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Rogers Communications Reports Fourth Quarter and Full-Year 2021 Results; Announces 2022 Financial Guidance

2022-01-27 06:58 ET - News Release

  • Strong execution delivers solid operational improvements led by Wireless recovery
  • Wireless postpaid net subscriber additions includes phone additions of 141,000; Wireless service revenue growth of 6% and adjusted EBITDA up 5%
    • Blended ARPU1 of $51.47 up 3%; improved Q4 postpaid churn by 4 basis points to 1.15%
  • Stable financial results in Cable; Internet net subscriber additions include 21,000 net new retail broadband subscribers
  • Media revenue growth up 26% reflects the return of live sports broadcasting advertising
  • Full-year 2022 guidance2 pre-Shaw transaction reflects improving economy, greater focus on execution, and accelerating investments in 5G and network expansion
    • Total service revenue growth range of 4% to 6%
    • Adjusted EBITDA growth range of 6% to 8%
    • Capital expenditures of $2.8 billion to $3.0 billion
    • Free cash flow of $1.8 billion to $2.0 billion
  • Shaw transaction remains on track to close in the first half of 2022

TORONTO, Jan. 27, 2022 (GLOBE NEWSWIRE) -- Rogers Communications Inc. today announced its unaudited financial and operating results for the fourth quarter ended December 31, 2021.

Consolidated Financial Highlights

 Three months ended December 31  Twelve months ended December 31 
(In millions of Canadian dollars, except per share amounts, unaudited) 2021 2020% Chg   2021 2020% Chg 
        
Total revenue 3,919 3,6806   14,655 13,9165 
Total service revenue 3,232 3,0237   12,533 11,9555 
Adjusted EBITDA 1 1,522 1,590(4)  5,887 5,8571 
Net income 405 449(10)  1,558 1,592(2)
Adjusted net income 1 486 500(3)  1,803 1,7255 
        
Diluted earnings per share$0.80$0.89(10) $3.07$3.13(2)
Adjusted diluted earnings per share 1$0.96$0.99(3) $3.56$3.405 
        
Cash provided by operating activities 1,147 94721   4,161 4,321(4)
Free cash flow 1 468 568(18)  1,671 2,366(29)

"We delivered strong results in our fourth quarter, led by accelerating revenue growth and solid net subscriber additions in our Wireless business," said Tony Staffieri, President and CEO. "This is a critical year for Rogers and the changes we are making to drive a renewed focus on execution, along with strategic investments in our networks and customer experience, should help drive long-term growth and increase shareholder value. We will accelerate the momentum across our business as we come together with Shaw to expand our next-generation networks nationally, offer customers more choice, and enable Canada to thrive in the global digital economy."

____________
1 Blended ARPU is a supplementary financial measure. Adjusted EBITDA is a total of segments measure. Free cash flow is a capital management measure. Adjusted diluted earnings per share is a non-GAAP ratio. Adjusted net income is a non-GAAP financial measure and is a component of adjusted diluted earnings per share. See "Non-GAAP and Other Financial Measures" for more information about each of these measures. None of these measures is a standardized financial measure under IFRS and they might not be comparable to similar financial measures disclosed by other companies.
2 See "2022 Outlook".

Operating Environment and 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. COVID-19 continues to significantly impact Canadians and economies around the world. Late in the fourth quarter, the Omicron variant re-accelerated the spread of COVID-19 and many Canadian provinces reintroduced various restrictions, including placing capacity limits on organized gatherings and retail stores. We remain focused on keeping our employees safe and our customers connected. 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.

Revenue
Total revenue and total service revenue increased by 6% and 7%, respectively, this quarter, driven by revenue growth in our Wireless and Media businesses.

Wireless service revenue increased by 6% this quarter, mainly as a result of larger postpaid subscriber base and higher roaming revenue, as COVID-19-related global travel restrictions were generally less strict than last year. Wireless equipment revenue increased by 4%, as a result of higher device upgrades by existing subscribers, and higher gross additions, partially offset by increased promotional activity during key selling periods.

Cable revenue was stable this quarter, primarily as a result of the movement of Internet customers to higher speed and usage tiers in our Ignite Internet™ offerings and the increases in our Internet and Ignite TV™ subscriber bases, offset by declines in our legacy television and home phone subscriber bases.

Media revenue increased by 26% this quarter, primarily as 2020 was impacted by the postponement of the start of the 2020-2021 NHL and NBA seasons.

Adjusted EBITDA and margins
Consolidated adjusted EBITDA decreased 4% this quarter and our adjusted EBITDA margin decreased by 440 basis points driven by the impact of Media.

Wireless adjusted EBITDA increased by 5%, primarily as a result of the flow-through of revenue growth. This gave rise to an adjusted EBITDA service margin of 62.6%.

Cable adjusted EBITDA was in line with last year, resulting in an adjusted EBITDA margin of 50.6% this quarter.

Media adjusted EBITDA decreased by $108 million this quarter, primarily due to higher sports programming and production costs as a result of the postponement of the start of the 2020-2021 NHL and NBA seasons, partially offset by higher revenue as discussed above.

Net income and adjusted net income
Net income and adjusted net income decreased this quarter by 10% and 3%, respectively, primarily as a result of lower adjusted EBITDA.

Cash flow and available liquidity
This quarter, we generated cash flow from operating activities of $1,147 million, up 21%, as a result of a lower investment in net operating assets. We also generated free cash flow of $468 million, down 18%, primarily as a result of higher capital expenditures.

This quarter, we issued $2 billion subordinated notes due 2081 with an initial coupon of 5% for the first five years. We used the proceeds to partially fund the remaining payment required to obtain the 3500 MHz spectrum licences. See "Managing our Liquidity and Financial Resources" for more information.

