RCI
$47.94
Rogers Communication
($.47)
(.97%)
Earnings Details
4th Quarter December 2020
Thursday, January 28, 2021 7:00:00 AM
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Summary

Rogers Communication (RCI) Recent Earnings

Rogers Communication (RCI) reported 4th Quarter December 2020 earnings of $0.76 per share on revenue of $2.8 billion. The consensus earnings estimate was $0.75 per share on revenue of $2.9 billion. Revenue fell 5.7% compared to the same quarter a year ago.

Rogers Communications Inc is a communications and media company. It provides wireless network technologies and services, conventional and specialty television networks. consumer magazines and cable television services.

Results
Reported Earnings
$0.76
Earnings Whisper
-
Consensus Estimate
$0.75
Reported Revenue
$2.82 Bil
Revenue Estimate
$2.89 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Rogers Communications Reports Fourth Quarter and Full-Year 2020 Results

  • Continued solid execution and a strong balance sheet despite COVID-19 impacts positions Rogers well for current and post-pandemic recovery environments
  • Strong delivery of Wireless postpaid net subscriber additions of 114,000, with adjusted EBITDA service margin up 370 basis points despite impacts of new Q4 lockdowns
    • Monthly postpaid churn of 1.19%, improved 7 basis points
    • Service revenue down 8% and adjusted EBITDA down 3%
  • Increased Cable service revenue by 3%; grew adjusted EBITDA by 5%
    • Adjusted EBITDA margin up 60 basis points; capital intensity decreased to 22%, down 700 basis points
    • 19,000 net new Internet subscribers, 71,000 net new Ignite TV™ subscribers in quiet selling period
  • Strong Media margins despite delays of live professional sports broadcasting
  • Free cash flow of $568 million, up 14%; strong liquidity position of $5.7 billion
  • Paid $253 million in dividends and declared a quarterly dividend of $0.50 per share

TORONTO, Jan. 28, 2021 (GLOBE NEWSWIRE) -- Rogers Communications Inc. today announced its unaudited financial and operating results for the fourth quarter ended December 31, 2020.

Consolidated Financial Highlights

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of Canadian dollars, except per share amounts, unaudited)2020 2019 % Chg 2020 2019 % Chg 
             
Total revenue3,680 3,952 (7)13,916 15,073 (8)
Total service revenue 13,023 3,244 (7)11,955 12,965 (8)
Adjusted EBITDA 21,590 1,530 4 5,857 6,212 (6)
Net income449 468 (4)1,592 2,043 (22)
Adjusted net income 2500 511 (2)1,725 2,135 (19)
             
Diluted earnings per share$0.89 $0.92 (3)$3.13 $3.97 (21)
Adjusted diluted earnings per share 2$0.99 $1.00 (1)$3.40 $4.15 (18)
             
Cash provided by operating activities947 1,166 (19)4,321 4,526 (5)
Free cash flow 2568 497 14 2,366 2,278 4 

1 As defined. See "Key Performance Indicators".
2 As defined. See "Non-GAAP Measures and Related Performance Measures". These measures should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies.

"Rogers continued to see sequential improvement in Q4, finishing the year with solid efficiency gains across all of our businesses, a strong balance sheet, solid Wireless postpaid net subscribers, and continued momentum in cash flow growth in our Cable business," said Joe Natale, President and CEO. "Despite the ongoing uncertainty from the pandemic, we remain committed to investing in our customers and our country by expanding our world-class networks that Canadians are relying on and continuing to build out Canada's largest 5G network, which will play an important role in Canada's long-term productivity and post-pandemic recovery efforts."

Quarterly Financial Highlights

Our solid financial position enables us to prioritize the actions we need to take as a result of the COVID-19 pandemic (COVID-19), continue to make high priority investments in our network, and ensure customers stay connected during this critical time.

Revenue
Total revenue decreased by 7% this quarter, largely driven by an 8% decrease in Wireless service revenue.

The Wireless service revenue decrease was mainly a result of lower roaming revenue due to global travel restrictions during COVID-19, and lower overage revenue, primarily as a result of the continued adoption of our Rogers Infinite™ unlimited data plans. Wireless equipment revenue decreased as a result of a lower gross additions and lower device upgrades by existing subscribers during COVID-19.

Cable revenue increased by 3% this quarter as a result of the movement of Internet customers from our legacy Internet to our Ignite Internet offerings and service pricing changes and discipline.

Media revenue decreased by 23% this quarter, primarily as a result of the postponement of the start of the 2020-2021 NHL and NBA seasons, which traditionally start early in the fourth quarter, and softness in the advertising market due to COVID-19, partially offset by higher revenue at Today's Shopping Choice™.

Adjusted EBITDA and margins
Consolidated adjusted EBITDA increased 4% this quarter and our adjusted EBITDA margin increased by 450 basis points.

Wireless adjusted EBITDA decreased by 3%, primarily as a result of the flow-through impact of the aforementioned decrease in revenue, partially offset by the shift to device financing, which has significantly improved our Wireless equipment margin, and various cost efficiencies. This gave rise to an adjusted EBITDA service margin of 63.2%, an improvement of 370 basis points from last year.

Cable adjusted EBITDA increased by 5% this quarter, primarily as a result of higher service revenue, as discussed above. This gave rise to a margin of 51.0% this quarter, up 60 basis points from last year.

Media adjusted EBITDA increased by $60 million this quarter primarily due to lower programming and production costs associated with the delayed start of major sports leagues relative to our maintained subscriber revenues and lower general operating costs as a result of reduced operating activity and cost efficiencies, partially offset by lower revenue, as discussed above. This gave rise to a margin of 20.0% this quarter.

Net income and adjusted net income
Net income and adjusted net income decreased this quarter by 4% and 2%, respectively, primarily as a result of higher depreciation and amortization and higher other expenses, partially offset by higher adjusted EBITDA.

Substantial cash flow and available liquidity
This quarter, we continued to generate substantial cash flow from operating activities of $947 million, down 19% as a result of an increase in net working capital and cash income taxes, and free cash flow of $568 million, up 14%.

Furthermore, as at December 31, 2020, we had $5.7 billion of available liquidity, including $2.5 billion in cash and cash equivalents and a combined $3.2 billion available under our bank credit facility and receivables securitization program, and investment-grade credit ratings with a stable outlook.

We also returned $253 million in dividends to shareholders this quarter and we declared a $0.50 per share dividend on January 27, 2021.

Operating Environment and Strategic Highlights

COVID-19 continues to significantly impact Canadians and economies around the world as a second wave affects Canada and other locations globally. After experiencing the most significant impact of COVID-19 to date in the second quarter, our results have recovered materially and are growing sequentially, although they are still down compared to last year. As a critical service provider during this time, it is of utmost importance to ensure our customers stay connected and that our customers and employees remain safe. This has not changed since the onset of the pandemic, when we quickly shifted priorities to keep our team members safe and customers connected.

In March 2020, we took swift action to ensure our customers and employees remain safe during the pandemic, including temporarily closing the majority of our retail stores across Canada and enabling about 90% of our employees to work from home. We also took steps to ensure our customers could stay connected to the world around them, including temporarily providing free services (offering a rotating selection of premium television channels), waiving certain fees for a designated period of time (for example international roaming fees and long distance voice calling fees), and adding network capacity and managing traffic.

In early 2020, we also implemented compensation- and health and safety-related programs to help our employees get through this challenging time, including supporting employees unable to work. As provinces relaxed certain public health restrictions, we reopened most of our retail stores throughout the fall, while implementing public health and safety measures. We also launched several community initiatives to support vulnerable Canadians during the pandemic, including partnerships with several organizations to provide digital lifelines to Canadians in need and a historic partnership with Food Banks Canada to support their largest ever food drive.

In the third quarter, live sports, which were suspended in March, resumed and allowed our broadcast teams to provide coverage to Canadians despite continued restricted attendance at live sports events. As public health restrictions were lifted to certain extents across the country, we maintained our focus on keeping our employees safe and our customers connected during this time.

In late September, several Canadian provinces declared a second wave of COVID-19 had commenced and provinces have adjusted various restrictions, including mandatory closures of certain types of businesses and reduced limits on social gatherings. As an essential service, almost all our retail stores remained open to serve customers, even as lockdowns were reintroduced in certain areas in the fourth quarter. As the fourth quarter progressed, the second wave of COVID-19 accelerated, resulting in lower-than-normal consumer activity during key selling periods. While COVID-19 continues to have a significant worldwide impact, we remain confident we have the right team, a strong balance sheet, and the world-class networks that will allow us to get through the pandemic having maintained our long-term focus on growth and doing the right thing for our customers.

Our six company priorities guide our work and decision-making as we further improve our operational execution and make well-timed investments to grow our core businesses and deliver increased shareholder value. Below are some highlights from 2020.

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

  • Improved Wireless postpaid churn by 11 basis points to 1.00%.
  • Accelerated our digital-first plan and added self-serve options during COVID-19, with overall digital adoption up 6 points to 84% and virtual assistant conversations up over 130%.
  • Moved to 100% Canada-based customer care specialists and opened our Kelowna Customer Solution Centre virtually.
  • Introduced an Ignite™ self-installation program, including a Drop & Go option, as a safe, easy, no-contact way for customers to install our Ignite Internet™ and Ignite TV™ services, with over 93% of customers choosing to easily install their products themselves since the beginning of April.
  • Launched Express Pickup, the only national carrier to give customers the convenience of ordering online and picking up in-store on the same day; expanded Pro On-the-Go™ to more cities across Canada, including Vancouver, Calgary, Edmonton, and Ottawa.
  • Supported customers with goodwill measures at the onset of COVID-19 by waiving pay-per-use international roaming fees in all available destinations until April 30 and long distance voice calling fees across Canada until June 30.

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

  • Launched and expanded Canada's first and largest 5G network to 160 cities and towns and started rolling out Canada’s first 5G standalone core network in Montreal, Ottawa, Toronto, and Vancouver to be ready to support future devices and chipsets as they become available.
  • Named best wireless network in Canada for the second year in a row, in July, by umlaut, the global leader in mobile network benchmarking, earned the number one spot in the Canada Wireless Network Quality Study by J.D. Power in the West and Ontario, in April, and ranked most consistent national wireless and broadband Internet provider in Canada by Ookla, in November.
  • Expanded our cable network through the acquisition of Cable Cable Inc. and Ruralwave Inc., local telecommunications companies in the Ontario Kawartha Lakes region, and announced partnerships with Southwestern Integrated Fibre Technology (SWIFT) to bring services to underserved communities in the Regional Municipality of Waterloo and Dufferin, Norfolk, Oxford, and Simcoe counties in Ontario.
  • Started rolling out wireless home broadband Internet service to more than 100 communities in Southwestern Ontario as part of our commitment to expand connectivity to rural and remote areas.
  • Strengthened our Advanced Services portfolio to help make it easier for businesses and governments to serve their customers and citizens, including with new Internet of Things (IoT) collaborations, and established the Rogers Internet of Things Chair with the University of Calgary to advance IoT research.
  • Added capacity and managed traffic where needed to ensure customers stayed connected during COVID-19, with total traffic on our networks up by over 50% during the first months of COVID-19, as more people started working and studying from home.

