores;

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other distribution channels, such as WOW! mobile boutique, as well as Wireless Wave and TBooth Wireless through our ownership interest in Glentel;

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our contact centres;

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outbound telemarketing; and

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Rogers Pro On-the-Go, a new, personalized retail service that delivers and sets up new wireless devices to the customer’s location of choice within the service area.

CABLE

We distribute our residential cable products using various channels, including:

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company-owned Rogers and Fido retail stores;

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customer self-serve using rogers.com and fido.ca;

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our contact centres, outbound telemarketing, and door-to-door agents; and

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major retail chains.

Our sales team and third-party retailers sell services to the business, public sector, and carrier wholesale markets. An extensive network of third-party channel distributors deals with IT integrators, consultants, local service providers, and other indirect sales relationships. This diverse approach gives greater breadth of coverage and allows for strong sales growth for next-generation services.

FIRST-CLASS MEDIA CONTENT

We deliver highly sought-after sports content enhanced by the following initiatives:

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an exclusive 12-year agreement with the NHL, which runs through the 2025-2026 season, that allows us to deliver coverage of professional hockey in Canada across television, smartphones, tablets, and the Internet;

 

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NHL LIVE, an online OTT destination for enhancing NHL action on any screen;

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Sportsnet NOW, Canada’s first OTT sports service, offering 24/7 access to Sportsnet’s TV content;

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Sportsnet NOW+, which offers access to additional content, such as additional NHL games, the Bundesliga, Premiership Rugby, and the IndyCar Series;

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Rogers™ Hometown Hockey™ Tour, which brings hockey-themed festivities and outdoor viewing parties to 25 communities across Canada over the 2019-2020 NHL season;

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the MLB Network, a 24-hour network dedicated to baseball, brought to Canada on Rogers television services;

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an 8-year, multi-platform broadcast rights agreement with MLB Properties and MLB Advanced Media to show live and in-progress games and highlights within Canada through November 2021;

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a 10-year, multi-platform agreement that runs through August 2024, which makes Rogers the exclusive wholesaler and Canadian distributor of World Wrestling Entertainment’s (WWE) flagship programming; and

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exclusive broadcasting and distribution rights of the Toronto Blue Jays through our ownership of the team.

CUSTOMER EXPERIENCE

We are committed to providing our customers with the best experience possible. To do this, we have invested in several areas to make it easier and more convenient for customers to interact with us, such as:

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contact centres located throughout Canada;

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an innovative Integrated Voice Response (IVR) system that can take calls in four languages, including English, French, Mandarin, and Cantonese;

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voice authentication technology across all of our contact centres that automatically identifies our registered customers by their voice, increasing security and protecting customers from potential fraud;

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self-serve options, including:

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the ability for Fido and Rogers customers to complete price plan changes and hardware upgrades online;

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a simplified login, allowing Fido customers to log in to their accounts online or through the Fido MyAccount app using their Facebook login credentials, eliminating the need to remember multiple login credentials and making self-service easier to access;

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the ability for customers to install their Internet and TV products at their convenience, without the need for a technician visiting their residence; and

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Rogers EnRoute™, a tool that gives customers the ability to track on their phone when a technician will arrive for an installation or service call;

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customer care available over Facebook Messenger, Twitter, and online chat through our websites;

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Rogers Infinite unlimited data plans with no overage charges;

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24-month, $0 down, interest-free wireless device financing on Rogers Infinite plans and through our Fido Payment Program;

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Rogers Pro On-the-Go, a personalized retail service whereby within hours of ordering a new wireless device, a connected solutions professional will meet a customer at their time and location of choice (within the service area) and set up their device based on their preferences;

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Ignite WiFi Hub for all Ignite TV customers to give them ultimate control over their WiFi experience;

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Family Data Manager, a data manager tool, and Data Top Ups, both of which allow Wireless customers to manage and customize their data usage in real-time through MyRogers;

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Fido Data Bytes, which grant Fido Pulse customers an additional hour of data, five times per billing cycle, at no extra charge;

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Fido XTRA, a program that gives Fido postpaid Wireless and Internet customers free access to new perks every Thursday, such as deals and giveaways from leading brands on food, drinks, apparel, entertainment, and more;

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a simple online bill, making it easier for customers to read and understand their monthly charges; and

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Roam Like Home and Fido Roam, worry-free wireless roaming allowing Canadians to use their wireless plan like they do at home when traveling to included destinations.

