Make More Possible
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Make more possible Rogers Communications Inc . 2017 Annual Report For over 20 years, Rosemary has relied on Rogers to keep her growing family connected across the country. About Rogers Rogers is a proud Canadian company dedicated to making more possible for our customers each and every day. Our aim is simple: to inspire meaningful connections and spark the memorable moments that define our lives. We do this by providing high-quality, worry-free services – wireless, cable, Internet, information technology, and telephony – from coast to coast to coast. Through Rogers Media, we bring Canadians incredible experiences across an enviable mix of assets in radio and television broadcasting, sports, magazines, and digital media. It is all about connecting consumers and businesses to what matters most. Page 2 Page 4 Page 6 Page 7 2017 financial and Segment Delivering on our A message operating results overview strategic priorities from our CEO Page 15 Page 16 Page 18 Page 19 The year Corporate Senior executive Directors ahead governance officers Page 21 Page 22 Page 152 Corporate social 2017 financial Corporate and responsibility report shareholder information 2017 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 1 2017 financial and operating results Total service revenue +4% Adjusted operating profit +6% (in billions of dollars) (in billions of dollars) 2017 13.56 2017 5.38 2016 13.03 2016 5.09 Adjusted operating profit margin +80bps Free cash flow +2% (%) (in billions of dollars) 2017 38.0 2017 1.75 2016 37.2 2016 1.71 Total revenue Adjusted operating profit $14.1 $5.4 billion billion l Wireless 58% l Wireless 64% l Cable 24% l Cable 31% l Media 15% l Media 3% l Business Solutions 3% l Business Solutions 2% Wireless subscribers +208 Internet subscribers +85 (000s) (000s) 2017 10,482 2017 2,230 2016 10,274 2016 2,145 2 ROGERS COMMUNICATIONS INC. 2017 ANNUAL REPORT Key Financial Information Years ended, or as at December 31 (in millions of dollars, except margins and per-share amounts, unaudited) 2017 2016 % Change Total revenue 14,143 13,702 3 Total service revenue 1 13,560 13,027 4 Adjusted operating profit 2 5,379 5,092 6 Adjusted operating profit margin 2 38.0% 37.2% 0.8 pts Net income 1,711 835 105 Adjusted net income 2 1,821 1,481 23 Basic earnings per share $3.32 $1.62 105 Adjusted basic earnings per share 2 $3.54 $2.88 23 Capital expenditures 2,436 2,352 4 Cash provided by operating activities 3,938 3,957 – Free cash flow 2 1,746 1,705 2 Annualized dividend per share at year-end $1.92 $1.92 – Key Performance Indicators Years ended, or as at December 31 2017 2016 Change Subscriber count results (000s) 1 Wireless postpaid net additions 354 286 68 Wireless prepaid net additions 61 111 (50) Internet net additions 85 97 (12) Television net losses (80) (76) (4) Phone net additions 14 4 10 Additional Wireless metrics 1 Postpaid churn (monthly) 1.20% 1.23% (0.03 pts) Postpaid ARPA (monthly) $124.75 $117.37 $7.38 Blended ARPU (monthly) $62.31 $60.42 $1.89 Ratios 1 Capital intensity 17.2% 17.2% – pts 2 Dividend payout ratio of free cash flow 56.6% 57.9% (1.3 pts) 1 Return on assets 5.9% 2.9% 3.0 pts 2 Debt leverage ratio 2.8 3.0 (0.2) 1 As defined. See “Key Performance Indicators” in Management Discussion and Analysis. 2 Adjusted operating profit, adjusted operating profit margin, adjusted net income, adjusted basic earnings per share, free cash flow, dividend payout ratio of free cash flow, and debt leverage ratio are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. They are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See “Non-GAAP Measures” for information about these measures, including how we calculate them. 2017 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 3 Segment overview Wireless Postpaid and prepaid wireless services, including the latest devices and applications, to consumers and businesses under the Rogers, Fido, and chatr brands. We reached 96% of the Canadian population on our LTE network at the end of 2017. We are augmenting our existing LTE network with the latest generation of 4.5G technology designed for a migration to a 5G environment. Cable & Business Solutions High-speed Internet access, television, phone, and advanced Wi-Fi services. In 2018, we plan to launch an all-IPTV platform, Ignite TV. We also provide network connectivity through our fibre network and data centres to support voice, data, networking, hosting, and cloud-based services for enterprises. Over time, we are migrating to the next generation of DOCSIS, which will enable upload and download speeds of up to 10 gigabits per second. This will