Deliver innovative solutions and compelling content that our customers will love

  • Launched Ignite™ SmartStream™, an entertainment add-on for Ignite Internet™ customers, to give customers access to their favourite streaming services in one place.
  • Launched 14 new apps and subscription video on-demand services on Ignite TV and expanded free content on Ignite TV with the introduction of new apps, including Fun at Home and Health at Home, tubi, XITE, and zone-ify.
  • Leveraged our media assets to advance inclusion and diversity, including a prime time special Ending Racism: What Will it Take?, a new digital series LIVE: #Cityline Real on Race, and a new Sportsnet interview series Top of HER Game™.
  • Delivered industry-leading coverage with the return of live sports, with Sportsnet™ the most-watched network for all programming in Canada for key demographics and first overall in prime time in August.
  • Launched access to Amazon Music on Ignite TV so customers can listen to their favourite music, as well as thousands of playlists and stations.
  • Provided free access for our customers to a rotating selection of channels for a select period of time during COVID-19 and temporarily removed data usage caps for customers on limited home Internet plans so they could stream, surf, and connect during the initial phase of the pandemic.

Drive profitable growth in all the markets we serve

  • Expanded consolidated adjusted EBITDA margin by 90 basis points.
  • Attracted 245,000 net Wireless postpaid subscribers, 57,000 net Internet subscribers, and 218,000 net Ignite TV subscribers.
  • Generated free cash flow of $2,366 million, up 4%.
  • Maintained our focus on long-term strategic growth despite the short-term economic downturn.

Develop our people and a high performance culture

  • Achieved an all-time high employee engagement score of 87% in our annual employee survey, up two points from 2019 and seven points above best-in-class.
  • Received Canada’s Top 100 Employers Award for the eighth year in a row and reclaimed certification for Canada’s Most Admired Corporate Cultures in 2020.
  • Delivered enhanced programs and employee communications to ensure employees were supported and informed during COVID-19, with 83% of teams reporting in our annual employee survey they felt supported on well-being & work-life balance during the COVID-19 crisis.
  • Extended our employee virtual health care solution in partnership with Sun Life until the end of the year to give employees and their families quick access to health care professionals during COVID-19.
  • Launched a new five-year Inclusion and Diversity (I&D) Strategy with measurable targets, including representation goals for equity-seeking groups across the business and at the executive level, and held 85 I&D events and listening sessions through our Employee Resource Groups.
  • Announced a $10 million commitment over the next five years in free advertising and creative services to charities and small businesses that support Black, Indigenous and People of Colour (BIPOC) and equity-seeking communities by leveraging our sports and media assets as part of our I&D plan.

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

  • Partnered with Food Banks Canada (FBC) and Jays Care Foundation for Step Up to the Plate, using the Rogers Centre™ to store and sort provisions for the largest food hamper program in the organization’s history to distribute over eight million meals for Canadian families; launched an awareness campaign across media and digital assets to raise money for FBC to address acute food shortages during COVID-19; and donated more than one million meals through a corporate donation and employee contributions.
  • Raised approximately $1 million through the Hearts and Smiles campaign in support of The Frontline Fund to help Canada’s frontline health care workers during COVID-19.
  • Launched the 60,000 Hours Challenge as part of The 60 Project to mark our 60th anniversary in 2020, with employee volunteers supporting over 200 organizations.
  • Donated $1 million to the Jays Care Foundation to deliver programs to support 35,000 youth across Canada, including virtual summer camps for 10,000 marginalized youth.
  • Awarded scholarships, through the Ted Rogers Scholarship Fund, to over 400 young people to pursue post-secondary education, with an estimated 75% of community recipients from BIPOC communities.
  • Partnered with The Salvation Army Canada to provide more than 1,600 digital donation units, a touchless giving option for Canadians to safely donate to the annual Christmas Kettle Campaign.

2020 Financial Guidance

In April 2020, due to the uncertainty surrounding the duration and potential outcomes of COVID-19, we withdrew the financial guidance originally issued on January 22, 2020. The impact on our operations and our financial results for the year has been material. Although COVID-19 has adversely impacted total service revenue and adjusted EBITDA in the short-term, we generated strong free cash flow, which will continue to remain a priority for us. See "About Forward-Looking Information" for more information on COVID-19, including the impacts it has had and may have on our business and the actions we are taking in response.

2021 Full-Year Consolidated Guidance

Due to the continued uncertainty surrounding the duration and potential outcomes of COVID-19, we are unable at this time to predict the ongoing future impacts on our operations and financial results, but the impact in 2020 was material and could remain material in 2021. It is difficult at this time to reliably estimate our financial results for the full-year 2021. We will therefore not provide a financial outlook for 2021 unless and until such a time as we can make a reasonable estimate of our financial results for 2021. See "About Forward-Looking Information" for more information on COVID-19, including the impacts it has had and may have on our business and the actions we are taking in response.

About Rogers

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, sports, 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).

Investment community contactMedia contact
  
Paul CarpinoAndrew Garas
647.435.6470647.242.7924
paul.carpino@rci.rogers.comandrew.garas@rci.rogers.com

Quarterly Investment Community Teleconference

Our fourth quarter 2020 results teleconference with the investment community will be held on:

  • January 28, 2021
  • 8:00 a.m. Eastern Time
  • webcast available at investors.rogers.com
  • media are welcome to participate on a listen-only basis

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

For More Information

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

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

About this Earnings Release

This earnings release contains important information about our business and our performance for the three and twelve months ended December 31, 2020, as well as forward-looking information about future periods. This earnings release should be used as preparation for reading our forthcoming Management's Discussion and Analysis (MD&A) and Audited Consolidated Financial Statements for the year ended December 31, 2020, which we intend to file with securities regulators in Canada and the US in the coming weeks. These documents will be made available at investors.rogers.com, sedar.com, and sec.gov or mailed upon request.

The financial information contained in this earnings release is prepared using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. This earnings release should be read in conjunction with our 2019 Annual MD&A, our 2019 Audited Consolidated Financial Statements, our 2020 First, Second, and Third Quarter MD&A and Interim Condensed Consolidated Financial Statements, and our other recent filings with Canadian and US securities regulatory authorities, which are available on SEDAR at sedar.com or EDGAR at sec.gov, respectively.

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.

All dollar amounts are in Canadian dollars unless otherwise stated and are unaudited. All percentage changes are calculated using the rounded numbers as they appear in the tables. Information is current as at January 27, 2021 and was approved by RCI's Board of Directors (the Board). This earnings release includes forward-looking statements and assumptions. See "About Forward-Looking Information" for more information.

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 earnings release, this quarter, the quarter, or fourth quarter refer to the three months ended December 31, 2020, first quarter refers to the three months ended March 31, 2020, second quarter refers to the three months ended June 30, 2020, third quarter refers to the three months ended September 30, 2020, and year to date or full-year refer to the twelve months ended December 31, 2020. All results commentary is compared to the equivalent periods in 2019 or as at December 31, 2019, as applicable, unless otherwise indicated.

Effective January 1, 2020, we updated the key performance indicators we present for our Cable segment to align our external reporting with the focus of our internal business strategy as a result of the convergence of technologies used to deliver Internet and television services, including the continued adoption of Ignite TV. We have begun disclosing Cable average revenue per account (ARPA), customer relationships, and market penetration as defined below. Additionally, we have amended the definition of our subscriber counts for Television to include only Ignite TV and renamed the metric accordingly as a result of shifting our product offering to focus on IPTV. Finally, we have ceased reporting Phone subscribers and total service units as our Phone product is increasingly being bundled with our Internet and Television products for a very low incremental cost. These changes have been made to align our external disclosure with the focus of the business and our strategy.

™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. ©2021 Rogers Communications

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

SegmentPrincipal activities
WirelessWireless telecommunications operations for Canadian consumers and businesses.
CableCable 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.
MediaA diversified portfolio of media properties, including sports media and entertainment, television and radio broadcasting, specialty channels, multi-platform shopping, and digital media.

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.

Summary of Consolidated Financial Results

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars, except margins and per share amounts)2020 2019 % Chg 2020 2019 % Chg 
             
Revenue            
Wireless2,291 2,493 (8)8,530 9,250 (8)
Cable1,019 987 3 3,946 3,954  
Media409 530 (23)1,606 2,072 (22)
Corporate items and intercompany eliminations(39)(58)(33)(166)(203)(18)
Revenue3,680 3,952 (7)13,916  15,073 (8)
Total service revenue 13,023 3,244 (7)11,955 12,965 (8)
             
Adjusted EBITDA 2            
Wireless1,034 1,064 (3)4,067 4,345 (6)
Cable520 497 5 1,935 1,919 1 
Media82 22 n/m51 140 (64)
Corporate items and intercompany eliminations(46)(53)(13)(196)(192)2 
Adjusted EBITDA 21,590 1,530 4 5,857 6,212 (6)
Adjusted EBITDA margin 243.2%38.7%4.5 pts42.1%41.2%0.9 pts
           
Net income449 468 (4)1,592 2,043 (22)
Basic earnings per share$0.89 $0.92 (3)$3.15 $3.99 (21)
Diluted earnings per share$0.89 $0.92 (3)$3.13 $3.97 (21)
           
Adjusted net income 2500 511 (2)1,725 2,135 (19)
Adjusted basic earnings per share 2$0.99 $1.00 (1)$3.42 $4.17 (18)
Adjusted diluted earnings per share 2$0.99 $1.00 (1)$3.40 $4.15 (18)
           
Capital expenditures656 791 (17)2,312 2,807 (18)
Cash provided by operating activities947 1,166 (19)4,321 4,526 (5)
Free cash flow 2568 497 14 2,366 2,278 4 

n/m - not meaningful
1 As defined. See "Key Performance Indicators".
2 Adjusted EBITDA, adjusted net income, and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures and Related Performance Measures" for information about these measures, including how we calculate them and the ratios in which they are used.

Results of our Reportable Segments

WIRELESS

Wireless Financial Results

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars, except margins)2020 2019 % Chg 2020 2019 % Chg 
       
Revenue      
Service revenue1,637 1,788 (8)6,579 7,156 (8)
Equipment revenue654 705 (7)1,951 2,094 (7)
Revenue2,291 2,493 (8)8,530 9,250 (8)
       
Operating expenses      
Cost of equipment654 733 (11)1,932 2,231 (13)
Other operating expenses603 696 (13)2,531 2,674 (5)
Operating expenses1,257 1,429 (12)4,463 4,905 (9)
       
Adjusted EBITDA1,034 1,064 (3)4,067 4,345 (6)
       
Adjusted EBITDA service margin 163.2%59.5%3.7pts61.8%60.7%1.1pts
Adjusted EBITDA margin 245.1%42.7%2.4pts47.7%47.0%0.7pts
Capital expenditures337 360 (6)1,100 1,320 (17)

1 Calculated using service revenue.
2 Calculated using total revenue.

Wireless Subscriber Results 1

 Three months ended December 31 Twelve months ended December 31 
(In thousands, except churn, blended ABPU, and blended ARPU)2020 2019 Chg 2020 2019 Chg 
       
Postpaid      
Gross additions458 483 (25)1,381 1,566 (185)
Net additions114 131 (17245 334 (89)
Total postpaid subscribers 29,683 9,438 245 9,683 9,438 245 
Churn (monthly)1.19%1.26%(0.07 pts)1.00%1.11%(0.11 pts)
Prepaid      
Gross additions127 168 (41)550 773 (223)
Net losses(40)(76)36 (142)(97(45)
Total prepaid subscribers 21,260 1,402 (1421,260 1,402 (142)
Churn (monthly)4.31%5.58%(1.27 pts)4.38%4.86%(0.48 pts)
Blended ABPU (monthly)$62.82 $66.17 ($3.35$63.24 $66.23 ($2.99)
Blended ARPU (monthly)$50.02 $55.26 ($5.24$50.75 $55.49 ($4.74)

1 Subscriber counts, subscriber churn, blended ABPU, and blended ARPU are key performance indicators. See "Key Performance Indicators".
2 As at end of period.