ENGAGED PEOPLE

For our team of approximately 25,300 employees, we strive to create a great workplace, focusing on all aspects of the employee experience, which include:

•

engaging employees and building high-performing teams through initiatives including engagement surveys and leadership development programs;

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aiming to attract and retain top talent through effective training and development, performance-driven employee recognition programs, and career progression programs for front-line employees;

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maintaining our commitment to diversity and inclusion; and

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providing a safe, collaborative, and agile workplace that provides employees the tools and training to be successful.

FINANCIAL STRENGTH AND FLEXIBILITY

We have an investment-grade balance sheet, conservative debt leverage, and substantial available liquidity of $2,493 million as at December 31, 2019. Our capital resources consist primarily of cash provided by operating activities, available lines of credit, funds available under our accounts receivable securitization and US dollar-denominated commercial paper (US CP) programs, and issuances of long-term debt. We also owned approximately $1,831 million of marketable equity securities in publicly traded companies as at December 31, 2019.

The following information is forward-looking and should be read in conjunction with “About Forward-Looking Information”, “Financial and Operating Guidance”, “Risks and Uncertainties Affecting Our Business”, and our other disclosures about various economic, competitive, and regulatory assumptions, factors, and risks that could cause our actual future financial and operating results to differ from those currently expected.

As noted in “Financial and Operating Guidance”, we anticipate generating positive free cash flow in 2020. We expect that we will have sufficient capital resources to satisfy our cash funding requirements in 2020, including the funding of dividends on our common shares, repayment of maturing short-term borrowings and long-term debt, and other financing activities, investing activities, and other requirements. This takes into account our

 

opening cash balance, cash provided by operating activities, and funds available to us under credit facilities, our accounts receivable securitization program, our US CP program, and other bank, publicly issued, or private placement debt from time to time. As at December 31, 2019, there were no significant restrictions on the flow of funds between RCI and its subsidiary companies.

We believe we can satisfy foreseeable additional funding requirements by issuing additional debt financing, which, depending on market conditions, could include restructuring our existing bank credit and letter of credit facilities, entering into new bank credit facilities, issuing public or private long-term or short-term debt, amending the terms of our accounts receivable securitization or US CP programs, or issuing equity. We may also opportunistically refinance a portion of existing debt depending on

market conditions and other factors. There is no assurance, however, that these financing initiatives will or can be done as they become necessary.

WIDESPREAD SHAREHOLDER BASE AND DIVIDENDS

RCI’s Class B Non-Voting common shares (Class B Non-Voting Shares) are widely held and actively trade on the TSX and the NYSE with a combined average daily trading volume of approximately 1.5 million shares in 2019. In addition, RCI’s Class A Voting common shares (Class A Shares) trade on the TSX. At the discretion of the Board, we pay an equal dividend on both classes of shares. In 2019, each share paid an annualized dividend of $2.00.

 

See “Accounting Policies” in this MD&A and the notes to our 2019 Audited Consolidated Financial Statements for important accounting policies and estimates as they relate to the following discussion.

We use several key performance indicators to measure our performance against our strategy and the results of our peers and

competitors. Many of these are not defined terms under IFRS and should not be considered alternative measures to net income or any other financial measure of performance under IFRS. See “Key Performance Indicators” and “Non-GAAP Measures and Related Performance Measures” for more information.

 

KEY CHANGES IN FINANCIAL RESULTS THIS YEAR COMPARED TO 2018

REVENUE

Wireless service revenue increased this year as a result of continuing to monetize the increasing demand for data in the first half of the year along with a disciplined approach around subscriber base management. This increase was partially offset by a decrease in overage revenue (as a result of stronger customer adoption of our new Rogers Infinite unlimited data plans) in the second half of 2019. Wireless equipment revenue decreased 1% this year driven by a decrease in gross subscriber additions and fewer hardware upgrades.