provide a great Ignite TV experience and lay a critical foundation as we continue to build our roadmap to the connected home of the future, integrating key services like Smart Home Monitoring and more. Media A portfolio of media properties, including sports entertainment, television, publishing, and radio broadcasting. We are investing in and owning the content our audiences want most, and bringing it to them on their screen of choice. Our core focus is on local content and sports. We own the City, OMNI Television, and Sportsnet TV stations and a network of 55 radio stations across the country. We also own the Toronto Blue Jays, Canada’s only Major League Baseball team, and we have an exclusive national 12-year licensing agreement with the NHL. We have a 37.5% ownership interest in Maple Leaf Sports & Entertainment Ltd., which owns the Toronto Maple Leafs, the Toronto Raptors, Toronto FC, the Toronto Argonauts, and the Toronto Marlies. 4 ROGERS COMMUNICATIONS INC. 2017 ANNUAL REPORT Total revenue Canada’s largest $8.3 wireless service provider billion l Service 93% l Equipment 7% Total revenue Canada’s largest $3.9 cable TV provider billion 4.3 million homes passed, representing the largest Cable 1 footprint across ON, NB, NL l Internet 42% 1 Ontario, New Brunswick, and the island of Newfoundland l Television 39% l Phone 9% Ignite Gigabit l Business Solutions 10% Internet service offered to our entire footprint Total revenue $2.2 #1 sports media brand billion for the third year in a row l Sports 57% Owner of the l Broadcasting 23% Toronto Blue Jays l TSC 15% Baseball Club l Digital and Publishing Content 5% 2017 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 5 Delivering on our strategic priorities “ We have set a clear, focused path for our future, with six strategic priorities to guide our decision-making and bring our purpose to life. I am pleased to share our priorities and our progress to date.” Create best-in-class customer Invest in our networks and experiences by putting our customers technology to deliver leading first in everything we do performance and reliability Deliver innovative solutions Drive profitable growth in and compelling content that all the markets we serve our customers will love Develop our people and a Be a strong, socially responsible high-performance culture leader in our communities across Canada 6 ROGERS COMMUNICATIONS INC. 2017 ANNUAL REPORT A message from our CEO Joe Natale President and Chief Executive Officer Rogers Communications Inc. Dear Shareholders, It is an exciting time for Rogers – I am inspired by the incredible energy of our team, our enviable mix of business assets and the meaningful growth opportunities ahead of us. It is truly an honour to build on Ted’s legacy and to work with our 25,000 team members to write the next chapter in our history. In 2017, our team delivered the best financial and subscriber results in many years. We grew total service revenue by 4%, adjusted operating profit by 6% and margins by 80 basis points. We grew after-tax free cash flow to $1.75 billion. We delivered on our full-year financial guidance and returned $988 million to shareholders through dividends. This momentum was reflected in our total shareholder return of 28% this year. 2017 Achievements Against Guidance 1 (in millions of dollars, except percentages) 2016 Actual 2017 Guidance ranges 2017 Actual Achievement Consolidated Guidance Revenue 13,702 Increase of 3% to 5% 14,143 3.2% Adjusted operating profit 5,092 Increase of 5% to 6% 5,379 5.6% Capital expenditures 2,352 2,350 to 2,450 2,436 n/m Free cash flow 1,705 Increase of 2% to 4% 1,746 2.4% 1 Please see 2017 Financial Report. Each and every day, our team members wake up with one purpose in mind: to connect our customers with the people and the memorable moments that matter most to them. At the heart of it, we bring people together – we connect people, businesses and communities to each other and to a world of possibilities around them. We leverage technology and media to help make truly special, human moments possible – this is hugely powerful! It is a responsibility that we take very seriously and that we deliver with tremendous pride and passion to our customers every day. 2017 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 7 Create best-in-class customer experiences by putting our customers first in everything we do Everything starts and ends with our customers, Invest in our networks and so improving their experience is core to our strategic technology to deliver leading plan. This means putting our customers first in performance and reliability everything we do and obsessing over their end-to- end experience.