Service revenue 
The 8% decrease in service revenue and the 9% decrease in blended ARPU this quarter were a result of:

  • lower roaming revenue, due to global travel restrictions during COVID-19; and
  • a decrease in overage revenue as a result of strong customer adoption of our Rogers Infinite unlimited data plans and lower wireless data usage as customers spent more time at home on WiFi during COVID-19.

The 5% decrease in blended ABPU this quarter was primarily a result of the declines in roaming and overage revenue, partially offset by an ongoing shift as subscribers finance new, higher-value device purchases.

The decrease in postpaid gross additions, the lower postpaid net additions, and the lower postpaid churn this quarter were all a result of the impacts of COVID-19, with overall lower market activity by Canadians.

Equipment revenue
The 7% decrease in equipment revenue this quarter was a result of:

  • lower gross additions due to COVID-19, and
  • lower device upgrades by existing customers; partially offset by
  • the shift in product mix towards higher-value devices; and
  • disciplined promotional activity during key selling periods.

Operating expenses
Cost of equipment
The 11% decrease in the cost of equipment this quarter was a result of the same factors discussed in equipment revenue above. The shift to customers financing their device purchases is reflected in the improvements in our equipment margin.

Other operating expenses
The 13% decrease in other operating expenses this quarter was primarily a result of:

  • lower roaming costs due to COVID-19 travel restrictions; and
  • various cost efficiencies and productivity initiatives.

Adjusted EBITDA
The 3% decrease in adjusted EBITDA this quarter was a result of the revenue and expense changes discussed above.

CABLE

Cable Financial Results

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars, except margins)2020 2019 % Chg 2020 2019 % Chg 
       
Revenue      
Service revenue1,016 984 3 3,936 3,940  
Equipment revenue3 3  10 14 (29)
Revenue1,019 987 3 3,946 3,954  
       
Operating expenses499 490 2 2,011 2,035 (1
       
Adjusted EBITDA520 497 5 1,935 1,919 1 
       
Adjusted EBITDA margin51.0%50.4%0.6 pts49.0%48.5%0.5 pts
Capital expenditures227 289 (21)940 1,153 (18)

Cable Subscriber Results 1

 Three months ended December 31
 Twelve months ended December 31
 
(In thousands, except ARPA and penetration)2020 2019 Chg 2020 2019 Chg 
       
Internet      
Net additions19 27 (8)57 104 (47)
Total Internet subscribers 2,3,42,598 2,534 64 2,598 2,534 64 
Ignite TV      
Net additions71 106 (35218 284 (66
Total Ignite TV subscribers 2544 326 218 544 326 218 
       
Homes passed 24,578 4,472 106 4,578 4,472 106 
Customer relationships      
Net additions11 8 3 12 21 (9)
Total customer relationships 2,3, 42,530 2,510 20 2,530 2,510 20 
ARPA (monthly)$134.43 $130.86 $3.57 $130.70 $131.71 ($1.01
       
Penetration 255.3%56.1%(0.8 pts)55.3%56.1%(0.8 pts)

1 Subscriber results are key performance indicators. See "Key Performance Indicators".
2 As at end of period.
3 On September 30, 2020, we acquired approximately 2,000 Internet subscribers and customer relationships as a result of our acquisition of Ruralwave Inc., which are not included in net additions, but do appear in the ending total balance for December 31, 2020.
4 On October 1, 2020, we acquired approximately 5,000 Internet subscribers and 6,000 customer relationships as a result of our acquisition of Cable Cable Inc., which are not included in net additions, but do appear in the ending total balance for December 31, 2020.

Revenue
The 3% increase in service revenue this quarter was a result of:

  • a 3% increase in ARPA as a result of the movement of Internet customers from our legacy Internet to our Ignite Internet offerings and service pricing changes and discipline; and
  • the increase in total customer relationships over the past year, due to growth in our Internet and Ignite TV subscriber bases; partially offset by
  • declines in our legacy television and home phone subscriber bases.

We remain focused on our Connected Home roadmap, driven by our Ignite TV product. During the past year, we have achieved significant growth in our Ignite TV subscriber base. The next steps on our roadmap include adding more apps and content to Ignite TV and launching more new products to help keep our customers connected.

Operating expenses
The 2% increase in operating expenses this quarter was a result of higher costs related to the increased revenue, partially offset by various cost efficiencies.

Adjusted EBITDA
The 5% increase in adjusted EBITDA this quarter was a result of the service revenue and expense changes discussed above.

MEDIA

Media Financial Results

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars, except margins)2020 2019 % Chg 2020 2019 % Chg 
       
Revenue409 530 (23)1,606 2,072 (22)
Operating expenses327 508 (36)1,555 1,932 (20)
       
Adjusted EBITDA82 22 n/m51 140 (64)
       
Adjusted EBITDA margin20.0%4.2%15.8pts3.2%6.8%(3.6pts)
Capital expenditures36 46 (22)79 102 (23)

Our Media results this quarter have been significantly affected by COVID-19 and reflect the postponement of the 2020-2021 NHL and NBA seasons, which traditionally start early in the fourth quarter. Additionally, our Media segment is affected by seasonal fluctuations, some of which relate to the typical amount of consumer activity and its impact on advertising and related retail cycles.

Revenue
The 23% decrease in revenue this quarter was a result of:

  • lower sports-related and other advertising revenue, primarily as a result of the delayed start of major sports leagues and softness in the overall advertising market due to COVID-19; partially offset by
  • higher Today's Shopping Choice™ revenue.

Operating expenses
The 36% decrease in operating expenses this quarter was a result of:

  • lower sports programming and production costs, as a result of the delayed start of major sports leagues; and
  • lower general operating costs as a result of reduced operating activity and cost efficiencies.

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

CAPITAL EXPENDITURES

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars, except capital intensity)2020 2019 % Chg 2020 2019 % Chg 
       
Wireless337 360 (6)1,100 1,320 (17)
Cable227 289 (21)940 1,153 (18)
Media36 46 (22)79 102 (23)
Corporate56 96 (42)193 232 (17)
       
Capital expenditures 1656 791 (17)2,312 2,807 (18)
       
Capital intensity 217.8%20.0%(2.2 pts)16.6%18.6%(2.0 pts)

1 Includes additions to property, plant and equipment net of proceeds on disposition, but does not include expenditures for spectrum licences or additions to right-of-use assets.
2 As defined. See "Key Performance Indicators".

Consolidated capital expenditures have declined by 17% this quarter. Most of this decline has been a result of fewer residential installations, lower costs given the introduction of self-install in our Cable business, deferrals of certain projects that have been delayed as a result of the pandemic, and overall cost efficiencies as evidenced by our improving capital intensity ratios. Despite the overall decline, we continue to prioritize capital spending to support our long-term strategy, including expansion of our 5G network and our Connected Home roadmap.

Wireless
Capital expenditures in Wireless this quarter, while lower than in 2019, reflect continued investments in our networks. We continued to work on our 5G deployments in the 600 MHz band and other bands as we have deployed our 5G network in 160 cities and towns and we started rolling out our 5G standalone core network in Montreal, Ottawa, Toronto, and Vancouver.

Cable
The decrease in capital expenditures in Cable this quarter was a result of lower residential installation activity during the pandemic and the recognition of capital efficiencies and improved capital intensity as we prioritized network infrastructure projects, including additional fibre deployments to increase our fibre-to-the-home and fibre-to-the-curb distribution. These upgrades will lower the number of homes passed per node and incorporate the latest technologies to help deliver more bandwidth and an even more reliable customer experience as we progress in our Connected Home roadmap.

Media
The decrease in capital expenditures in Media this quarter was primarily a result of lower stadium and facility investments at the Toronto Blue Jays™, partially offset by an increase in IT and broadcast infrastructure expenditures.

Corporate
The decrease in corporate capital expenditures this quarter was a result of lower investments in our real estate facilities.

Capital intensity
Capital intensity decreased this quarter as a result of lower capital expenditures partially offset by lower revenue, as discussed above.

Review of Consolidated Performance

This section discusses our consolidated net income and other income and expenses that do not form part of the segment discussions above.

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars)2020 2019 % Chg 2020 2019 % Chg 
        
Adjusted EBITDA 11,590 1,530 4 5,857 6,212 (6)
Deduct (add):       
Depreciation and amortization666 638 4 2,618 2,488 5 
Restructuring, acquisition and other73 38 92 185 139 33 
Finance costs228 230 (1)881 840 5 
Other expense (income)2 (12)n/m1 (10)n/m
Income tax expense172 168 2 580 712 (19)
        
Net income449 468 (4)1,592 2,043 (22)

1 Adjusted EBITDA is a non-GAAP measure and should not be considered a substitute or alternative for GAAP measures. It is not a defined term under IFRS and does not have a standard meaning, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures and Related Performance Measures" for information about this measure, including how we calculate it.

Depreciation and amortization

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars)2020 2019 % Chg 2020 2019 % Chg 
        
Depreciation of property, plant and equipment605 588 3 2,390 2,297 4 
Depreciation of right-of-use assets58 47 23 217 175 24 
Amortization3 3  11 16 (31
        
Total depreciation and amortization666 638 4 2,618 2,488 5 

Total depreciation and amortization increased this quarter primarily as a result of the cumulative impact of higher capital expenditures and additions to right-of-use assets over the past several years. See "Capital Expenditures" for more information.

Restructuring, acquisition and other
This quarter, we incurred $73 million (2019 - $38 million), in restructuring, acquisition and other expenses. In 2020, these costs were incremental, temporary employee compensation and other costs incurred in response to COVID-19 as well as severance costs associated with the targeted restructuring of our employee base. In 2019, these costs were primarily severance costs associated with the targeted restructuring of our employee base and contract termination and other costs.