Cable revenue increased this year as a result of the increase in Internet revenue, due to the general movement of customers to higher speed and usage tiers, the impact of Internet service pricing changes, and a larger subscriber base for our Internet products, partially offset by promotional pricing provided to subscribers and Television and Phone subscriber losses over the past year.

Media revenue decreased this year as a result of the sale of our publishing business and a Major League Baseball distribution to the Toronto Blue Jays in 2018. Excluding the impact of the sale of our publishing business and the distribution from Major League Baseball last year, Media revenue would have increased by 1% this year.

ADJUSTED EBITDA

Wireless adjusted EBITDA increased this year primarily as a result of the adoption of IFRS 16, which contributed approximately 4% of the growth, and a larger postpaid subscriber base, which led to a margin of 47.0%, up 250 basis points from last year.

Cable adjusted EBITDA increased this year as a result of strong Internet revenue growth, the ongoing product mix shift to higher-margin Internet services, and various cost efficiencies, which led to a margin of 48.5%, up 80 basis points from last year.

Media adjusted EBITDA decreased this year primarily as a result of lower revenue as discussed above and higher programming costs, partially offset by lower player compensation at the Toronto Blue Jays, which led to a margin of 6.8%, down 220 basis points from last year. Excluding the impact of the sale of our publishing business and the distribution from Major League Baseball last year, Media adjusted EBITDA would have increased by 1% this year.

NET INCOME AND ADJUSTED NET INCOME

Net income and adjusted net income both decreased this year primarily as a result of higher depreciation and amortization and higher finance costs, partially offset by higher adjusted EBITDA.

 

WIRELESS

ROGERS IS CANADA’S LARGEST PROVIDER OF WIRELESS COMMUNICATIONS SERVICES

As at December 31, 2019, we had:

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approximately 10.8 million subscribers; and

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approximately 33% subscriber and revenue share of the Canadian wireless market.

WIRELESS FINANCIAL RESULTS

 

		Years ended December 31
(In millions of dollars, except margins)		2019				2018				% Chg
Revenue
Service revenue			7,156				7,091				1
Equipment revenue			2,094				2,109				(1	)
Revenue			9,250				9,200				1
Operating expenses
Cost of equipment			2,231				2,264				(1	)
Other operating expenses			2,674				2,846				(6	)
Operating expenses			4,905				5,110				(4	)
Adjusted EBITDA			4,345				4,090				6
Adjusted EBITDA margin			47.0%				44.5%				2.5 pts
Capital expenditures			1,320				1,086				22

WIRELESS SUBSCRIBER RESULTS ¹

 

(In thousands, except churn, blended ABPU, and blended ARPU)		Years ended December 31
		2019				2018				Chg
Postpaid
Gross additions			1,566				1,632				(66	)
Net additions			334				453				(119	)
Total postpaid subscribers 2,3			9,438				9,157				281
Churn (monthly)			1.11%				1.10%				0.01 pts
Prepaid
Gross additions			773				751				22
Net losses			(97	)			(152	)			55
Total prepaid subscribers 2,4			1,402				1,626				(224	)
Churn (monthly)			4.86%				4.38%				0.48 pts
Blended ABPU (monthly)		$	66.23			$	64.74			$	1.49
Blended ARPU (monthly)		$	55.49			$	55.64			($	0.15	)

 

1	Subscriber counts, subscriber churn, blended ABPU, and blended ARPU are key performance indicators. See “Key Performance Indicators”.

2	As at end of period.

3

Effective October 1, 2019, and on a prospective basis, we reduced our Wireless postpaid subscriber base by 53,000 subscribers to remove a low-ARPU public services customer that is in the process of migrating to another service provider. We believe adjusting our base for a customer of this size that migrates off our network provides a more meaningful reflection of the underlying organic performance of our Wireless business.

4	Effective April 1, 2019, we adjusted our Wireless prepaid subscriber base to remove 127,000 subscribers as a result of a change to our deactivation policy from 180 days to 90 days to be more consistent within the industry.

REVENUE

Our revenue depends on the size of our subscriber base, the revenue per user, the revenue from the sale of wireless devices, and other equipment revenue.