Finance costs

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars)2020 2019 % Chg 2020 2019 % Chg 
        
Interest on borrowings 1195 192 2 780 746 5 
Interest on lease liabilities18 17 6 70 61 15 
Interest on post-employment benefits liability3 3  13 11 18 
Loss on repayment of long-term debt 19 (100) 19 (100)
(Gain) loss on foreign exchange(8)(27)(70)107 (79)n/m
Change in fair value of derivative instruments16 26 (38)(97)80 n/m
Capitalized interest(4)(5)(20)(19)(19) 
Other8 5 60 27 21 29 
        
Total finance costs228 230 (1)881 840 5 

1 Interest on borrowings includes interest on short-term borrowings and on long-term debt.

Income tax expense

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars, except tax rates)2020 2019 2020 2019 
      
Statutory income tax rate26.6%26.7%26.6%26.7%
Income before income tax expense621 636 2,172 2,755 
Computed income tax expense165 170 578 736 
Increase (decrease) in income tax expense resulting from:     
Non-deductible stock-based compensation3    
Non-deductible portion of equity losses3  10 7 
Income tax adjustment, legislative tax change(3) (3)(23)
Non-taxable portion of capital gains   (2)
Other items4 (2)(5)(6)
      
Total income tax expense172 168 580 712 
      
Effective income tax rate27.7%26.4%26.7%25.8%
Cash income taxes paid175 55 418 400 

Cash income taxes increased this quarter as a result of the timing of installment payments. Our transition to a device financing business model results in earlier recognition of equipment revenue for income tax purposes. As a result, we expect a further approximately $300 million increase in our 2021 cash income tax, mostly within the first quarter, reflecting our final 2020 tax installment.

Net income

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars, except per share amounts)2020 2019 % Chg 2020 2019 % Chg 
             
Net income449 468 (4)1,592 2,043 (22)
Basic earnings per share$0.89 $0.92 (3)$3.15 $3.99 (21)
Diluted earnings per share$0.89 $0.92 (3)$3.13 $3.97 (21)

Adjusted net income
We calculate adjusted net income from adjusted EBITDA as follows:

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars, except per share amounts)2020 2019 % Chg 2020 2019 % Chg 
        
Adjusted EBITDA 11,590 1,530 4 5,857 6,212 (6)
Deduct:       
Depreciation and amortization666 638 4 2,618 2,488 5 
Finance costs 2228 211 8 881 821 7 
Other expense (income)2 (12)n/m1 (10)n/m
Income tax expense 3194 182 7 632 778 (19)
        
Adjusted net income 1500 511 (2)1,725 2,135 (19)
        
Adjusted basic earnings per share 1$0.99 $1.00 (1)$3.42 $4.17 (18)
Adjusted diluted earnings per share 1$0.99 $1.00 (1)$3.40 $4.15 (18)

1 Adjusted EBITDA and adjusted net income are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures and Related Performance Measures" for information about these measures, including how we calculate them and the ratios in which they are used.
2 Finance costs exclude a $19 million loss on repayment of long-term debt for the three and twelve months ended December 31, 2019.
3 Income tax expense excludes recoveries of $19 million and $49 million (2019 - recoveries of $14 million and $43 million) for the three and twelve months ended December 31, 2020, respectively, related to the income tax impact for adjusted items. Income tax expense also excludes a $3 million recovery as a result of legislative tax changes for the three and twelve months ended December 31, 2020 (2019 - $23 million for the twelve months ended December 31).

Managing our Liquidity and Financial Resources

Operating, investing, and financing activities

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars)2020 2019 2020 2019 
Cash provided by operating activities before changes in net operating assets and liabilities, income taxes paid, and interest paid1,581 1,521 5,880 6,167 
Change in net operating assets and liabilities 1(265)(102)(333)(462)
Income taxes paid(175)(55)(418)(400)
Interest paid(194)(198)(808)(779)
      
Cash provided by operating activities947 1,166 4,321 4,526 
      
Investing activities:     
Capital expenditures(656)(791)(2,312)(2,807)
Additions to program rights(12)(31)(57)(60)
Changes in non-cash working capital related to capital expenditures and intangible assets97 109 (37)(35)
Acquisitions and other strategic transactions, net of cash acquired(95) (103)(1,731)
Other11 20 (49)21 
      
Cash used in investing activities(655)(693)(2,558)(4,612)
      
Financing activities:     
Net proceeds received from (repayments of) short-term borrowings256 553 (1,146)30 
Net (repayment) issuance of long-term debt (92)2,540 2,184 
Net proceeds (payments) on settlement of debt derivatives and forward contracts 5 80 (121)
Principal payments of lease liabilities(58)(43)(213)(167)
Transaction costs incurred(1)(28)(23)(61)
Repurchase of Class B Non-Voting Shares (361) (655)
Dividends paid(253)(256)(1,011)(1,016)
Other (19) (19)
      
Cash (used in) provided by financing activities(56)(241)227 175 
      
Change in cash and cash equivalents236 232 1,990 89 
Cash and cash equivalents, beginning of period2,248 262 494 405 
      
Cash and cash equivalents, end of period2,484 494 2,484 494 

1 As a result of the growth of our financing receivable program and the ways in which we manage our business, effective this quarter and retroactively, we have reclassified the "net change in contract asset balances" and the "net change in financing receivable balances" into "change in net operating assets and liabilities". Additionally, certain 2019 reported figures have been reclassified to conform to the current presentation.

Operating activities
The 19% decrease in cash provided by operating activities this quarter was primarily a result of higher investments in net operating assets and liabilities due to timing, as well as higher income taxes paid. For the year, our net investment in net operating assets and liabilities was lower than in 2019.

Investing activities
Capital expenditures
During the quarter, we incurred $656 million on capital expenditures before changes in non-cash working capital items. See "Capital Expenditures" for more information.

Financing activities
During the quarter, we received net amounts of $255 million (2019 - received $438 million), on our short-term borrowings, long-term debt, and related derivatives, net of transaction costs paid. See "Financial Risk Management" for more information on the cash flows relating to our derivative instruments.

Short-term borrowings
Our short-term borrowings consist of amounts outstanding under our receivables securitization program and under our US dollar-denominated commercial paper (US CP) program. Below is a summary of our short-term borrowings as at December 31, 2020 and December 31, 2019.

 As at
December 31
 As at
December 31
 
(In millions of dollars)2020 2019 
   
Receivables securitization program650 650 
US commercial paper program (net of the discount on issuance)571 1,588 
   
Total short-term borrowings1,221 2,238 

The tables below summarize the activity relating to our short-term borrowings for the three and twelve months ended December 31, 2020 and 2019.

 Three months ended
December 31, 2020
 Twelve months ended
December 31, 2020
 
(In millions of dollars, except exchange rates)Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 
        
Proceeds received from US commercial paper200 1.280 256 3,316 1.329 4,406 
Repayment of US commercial paper   (4,098)1.355 (5,552)
Net proceeds received from (repayment of) US commercial paper  256   (1,146)
        
Net proceeds received from (repayment of) short-term borrowings  256   (1,146)


 Three months ended
December 31, 2019
 Twelve months ended
December 31, 2019
 
(In millions of dollars, except exchange rates)Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 
       
Proceeds received from US commercial paper2,851 1.321 3,766 12,897 1.328 17,127 
Repayment of US commercial paper(2,430)1.322 (3,213)(12,876)1.328 (17,094)
Net proceeds received from US commercial paper  553   33 
       
Proceeds received from credit facilities   420 1.336 561 
Repayment of credit facilities   (420)1.343 (564)
Net repayment of credit facilities     (3)
       
Net proceeds received from short-term borrowings  553   30 

Concurrent with our US CP issuances, we entered into debt derivatives to hedge the foreign currency risk associated with the principal and interest components of the borrowings. See "Financial Risk Management" for more information.

Receivables securitization program
On December 23, 2020, we entered into a new receivables securitization program to replace our previous accounts receivable securitization program. The new program enables us to sell certain trade accounts receivable and financing receivables into the program, with the proceeds recorded in current liabilities as revolving floating rate loans of up to $1.2 billion, an increase from $1.05 billion in the previous program. Similar to the previous program, we will continue to service the receivables and they will continue to be recorded as accounts receivable or financing receivables, as applicable, on our Consolidated Statement of Financial Position.

The terms of our receivables securitization program are committed until its expiry on December 22, 2023. Initial funding of $650 million was available on December 23, 2020 and will increase to a minimum of $800 million on January 25, 2021. The buyer’s interest in these receivables ranks ahead of our interest. The buyer of our receivables has no further claim on any of our other assets.

Long-term debt
Our long-term debt consists of amounts outstanding under our bank credit facilities and the senior notes and debentures we have issued. The tables below summarize the activity relating to our long-term debt for the three and twelve months ended December 31, 2020 and 2019.

 Three months ended
December 31, 2020
 Twelve months ended
December 31, 2020
 
(In millions of dollars, except exchange rates)Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 
             
Credit facility borrowings (US$)   970 1.428 1,385 
Credit facility repayments (US$)   (970)1.406 (1,364)
        
Net borrowings under credit facilities     21 
        
Senior note issuances (Cdn$)     1,500 
Senior note issuances (US$)   750 1.359 1,019 
        
Net issuance of senior notes     2,519 
        
Net issuance of long-term debt     2,540 


 Three months ended
December 31, 2019
 Twelve months ended
December 31, 2019
 
(In millions of dollars, except exchange rates)Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 
         
Senior note issuances (Cdn$)     1,000 
Senior note issuances (US$)1,000 1.308 1,308 2,250 1.326 2,984 
Total senior note issuances  1,308   3,984 
         
Senior note repayments (Cdn$)  (1,400)  (1,800)
         
Net (repayment) issuance of long-term debt  (92)  2,184 


 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars)2020 2019 2020 2019 
         
Long-term debt net of transaction costs, beginning of period18,747 16,279 15,967 14,290 
Net issuance (repayment) of long-term debt (92)2,540 2,184 
Gain on foreign exchange(550)(195)(298)(458)
Deferred transaction costs incurred(1)(28)(23)(61)
Amortization of deferred transaction costs5 3 15 12 
         
Long-term debt net of transaction costs, end of period18,201 15,967 18,201 15,967 

Issuance of senior notes and related debt derivatives
In November 2019, we issued US$1 billion senior notes due 2049 at a rate of 3.7%. At the same time, we entered into debt derivatives to convert all interest and principal payment obligations to Canadian dollars at a fixed interest rate. As a result, we received net proceeds of $1.3 billion from the issuance. We did not issue any senior notes this quarter.

Repayment of senior notes and related derivative settlements
We did not repay any senior notes or settle any related debt derivatives this quarter.

In November 2019, we repaid the entire outstanding principal amount of our $900 million 4.7% senior notes otherwise due in September 2020 for which we recognized a $19 million loss on repayment of long-term debt reflecting our obligation to pay redemption premiums upon repayment. We also repaid the entire outstanding principal amount of our $500 million 5.38% senior notes, which came due in November 2019. There were no derivatives associated with these senior notes.

Repurchase of Class B Non-Voting Shares
We did not repurchase any RCI Class B Non-Voting common shares (Class B Non-Voting Shares) this quarter or year. During the three months ended December 31, 2019, we repurchased for cancellation 5.6 million Class B Non-Voting Shares under our normal course issuer bid (NCIB) program for a purchase price of $357 million. During 2019, we repurchased for cancellation 9.9 million Class B Non-Voting Shares under our NCIB programs for a total purchase price of $655 million.

Dividends
Below is a summary of the dividends we declared and paid on our outstanding RCI Class A Voting common shares (Class A Shares) and Class B Non-Voting Shares in 2020 and 2019. On October 21, 2020, the Board of Directors declared a dividend of $0.50 per Class A Share and Class B Non-Voting Share to be paid on January 4, 2021 to shareholders of record on December 10, 2020.

Declaration dateRecord datePayment dateDividend per
share (dollars)
Dividends paid
(in millions of dollars)
     
January 21, 2020March 10, 2020April 1, 20200.50 252 
April 21, 2020June 10, 2020July 2, 20200.50 253 
July 21, 2020September 9, 2020October 1, 20200.50 253 
October 21, 2020December 10, 2020January 4, 20210.50 252 
     
January 24, 2019March 12, 2019April 1, 20190.50 257 
April 18, 2019June 10, 2019July 2, 20190.50 256 
June 5, 2019September 9, 2019October 1, 20190.50 256 
October 23, 2019December 11, 2019January 2, 20200.50 253 

Free cash flow

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars)2020 2019 % Chg 2020 2019 % Chg 
             
Adjusted EBITDA 11,590  1,530 4 5,857  6,212 (6)
Deduct:            
Capital expenditures 2656  791 (17)2,312  2,807 (18)
Interest on borrowings, net of capitalized interest191  187 2 761  727 5 
Cash income taxes 3175  55 n/m 418  400 5 
             
Free cash flow 1568  497 14 2,366  2,278 4 

1 Adjusted EBITDA and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures and Related Performance Measures" for information about these measures, including how we calculate them and the ratios in which they are used.
2 Includes additions to property, plant and equipment net of proceeds on disposition, but does not include expenditures for spectrum licences or additions to right-of-use assets.
3 Cash income taxes are net of refunds received.

Free cash flow increased this quarter primarily as a result of higher adjusted EBITDA and lower capital expenditures, partially offset by higher cash income taxes.

Financial Condition

Below is a summary of our total available liquidity under our cash and cash equivalents, bank credit facilities, letter of credit facilities, and short-term borrowings as at December 31, 2020 and December 31, 2019.

As at December 31, 2020          
(In millions of dollars)Total available Drawn Letters of credit US CP program 1 Net available 
      
Bank credit facilities:     
Revolving3,200  8 573 2,619  
Outstanding letters of credit101  101  —  
Total bank credit facilities3,301  109 573 2,619  
Receivables securitization1,200 650   550  
Cash and cash equivalents2,484    2,484  
      
Total6,985 650 109 573 5,653  


As at December 31, 2019          
(In millions of dollars)Total available Drawn Letters of credit US CP program 1 Net available 
      
Bank credit facilities:     
Revolving3,200  8 1,593 1,599 
Outstanding letters of credit101  101   
Total bank credit facilities3,301  109 1,593 1,599 
Receivables securitization1,050 650   400 
Cash and cash equivalents494    494 
      
Total4,845 650 109 1,593 2,493 

1 The US CP program amounts are gross of the discount on issuance.

In addition to the sources of available liquidity noted above, we held $1,535 million of marketable securities in publicly traded companies as at December 31, 2020 (December 31, 2019 - $1,831 million).

Weighted average cost of borrowings
Our weighted average cost of borrowings was 4.09% as at December 31, 2020 (December 31, 2019 - 4.30%) and our weighted average term to maturity was 12.8 years (December 31, 2019 - 14.1 years).

Credit ratings
Below is a summary of the credit ratings on RCI's outstanding senior notes and debentures (long-term) and US CP (short-term) as at December 31, 2020.

IssuanceStandard & Poor'sMoody'sFitch
Corporate credit issuer default rating 1BBB+ with a stable outlookBaa1 with a stable outlookBBB+ with a stable outlook
Senior unsecured debt 1BBB+ with a stable outlookBaa1 with a stable outlookBBB+ with a stable outlook
US commercial paper 1A-2P-2N/A 2

1 Unchanged in the quarter.
2 We have not sought a rating from Fitch for our short-term obligations.

Adjusted net debt and debt leverage ratio
We use adjusted net debt and debt leverage ratio to conduct valuation-related analysis and make capital structure-related decisions. Adjusted net debt includes long-term debt, net debt derivative assets or liabilities, short-term borrowings, lease liabilities, and cash and cash equivalents or bank advances.

 As at
December 31
 As at
December 31
 
(In millions of dollars, except ratios)2020 2019 
   
Long-term debt 118,373 16,130 
Net debt derivative assets valued without any adjustment for credit risk 2(1,101)(1,414)
Short-term borrowings1,221 2,238 
Lease liabilities1,835 1,725 
Cash and cash equivalents(2,484)(494)
   
Adjusted net debt 317,844 18,185 
Divided by: trailing 12-month adjusted EBITDA 35,857 6,212 
   
Debt leverage ratio 33.0 2.9 

1 Includes current and long-term portion of long-term debt before deferred transaction costs and discounts. See "Reconciliation of adjusted net debt and debt leverage ratio" in "Non-GAAP Measures and Related Performance Measures" for the calculation of this amount.
2 For purposes of calculating adjusted net debt and debt leverage ratio, we believe including debt derivatives valued without adjustment for credit risk is commonly used to evaluate debt leverage and for market valuation and transactional purposes.
3 Adjusted net debt and adjusted EBITDA are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures and Related Performance Measures" for information about these measures, including how we calculate them and the ratios in which they are used.

Normal course issuer bid
In April 2020, the TSX accepted a notice of our intention to commence a NCIB program that allows us to purchase, during the twelve-month period beginning April 24, 2020 and ending April 23, 2021, the lesser of 34.9 million Class B Non-Voting Shares and that number of Class B Non-Voting Shares that can be purchased for an aggregate purchase price of $500 million (2020 NCIB). Rogers security holders may obtain a copy of this notice, without charge, by contacting us.

In April 2019, we commenced a NCIB program that allowed us to purchase, during the twelve-month period beginning April 24, 2019 and ending April 23, 2020, the lesser of 35.7 million Class B Non-Voting Shares and that number of Class B Non-Voting Shares that can be purchased for an aggregate purchase price of $500 million (2019 NCIB).

We did not repurchase any Class B Non-Voting Shares this year. During the three months ended December 31, 2019, we repurchased for cancellation 5.6 million Class B Non-Voting Shares under our 2019 NCIB for a purchase price of $357 million. During 2019, we repurchased for cancellation 9.9 million Class B Non-Voting Shares under our 2019 NCIB program and our prior NCIB program for a total purchase price of $655 million.

Outstanding common shares

 As at
December 31
 As at
December 31
 
 2020 2019 
   
Common shares outstanding 1  
Class A Voting Shares111,154,811 111,154,811 
Class B Non-Voting Shares393,770,507 393,770,507 
   
Total common shares504,925,318 504,925,318 
   
Options to purchase Class B Non-Voting Shares  
Outstanding options4,726,634 3,154,795 
Outstanding options exercisable1,470,383 993,645 

1 Holders of our Class B Non-Voting Shares are entitled to receive notice of and to attend shareholder meetings; however, they are not entitled to vote at these meetings except as required by law or stipulated by stock exchanges. If an offer is made to purchase outstanding Class A Shares, there is no requirement under applicable law or our constating documents that an offer be made for the outstanding Class B Non-Voting Shares, and there is no other protection available to shareholders under our constating documents. If an offer is made to purchase both classes of shares, the offer for the Class A Shares may be made on different terms than the offer to the holders of Class B Non-Voting Shares.

Financial Risk Management

This section should be read in conjunction with "Financial Risk Management" in our 2019 Annual MD&A. We use derivative instruments to manage financial risks related to our business activities. We only use derivatives to manage risk and not for speculative purposes. We also manage our exposure to both fixed and fluctuating interest rates and had fixed the interest rate on 93.6% of our outstanding debt, including short-term borrowings, as at December 31, 2020 (December 31, 2019 - 87.2%).

Debt derivatives
We use cross-currency interest rate agreements and foreign exchange forward agreements (debt derivatives) to manage risks from fluctuations in foreign exchange rates and interest rates associated with our US dollar-denominated senior notes and debentures, lease liabilities, credit facility borrowings, and US dollar-denominated commercial paper borrowings. We designate the debt derivatives related to our senior notes, debentures and lease liabilities as hedges for accounting purposes against the foreign exchange risk associated with specific debt instruments. Debt derivatives related to our credit facility and US CP borrowings have not been designated as hedges for accounting purposes.

Credit facilities and US CP
Below is a summary of the debt derivatives we entered and settled related to our credit facilities and US CP program during the three and twelve months ended December 31, 2020 and 2019.

 Three months ended
December 31, 2020
 Twelve months ended
December 31, 2020
 
(In millions of dollars, except exchange rates)Notional
 (US$)
 Exchange
rate
 Notional
(Cdn$)
 Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 
        
Credit facilities       
Debt derivatives entered   970 1.428 1,385 
Debt derivatives settled   970 1.406 1,364 
Net cash paid     (21)
        
US commercial paper program       
Debt derivatives entered200 1.280 256 3,316 1.329 4,406 
Debt derivatives settled   4,091 1.330 5,441 
Net cash received     101 


 Three months ended
December 31, 2019
 Twelve months ended
December 31, 2019
 
(In millions of dollars, except exchange rates)Notional
 (US$)
 Exchange
rate
 Notional
(Cdn$)
 Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 
             
Credit facilities            
Debt derivatives entered   420 1.336 561 
Debt derivatives settled   420 1.343 564 
Net cash received         3 
             
US commercial paper program            
Debt derivatives entered2,851 1.321 3,766 12,897 1.328 17,127 
Debt derivatives settled2,426 1.321 3,204 12,847 1.329 17,069 
Net cash received (paid)    5     (13)

As at December 31, 2020, we had nil and US$448 million notional amount of debt derivatives outstanding relating to our credit facility borrowings and US CP program (December 31, 2019 - nil and US$1,226 million), respectively.

Senior notes
Below is a summary of the debt derivatives we entered related to senior notes during the twelve months ended December 31, 2020 and 2019.

(In millions of dollars, except interest rates)  
  US$Hedging effect
Effective datePrincipal/Notional
amount (US$)
 Maturity
date
 Coupon rate Fixed hedged (Cdn$)
interest rate 1
 Equivalent (Cdn$) 
       
2020 issuances      
June 22, 2020750 2022 USD LIBOR + 0.60%0.955%1,019 
       
2019 issuances      
April 30, 20191,250 2049 4.350%4.173%1,676 
November 12, 20191,000 2049 3.700%3.996%1,308 

1 Converting from a fixed US$ coupon rate to a weighted average Cdn$ fixed rate.

As at December 31, 2020, we had US$9,050 million (December 31, 2019 - US$8,300 million) in US dollar-denominated senior notes and debentures, of which all of the associated foreign exchange and interest rate risk had been hedged using debt derivatives.

Lease liabilities
Below is a summary of the debt derivatives we entered and settled related to our outstanding lease liabilities for the three and twelve months ended December 31, 2020 and 2019.

 Three months ended December 31, 2020
 Twelve months ended December 31, 2020
 
(In millions of dollars, except exchange rates)Notional
(US$)
 Exchange rate Notional
(Cdn$)
 Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 
        
Debt derivatives entered25 1.280 32 115 1.374 158 
Debt derivatives settled13 1.462 19 43 1.372 59 


 Three months ended December 31, 2019
 Twelve months ended December 31, 2019
 
(In millions of dollars, except exchange rates)Notional
(US$)
 Exchange rate Notional
(Cdn$)
 Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 
        
Debt derivatives entered70 1.314 92 70 1.314 92 
Debt derivatives settled      

As at December 31, 2020, we had US$142 million notional amount of debt derivatives outstanding relating to our outstanding lease liabilities (December 31, 2019 - US$70 million) with terms to maturity ranging from January 2021 to December 2023 (December 31, 2019 - January 2020 to December 2022), at an average rate of $1.352/US$ (December 31, 2019 - $1.318/US$).

See "Mark-to-market value" for more information about our debt derivatives.

Expenditure derivatives
We use foreign currency forward contracts (expenditure derivatives) to manage the foreign exchange risk in our operations, designating them as hedges for accounting purposes for certain of our forecast operational and capital expenditures.

Below is a summary of the expenditure derivatives we entered and settled during the three and twelve months ended December 31, 2020 and 2019.

 Three months ended December 31, 2020 Twelve months ended December 31, 2020
 
(In millions of dollars, except exchange rates)Notional
(US$)
 Exchange rate Notional
(Cdn$)
 Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 
        
Expenditure derivatives entered294 1.286 378 1,560 1.343 2,095 
Expenditure derivatives settled205 1.298 266 940 1.299 1,221 


 Three months ended December 31, 2019 Twelve months ended December 31, 2019
 
(In millions of dollars, except exchange rates)Notional
(US$)
 Exchange rate Notional
(Cdn$)
 Notional
(US$)
 Exchange
rate
 Notional
(Cdn$)
 
        
Expenditure derivatives entered30 1.300 39 810 1.321 1,070 
Expenditure derivatives settled210 1.243 261 900 1.249 1,124 

As at December 31, 2020, we had US$1,590 million notional amount of expenditure derivatives outstanding (December 31, 2019 - US$990 million) with terms to maturity ranging from January 2021 to December 2022 (December 31, 2019 - January 2020 to December 2021), at an average rate of $1.342/US$ (December 31, 2019 - $1.300/US$).

See "Mark-to-market value" for more information about our expenditure derivatives.

Equity derivatives
We use total return swaps (equity derivatives) to hedge the market price appreciation risk of the Class B Non-Voting Shares granted under our stock-based compensation programs. The equity derivatives have not been designated as hedges for accounting purposes.

As at December 31, 2020, we had equity derivatives outstanding for 4.6 million (December 31, 2019 - 4.3 million) Class B Non-Voting Shares with a weighted average price of $51.82 (December 31, 2019 - $51.76).

We did not enter into or settle any equity derivatives during the three months ended December 31, 2020 or 2019.

See "Mark-to-market value" for more information about our equity derivatives.

Mark-to-market value
We record our derivatives using an estimated credit-adjusted, mark-to-market valuation, calculated in accordance with IFRS.

 As at December 31, 2020
 
(In millions of dollars, except exchange rates)Notional
amount
(US$)
 Exchange
rate
 Notional
amount
(Cdn$)
 Fair value 
(Cdn$)
 
Debt derivatives accounted for as cash flow hedges:    
As assets4,550 1.0795 4,912 1,405 
As liabilities4,642 1.3359 6,201 (307)
Short-term debt derivatives not accounted for as hedges:    
As liabilities449 1.2995 583 (12)
Net mark-to-market debt derivative asset   1,086 
Expenditure derivatives accounted for as cash flow hedges:    
As liabilities1,590 1.3421 2,134 (109)
Equity derivatives not accounted for as hedges:    
As assets  238 34 
     
Net mark-to-market asset   1,011 


 As at December 31, 2019
 
(In millions of dollars, except exchange rates)Notional
amount
(US$)
 Exchange
rate
 Notional
amount
(Cdn$)
 Fair value 
(Cdn$)
 
Debt derivatives accounted for as cash flow hedges:        
As assets5,800 1.1357 6,587 1,508 
As liabilities2,570 1.3263 3,409 (96)
Short-term debt derivatives not accounted for as hedges:    
As liabilities1,223 1.3227 1,618 (29)
Net mark-to-market debt derivative asset   1,383 
Expenditure derivatives accounted for as cash flow hedges:    
As assets270 1.2391 335 16 
As liabilities720 1.3228 952 (15)
Net mark-to-market expenditure derivative asset   1 
Equity derivatives not accounted for as hedges:    
As assets  223 55 
     
Net mark-to-market asset   1,439 

Updates to Risks and Uncertainties

See our 2019 Annual MD&A for a discussion of the principal risks and uncertainties that could have a material adverse effect on our business and financial results as at March 5, 2020, which should be reviewed in conjunction with this MD&A. The following factors may contribute to those risks and uncertainties.

Outbreak of COVID-19 and related pandemic
On March 11, 2020, the World Health Organization recognized the outbreak of COVID-19 as a pandemic and we have been closely monitoring related developments. As COVID-19 continues to significantly impact the well-being of individuals and the Canadian and global economies, we have invoked our business continuity plans and implemented a specific response plan to continue providing our essential services and support to our customers and communities while safeguarding the health and safety of the public and our employees.

We are focused on operating and maintaining our wireless and cable networks, including adding capacity and managing traffic where needed, our media operations, and the key business operations required to ensure service continuity for customers. We have implemented alternative working arrangements for employees while we review and follow directions from the government to ensure the safety of our team and implement necessary safeguards to accommodate a gradual approach in reopening our sites to employees. On March 16, 2020, and until June 30, 2020, we announced a series of measures to help our customers, including the temporary waiving of certain fees and providing access to a rotating selection of television channels and content, as we continually seek new ways to support our customers.

Public and private sector regulations, policies, and other measures aimed at reducing the transmission of COVID-19 include the imposition of business closures, travel restrictions, the promotion of social distancing, and the adoption of work-from-home and online education by companies, schools, and institutions. These measures are impacting how customers use our networks, products, and services, the manner or extent to which we can offer certain products and services (including the suspension of major sports leagues and live events), and the ability of certain suppliers and vendors to provide products and services to us.

We maintained our programs to help employees manage through COVID-19 and provide support and services to our customers and audiences. After temporarily closing most of our retail locations nationally in March, we continued a steady and phased approach to reopening our retail locations across Canada, following the public health guidelines of their respective provinces, and had reopened most of our retail stores as at December 31, 2020.

In late September, several Canadian provinces declared a second wave of COVID-19 had commenced and provinces are adjusting various restrictions, including mandatory closures of certain types of businesses and reduced limits on social gatherings. In response to the second wave, we formed a regional hotspot assessment team to monitor COVID-19 infection rates across Canada and alert management to allow appropriate responses across our businesses as required.

We remain in close contact with government officials at all levels, suppliers, partners, and key business customers, and our pandemic response plans are continually evolving.

The full extent and impact of COVID-19 is unknown. Potential adverse impacts of the pandemic include, but are not limited to:

  • the risk of a material reduction in demand for our products and services due to businesses closing or downsizing, job losses and associated financial hardship, or, more generally, a declining level of retail activity, which may lead to a decline in revenue as a result of:
    • lower Wireless subscriber activity, including lower equipment revenue;
    • the restriction of fan attendance at major sports league games, the potential suspension or further shortening of current or future major sports league seasons due to the second wave of COVID-19, and the associated television programming;
    • services temporarily provided to our customers at no cost, such as long distance calling, roaming, and free television channels;
    • lower roaming and overage revenue as customers are unable or unwilling to travel and continue to stay home; and
    • customers downgrading or cancelling their services;
  • an increase in delinquent or unpaid bills, which could lead to increased bad debt expense;
  • issues delivering certain products and services, or maintaining or upgrading our networks, due to store closures and supply chain disruptions;
  • additional capital expenditures to maintain or expand our networks in order to accommodate substantially increased network usage; and
  • higher costs for new capital.

While we expect certain cost savings to offset some of the lower revenue, such as lower equipment costs, we also cannot predict the extent to which they would be offset or the extent to which they would materialize.

Although vaccine candidates have recently been announced, with a potential for the majority of Canadians being vaccinated by the fall of 2021, there is still significant uncertainty surrounding the duration and potential outcomes of COVID-19. The federal and provincial governments have introduced measures throughout the year to slow the spread of COVID-19 that may have broader impacts on the Canadian and global economies or financial markets. We are unable at this time to predict the overall impact on our operations, liquidity, financial condition, or results; however, it has had, and may continue to have, a material, adverse impact on our results. Any future epidemic, pandemic, or other public health crisis that occurs in the future may pose similar risks to us.

Wholesale Internet costing and pricing
In August 2019, in Telecom Order CRTC 2019-288, Follow-up to Telecom Orders 2016-396 and 2016-448 - Final rates for aggregated wholesale high-speed access services (Order), the CRTC set final rates for facilities-based carriers' wholesale high-speed access services, including Rogers' third party internet access (TPIA) service. The Order set final rates for Rogers that are significantly lower than the interim rates that were previously billed and it further determined that these final rates will apply retroactively to March 31, 2016.

We do not believe the final rates set by the CRTC are just and reasonable as required by the Telecommunications Act as we believe they are below cost. On September 13, 2019, Rogers, in conjunction with the other large Canadian cable companies (Cable Carriers), filed a motion for Leave to Appeal pursuant to Section 64(1) of the Telecommunications Act with the Federal Court of Appeal (Court) and an associated motion for an interlocutory Stay of the CRTC Order. The Cable Carriers also filed an appeal to Cabinet and a review and vary application back to the CRTC. On September 27, 2019, the Court granted an Interim Stay suspending the Order until the Court rules on the Cable Carriers’ motion for an interlocutory Stay of the CRTC’s Order pending the Court’s determination of the Cable Carriers’ motion for Leave to Appeal. On November 22, 2019, the Court granted Leave to Appeal and an interlocutory Stay of the CRTC Order. The appeal was heard in June 2020. On September 10, 2020, the Court dismissed the Cable Carriers' appeal and simultaneously vacated the interlocutory Stay previously granted. On September 28, 2020, the CRTC issued a Stay of Order 2019-288 pending review of the appropriateness of the rates established in the Order. On November 12, 2020, the Cable Carriers filed a motion for Leave to Appeal the Court's decision with the Supreme Court of Canada.

Due to the CRTC's issuance of the Stay, and the significant uncertainty surrounding both the outcome and the amount, if any, we could ultimately have to repay to the resellers, we have not recorded a liability for this contingency at this time. The CRTC's order as drafted would have resulted in a refund of amounts previously billed to the resellers of approximately $210 million, representing the impact on a retroactive basis from March 31, 2016 to December 31, 2020. We estimate the ongoing impact would be between $10 and $15 million per quarter.

Outcome of proceedings
The outcome of all the proceedings and claims against us, including the matters described above, is subject to future resolution that includes the uncertainties of litigation. It is not possible for us to predict the result or magnitude of the claims due to the various factors and uncertainties involved in the legal process. Based on information currently known to us, we believe it is not probable that the ultimate resolution of any of these proceedings and claims, individually or in total, will have a material adverse effect on our business, financial results, or financial condition. If circumstances change and it becomes probable that we will be held liable for claims against us and such claim is estimable, we will recognize a provision during the period in which the change in probability occurs, which could be material to our Consolidated Statements of Income or Consolidated Statements of Financial Position.

Key Performance Indicators

We measure the success of our strategy using a number of key performance indicators that are defined and discussed in our 2019 Annual MD&A and this earnings release. We believe these key performance indicators allow us to appropriately measure our performance against our operating strategy and against the results of our peers and competitors. The following key performance indicators are not measurements in accordance with IFRS and should not be considered alternatives to net income or any other measure of performance under IFRS. They include:

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

Effective January 1, 2020, we updated the key performance indicators we present for our Cable segment to align our external reporting with the focus of our internal business strategy as a result of the convergence of technologies used to deliver Internet and television services, including the continued adoption of Ignite TV. We have begun disclosing Cable average revenue per account (ARPA), customer relationships, and market penetration as defined below. Additionally, we have amended the definition of our subscriber counts for Television to include only Ignite TV and renamed the metric accordingly as a result of shifting our product offering to focus on IPTV. Finally, we have ceased reporting Phone subscribers and total service units as our Phone product is increasingly being bundled with our Internet and Television products for a very low incremental cost. These changes have been made to align our external disclosure with the focus of the business and our strategy. Our updated definitions are as follows:

SUBSCRIBER COUNTS
Subscriber count (Cable)

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

CUSTOMER RELATIONSHIPS
Customer relationships are represented by dwelling units where at least one of our Cable services (i.e. Internet, legacy television or Ignite TV, and/or home phone) are installed and operating, and the service or services are billed accordingly. When there is more than one unit in one dwelling, such as an apartment building, each tenant with at least one of our Cable services is counted as an individual customer relationship, whether the service is invoiced separately or included in the tenant's rent. Institutional units, like hospitals or hotels, are each considered one customer relationship.

AVERAGE REVENUE PER ACCOUNT (CABLE)
Average revenue per account (ARPA) measures total average spending by a single customer account on Cable products. We use it to identify trends and measure our success in attracting and retaining multiple-service accounts. We calculate ARPA by dividing Cable service revenue by the average total number of customer relationships for the same period.

MARKET PENETRATION
Market penetration (penetration) measures our success at attracting new households to our brands and products within our network footprint. Market penetration is calculated by dividing customer relationships by homes passed. An increasing market penetration rate reflects more new customer relationships than new homes passed.

Non-GAAP Measures and Related Performance Measures

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

Non-GAAP measure or related performance measureWhy we use itHow we calculate itMost
comparable
IFRS financial
measure
Adjusted EBITDA

 

Adjusted EBITDA margin
? To evaluate the performance of our businesses, and when making decisions about the ongoing operations of the business and our ability to generate cash flows.Adjusted EBITDA:
Net income
add (deduct)
income tax expense (recovery); finance costs; depreciation and amortization; other expense (income); restructuring, acquisition and other; and loss (gain) on disposition of property, plant and equipment.

 

Adjusted EBITDA margin:
Adjusted EBITDA
divided by
revenue (or service revenue for Wireless).
Net income
? We believe that certain investors and analysts use adjusted EBITDA to measure our ability to service debt and to meet other payment obligations.
? We also use it as one component in determining short-term incentive compensation for all management employees.
Adjusted net
income

 

Adjusted basic
and diluted
earnings per
share
? To assess the performance of our businesses before the effects of the noted items, because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply that they are non-recurring.Adjusted net income:
Net income
add (deduct)
restructuring, acquisition and other; loss (recovery) on sale or wind down of investments; loss (gain) on disposition of property, plant and equipment; (gain) on acquisitions; loss on non-controlling interest purchase obligations; loss on repayment of long-term debt; loss on bond forward derivatives; and income tax adjustments on these items, including adjustments as a result of legislative changes.

 

Adjusted basic and diluted earnings per share:
Adjusted net income and adjusted net income including the dilutive effect of stock-based compensation
divided by
basic and diluted weighted average shares outstanding.
Net income

 

Basic and
diluted
earnings per
share
Free cash flow? To show how much cash we have available to repay debt and reinvest in our company, which is an important indicator of our financial strength and performance.Adjusted EBITDA
deduct
capital expenditures; interest on borrowings net of capitalized interest; and cash income taxes.

 
Cash provided
by operating
activities
? We believe that some investors and analysts use free cash flow to value a business and its underlying assets.
Adjusted net
debt
? To conduct valuation-related analysis and make decisions about capital structure.Total long-term debt
add (deduct)
current portion of long-term debt; deferred transaction costs and discounts; net debt derivative (assets) liabilities; credit risk adjustment related to net debt derivatives; current portion of lease liabilities; lease liabilities; bank advances (cash and cash equivalents); and short-term borrowings.
Long-term
debt
? We believe this helps investors and analysts analyze our enterprise and equity value and assess our leverage.
Debt leverage ratio? To conduct valuation-related analysis and make decisions about capital structure.Adjusted net debt (defined above)
divided by
12-month trailing adjusted EBITDA (defined above).
Long-term debt
divided by net
income
? We believe this helps investors and analysts analyze our enterprise and equity value and assess our leverage.

Reconciliation of adjusted EBITDA

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars)2020 2019 2020 2019 
     
Net income449 468 1,592 2,043 
Add:    
Income tax expense172 168 580 712 
Finance costs228 230 881 840 
Depreciation and amortization666 638 2,618 2,488 
     
EBITDA1,515 1,504 5,671 6,083 
Add (deduct):    
Other expense (income)2 (12)1 (10)
Restructuring, acquisition and other73 38 185 139 
     
Adjusted EBITDA1,590 1,530 5,857 6,212 

Reconciliation of adjusted EBITDA margin

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars, except margins)2020 2019 2020 2019 
     
Adjusted EBITDA1,590 1,530 5,857 6,212 
Divided by: total revenue3,680 3,952 13,916 15,073 
     
Adjusted EBITDA margin43.2%38.7%42.1%41.2%

Reconciliation of adjusted net income

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars)2020 2019 2020 2019 
         
Net income449 468 1,592 2,043 
Add (deduct):    
Restructuring, acquisition and other73 38 185 139 
Loss on repayment of long-term debt 19  19 
Income tax impact of above items(19)(14)(49)(43)
Income tax adjustment, legislative tax change(3) (3)(23)
     
Adjusted net income500 511 1,725 2,135 

Reconciliation of adjusted earnings per share

 Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars, except per share amounts; number of shares outstanding in millions)2020 2019 2020 2019 
         
Adjusted basic earnings per share:        
Adjusted net income500 511 1,725 2,135 
Divided by:        
Weighted average number of shares outstanding505 509 505 512 
         
Adjusted basic earnings per share$0.99 $1.00 $3.42 $4.17 
         
Adjusted diluted earnings per share:        
Diluted adjusted net income500 511 1,718 2,129 
Divided by:        
Diluted weighted average number of shares outstanding506 510 506 513 
         
Adjusted diluted earnings per share$0.99 $1.00 $3.40 $4.15 

Reconciliation of free cash flow

 Three months ended December 31 Twelve months ended December 31 
(In millions of dollars)2020 2019 2020 2019 
         
Cash provided by operating activities947 1,166 4,321 4,526 
Add (deduct):        
Capital expenditures(656)(791)(2,312)(2,807)
Interest on borrowings, net of capitalized interest(191)(187)(761)(727)
Interest paid194 198 808 779 
Restructuring, acquisition and other73 38 185 139 
Program rights amortization(23)(19)(77)(77)
Change in net operating assets and liabilities 1265 102 333 462 
Other adjustments 1(41)(10)(131)(17)
         
Free cash flow568 497 2,366 2,278 

1 As a result of the growth of our financing receivable program and the ways in which we manage our business, effective this quarter and retroactively, we have reclassified the "net change in contract asset balances" and the "net change in financing receivable balances" into "change in net operating assets and liabilities". Additionally, certain 2019 reported figures have been reclassified to conform to the current presentation.

Reconciliation of adjusted net debt and debt leverage ratio

 As at
December 31
 As at
December 31
 
(In millions of dollars)2020 2019 
     
Current portion of long-term debt1,450  
Long-term debt16,751 15,967 
Deferred transaction costs and discounts172 163 
 18,373 16,130 
Add (deduct):    
Net debt derivative assets(1,086)(1,383)
Credit risk adjustment related to net debt derivative assets(15)(31)
Short-term borrowings1,221 2,238 
Current portion of lease liabilities278 230 
Lease liabilities1,557 1,495 
Cash and cash equivalents(2,484)(494)
     
Adjusted net debt17,844 18,185 


 As at
December 31
 As at
December 31
 
(In millions of dollars, except ratios)2020 2019 
   
Adjusted net debt17,844 18,185 
Divided by: trailing 12-month adjusted EBITDA5,857 6,212 
   
Debt leverage ratio3.0 2.9 

Other Information

Consolidated financial results - quarterly summary
Below is a summary of our consolidated results for the past eight quarters.

 2020
 2019
(In millions of dollars, except per share amounts)Q4 Q3 Q2 Q1  Q4 Q3 Q2 Q1 
Revenue                 
Wireless2,291 2,228 1,934 2,077  2,493 2,324 2,244 2,189 
Cable1,019 988 966 973  987 994 997 976 
Media409 489 296 412  530 483 591 468 
Corporate items and intercompany eliminations(39)(40)(41)(46) (58)(47)(52)(46)
Total revenue3,680 3,665 3,155 3,416  3,952 3,754 3,780 3,587 
Total service revenue 13,023 3,086 2,797 3,049  3,244 3,233 3,345 3,143 
                  
Adjusted EBITDA 2                 
Wireless1,034 1,089 918 1,026  1,064 1,138 1,128 1,015 
Cable520 508 454 453  497 499 478 445 
Media82 89 (35)(85) 22 130 72 (84)
Corporate items and intercompany eliminations(46)(48)(43)(59) (53)(55)(43)(41)
Adjusted EBITDA1,590 1,638 1,294 1,335  1,530 1,712 1,635 1,335 
Deduct (add):                 
Depreciation and amortization666 663 650 639  638 627 614 609 
Restructuring, acquisition and other73 49 42 21  38 42 39 20 
Finance costs228 219 214 220  230 215 206 189 
Other expense (income)2 6 7 (14) (12)16 (1)(13)
Net income before income tax expense621 701 381 469  636 812 777 530 
Income tax expense172 189 102 117  168 219 186 139 
Net income449 512 279 352  468 593 591 391 
                  
Earnings per share:                 
Basic$0.89 $1.01 $0.55 $0.70  $0.92 $1.16 $1.15 $0.76 
Diluted$0.89 $1.01 $0.54 $0.68  $0.92 $1.14 $1.15 $0.76 
          
Net income449 512 279 352  468 593 591 391 
Add (deduct):         
Restructuring, acquisition and other73 49 42 21  38 42 39 20 
Loss on repayment of long-term debt     19    
Income tax impact of above items(19)(13)(11)(6) (14)(13)(10)(6)
Income tax adjustment, legislative tax change(3)      (23) 
Adjusted net income 2500 548 310 367  511 622 597 405 
          
Adjusted earnings per share 2:         
Basic$0.99 $1.09 $0.61 $0.73  $1.00 $1.22 $1.17 $0.79 
Diluted$0.99 $1.08 $0.60 $0.71  $1.00 $1.19 $1.16 $0.78 
          
Capital expenditures656 504 559 593  791 657 742 617 
Cash provided by operating activities947 986 1,429 959  1,166 1,305 1,057 998 
Free cash flow 2568 868 468 462  497 767 609 405 

1 As defined. See "Key Performance Indicators".
2 Adjusted EBITDA, adjusted net income, and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures and Related Performance Measures" for information about these measures, including how we calculate them and the ratios in which they are used.

Supplementary Information

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

 Three months ended December 31
 Twelve months ended December 31
 
 2020 2019 2020 2019 
     
Revenue3,680 3,952 13,916 15,073 
     
Operating expenses:    
Operating costs2,090 2,422 8,059 8,861 
Depreciation and amortization666 638 2,618 2,488 
Restructuring, acquisition and other73 38 185 139 
Finance costs228 230 881 840 
Other expense (income)2 (12)1 (10)
     
Income before income tax expense621 636 2,172 2,755 
Income tax expense172 168 580 712 
     
Net income for the period449 468 1,592 2,043 
     
Earnings per share:    
Basic$0.89 $0.92 $3.15 $3.99 
Diluted$0.89 $0.92 $3.13 $3.97 

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

 As at
December 31
 As at
December 31
 
 2020 2019 
   
Assets  
Current assets:  
Cash and cash equivalents2,484 494 
Accounts receivable 12,856 2,376 
Inventories479 460 
Current portion of contract assets533 1,234 
Other current assets 1516 452 
Current portion of derivative instruments61 101 
Total current assets6,929 5,117 
   
Property, plant and equipment14,018 13,934 
Intangible assets8,926 8,905 
Investments2,536 2,830 
Derivative instruments1,378 1,478 
Financing receivables 1748 76 
Other long-term assets 1346 756 
Goodwill3,973 3,923 
   
Total assets38,854 37,019 
   
Liabilities and shareholders’ equity  
Current liabilities:  
Short-term borrowings1,221 2,238 
Accounts payable and accrued liabilities2,714 3,033 
Income tax payable344 48 
Other current liabilities 1243 191 
Contract liabilities336 224 
Current portion of long-term debt1,450  
Current portion of lease liabilities278 230 
Total current liabilities6,586 5,964 
   
Provisions42 36 
Long-term debt16,751 15,967 
Lease liabilities1,557 1,495 
Other long-term liabilities 11,149 704 
Deferred tax liabilities3,196 3,437 
Total liabilities29,281 27,603 
   
Shareholders’ equity9,573 9,416 
   
Total liabilities and shareholders’ equity38,854 37,019 

1 As a result of the growth of our financing receivable program and the ways in which we manage our business, effective this quarter and retroactively, we have reclassified certain balances. Current financing receivables have been reclassified from "other current assets" to "accounts receivable", "financing receivables" have been separately disclosed and reclassified from "other long-term assets", and "contract assets" have been reclassified to "other long-term assets". Derivative instrument liabilities have been reclassified to "other current liabilities" and "other long-term liabilities", as applicable.

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

 Three months ended December 31
 Twelve months ended December 31
 
 2020 2019 2020 2019 
Operating activities:        
Net income for the period449 468 1,592 2,043 
Adjustments to reconcile net income to cash provided by operating activities:    
Depreciation and amortization666 638 2,618 2,488 
Program rights amortization23 19 77 77 
Finance costs228 230 881 840 
Income tax expense172 168 580 712 
Post-employment benefits contributions, net of expense39 7 13 (75)
Other 14 (9)119 82 
Cash provided by operating activities before changes in net operating assets and liabilities, income taxes paid, and interest paid1,581 1,521 5,880 6,167 
Change in net operating assets and liabilities 1(265)(102)(333)(462)
Income taxes paid(175)(55)(418)(400)
Interest paid(194)(198)(808)(779)
     
Cash provided by operating activities947 1,166 4,321 4,526 
     
Investing activities:    
Capital expenditures(656)(791)(2,312)(2,807)
Additions to program rights(12)(31)(57)(60)
Changes in non-cash working capital related to capital expenditures and intangible assets97 109 (37)(35)
Acquisitions and other strategic transactions, net of cash acquired(95) (103)(1,731)
Other11 20 (49)21 
     
Cash used in investing activities(655)(693)(2,558)(4,612)
     
Financing activities:    
Net proceeds received from (repayments of) short-term borrowings256 553 (1,146)30 
Net (repayment) issuance of long-term debt (92)2,540 2,184 
Net proceeds (payments) on settlement of debt derivatives and forward contracts 5 80 (121)
Principal payments of lease liabilities(58)(43)(213)(167)
Transaction costs incurred(1)(28)(23)(61)
Repurchase of Class B Non-Voting Shares (361) (655)
Dividends paid(253)(256)(1,011)(1,016)
Other (19) (19)
     
Cash (used in) provided by financing activities(56)(241)227 175 
     
Change in cash and cash equivalents236 232 1,990 89 
Cash and cash equivalents, beginning of period2,248 262 494 405 
     
Cash and cash equivalents, end of period2,484 494 2,484 494 

1 As a result of the growth of our financing receivable program and the ways in which we manage our business, effective this quarter and retroactively, we have reclassified the "net change in contract asset balances" and the "net change in financing receivable balances" into "change in net operating assets and liabilities". Additionally, certain 2019 reported figures have been reclassified to conform to the current presentation.

Change in net operating assets and liabilities

  Three months ended December 31
 Twelve months ended December 31
 
(In millions of dollars)2020 2019 2020 2019 
         
Accounts receivable, excluding financing receivables30 (228)455 (174)
Financing receivables(540)(83)(1,658)(120)
Contract assets 1256 (148)1,170 (204)
Inventories(17)(66)(19) 
Other current assets(60)27  (132)(41)
Accounts payable and accrued liabilities15 313  (326)61  
Other liabilities 151 83  177  
     
Total change in net operating assets and liabilities(265)(102)(333)(462)

1 As a result of the growth of our financing receivable program and the ways in which we manage our business, effective this quarter and retroactively, we have reclassified certain balances. Changes in contract liabilities previously presented on a net basis within "contract assets" have been reclassified to "other liabilities".

Investments

 As at
December 31
 As at
December 31
 
(In millions of dollars)2020 2019 
   
Investments in:  
Publicly traded companies1,535 1,831 
Private companies97 107 
Investments, measured at fair value through other comprehensive income1,632 1,938 
Investments, associates and joint ventures904 892 
   
Total investments2,536 2,830 

Long-term debt

       As at
December 31
 As at
December 31
 
(In millions of dollars, except interest rates)Due date Principal
amount
 Interest
rate
 2020 2019 
       
Senior notes2021 1,450 5.340% 1,450 1,450 
Senior notes2022 600 4.000% 600 600 
Senior notes2022US750 Floating 955  
Senior notes2023US500 3.000% 637 649 
Senior notes2023US850 4.100% 1,082 1,104 
Senior notes2024 600 4.000% 600 600 
Senior notes2025US700 3.625% 890 909 
Senior notes2026US500 2.900% 637 649 
Senior notes2027 1,500 3.650% 1,500  
Senior notes2029 1,000 3.250% 1,000 1,000 
Senior debentures 12032US200 8.750% 255 260 
Senior notes2038US350 7.500% 446 455 
Senior notes2039 500 6.680% 500 500 
Senior notes2040 800 6.110% 800 800 
Senior notes2041 400 6.560% 400 400 
Senior notes2043US500 4.500% 637 649 
Senior notes2043US650 5.450% 827 844 
Senior notes2044US1,050 5.000% 1,337 1,365 
Senior notes2048US750 4.300% 955 973 
Senior notes2049US1,250 4.350% 1,592 1,624 
Senior notes2049US1,000 3.700% 1,273 1,299 
     18,373 16,130 
Deferred transaction costs and discounts    (172)(163)
Less current portion    (1,450) 
       
Total long-term debt    16,751 15,967 

1 Senior debentures originally issued by Rogers Cable Inc. which are unsecured obligations of RCI and for which RCCI was an unsecured guarantor as at December 31, 2020 and December 31, 2019.

About Forward-Looking Information

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

Forward-looking information:

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

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

  • revenue;
  • total service revenue;
  • adjusted EBITDA;
  • capital expenditures;
  • cash income tax payments;
  • free cash flow;
  • dividend payments;
  • the growth of new products and services;
  • expected growth in subscribers and the services to which they subscribe;
  • the cost of acquiring and retaining subscribers and deployment of new services;
  • continued cost reductions and efficiency improvements;
  • traction against our debt leverage ratio;
  • statements relating to plans we have implemented in response to COVID-19 and its impact on us; and
  • all other statements that are not historical facts.

Our conclusions, forecasts, and projections are based on the following factors, among others:

  • general economic and industry growth rates;
  • currency exchange rates and interest rates;
  • product pricing levels and competitive intensity;
  • subscriber growth;
  • pricing, usage, and churn rates;
  • changes in government regulation;
  • technology deployment;
  • availability of devices;
  • timing of new product launches;
  • content and equipment costs;
  • the integration of acquisitions;
  • industry structure and stability; and,
  • the impact of COVID-19 on our operations, liquidity, financial condition, or results.

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

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

  • regulatory changes;
  • technological changes;
  • economic, geopolitical, and other conditions affecting commercial activity;
  • unanticipated changes in content or equipment costs;
  • changing conditions in the entertainment, information, and communications industries;
  • the integration of acquisitions;
  • litigation and tax matters;
  • the level of competitive intensity;
  • the emergence of new opportunities;
  • external threats, such as epidemics, pandemics, and other public health crises, natural disasters, the effects of climate change, or cyberattacks, among others; and
  • new interpretations and new accounting standards from accounting standards bodies.

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

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

Before making an investment decision
Before making any investment decisions and for a detailed discussion of the risks, uncertainties, and environment associated with our business, fully review the "Updates to Risks and Uncertainties" section in this earnings release and fully review the sections in our 2019 Annual MD&A entitled "Regulation in Our Industry" and "Governance and Risk Management", as well as our various other filings with Canadian and US securities regulators, which can be found at sedar.com and sec.gov, respectively. Information on or connected to sedar.com, sec.gov, our website, or any other website referenced in this document is not part of or incorporated into this earnings release.


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Source: Rogers Communications, Inc.