As at December 31, 2021, we had $4.2 billion of available liquidity3, including $0.7 billion in cash and cash equivalents and a combined $3.5 billion available under our bank credit facilities and receivables securitization program.

We also returned $253 million in dividends to shareholders this quarter and we declared a $0.50 per share dividend on January 26, 2022.

____________
3
 Available liquidity is a capital management measure. See "Non-GAAP and Other Financial Measures" and "Financial Condition" for more information about this measure.

2022 Outlook

For the full-year 2022, we expect growth in service revenue and adjusted EBITDA will drive higher free cash flow. In 2022, we expect to have the financial flexibility to maintain our network advantages and to continue to return cash to shareholders. We are providing a guidance range for total service revenue this year as this metric more closely reflects our core business with our customers.

 2021
Actual
 2022 Guidance Ranges 1
(In millions of dollars, except percentages; unaudited) 
      
Consolidated Guidance     
Total service revenue12,533 Increase of 4%toincrease of 6%
Adjusted EBITDA5,887 Increase of 6%toincrease of 8%
Capital expenditures 22,788 2,800to3,000
Free cash flow1,671 1,800to2,000

1 Guidance ranges presented as percentages reflect percentage increases over full-year 2021 results.
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.

The above table outlines guidance ranges for selected full-year 2022 consolidated financial metrics without giving effect to the acquisition of Shaw (Transaction, see "Shaw Transaction"), the associated financing, or any other associated transactions or expenses. These ranges take into consideration our current outlook and our 2021 results. The purpose of the financial outlook is to assist investors, shareholders, and others in understanding certain financial metrics relating to expected 2022 financial results for evaluating the performance of our business. This information may not be appropriate for other purposes. Information about our guidance, including the various assumptions underlying it, is forward-looking and should be read in conjunction with "About Forward-Looking Information" (including the material assumptions listed under the heading "Key assumptions underlying our full-year 2022 guidance") and the related disclosure and information about various economic, competitive, and regulatory assumptions, factors, and risks that may cause our actual future financial and operating results to differ from what we currently expect.

We provide annual guidance ranges on a consolidated full-year basis that are consistent with annual full-year Board of Directors-approved plans. Any updates to our full-year financial guidance over the course of the year would only be made to the consolidated guidance ranges that appear above. Guidance ranges will be reassessed once the Transaction has closed.

Shaw Transaction

On March 15, 2021, we announced an agreement with Shaw Communications Inc. (Shaw) to acquire all of Shaw's issued and outstanding Class A Participating Shares and Class B Non-Voting Participating Shares for a price of $40.50 per share in cash, with the exception of the shares held by the Shaw Family Living Trust, the controlling shareholder of Shaw, and related persons (Shaw Family Shareholders). The Shaw Family Shareholders will receive 60% of the consideration for their shares in the form of RCI Class B Non-Voting common shares on the basis of the volume-weighted average trading price for such shares for the ten trading days ended March 12, 2021, and the balance in cash. The Transaction is valued at approximately $26 billion, including the assumption of approximately $6 billion of Shaw debt.

The Transaction will be implemented through a court-approved plan of arrangement under the Business Corporations Act (Alberta). On May 20, 2021, Shaw shareholders voted to approve the Transaction at a special shareholders meeting. The Court of Queen's Bench of Alberta issued a final order approving the Transaction on May 25, 2021. The Transaction is subject to other customary closing conditions, including receipt of applicable approvals and expiry of certain waiting periods under the Broadcasting Act (Canada), the Competition Act (Canada), and the Radiocommunication Act (Canada) (collectively, Key Regulatory Approvals). Subject to receipt of all required approvals and satisfaction of other conditions prior to closing, the Transaction is expected to close in the first half of 2022.

The combined entity will have the scale, assets, and capabilities needed to deliver unprecedented wireline and wireless broadband and network investments, innovation, and growth in new telecommunications services, and greater choice for Canadian consumers and businesses. As part of the Transaction, the combined company will invest $2.5 billion to build 5G networks across Western Canada over the next five years and Rogers will commit to establishing a new $1 billion Rogers Indigenous, Rural and Remote Connectivity Fund dedicated to connecting rural, remote, and indigenous communities across Western Canada to high-speed Internet and closing critical connectivity gaps faster for underserved areas.

In connection with the Transaction, we entered into a binding commitment letter for a committed credit facility with a syndicate of banks in an original amount up to $19 billion. During the second quarter, we entered into a $6 billion non-revolving credit facility (Shaw term loan facility), which served to reduce the amount available under the committed credit facility to $13 billion. See "Managing our Liquidity and Financial Resources" for more information on the committed facility and the Shaw term loan facility. We also expect that RCI will either assume Shaw's senior notes or provide a guarantee of Shaw's payment obligations under those senior notes upon closing the Transaction and, in either case, Rogers Communications Canada Inc. (RCCI) will guarantee Shaw's payment obligations under those senior notes.

In connection with our application for Canadian Radio-Television and Telecommunications Commission (CRTC) approval to acquire Shaw's licensed broadcasting assets, the CRTC held an oral hearing from November 22 to 26, 2021, during which Rogers, Shaw, and 31 intervenors (including Canada Public Affairs Channel Inc. (CPAC) as an interested party) had an opportunity to comment on and respond to questions from the CRTC regarding the application. Final written submissions from intervenors were accepted until December 13, 2021, and Rogers and CPAC submitted final replies on December 20, 2021.

In accordance with the terms of the arrangement agreement, Rogers and Shaw filed pre-merger notifications pursuant to Part IX of the Competition Act to trigger the Competition Bureau's review of the Transaction. Rogers and Shaw have worked cooperatively and constructively to respond to further requests for information, as required under the arrangement agreement. On September 28, 2021, the Competition Bureau issued a public request for information to help further gather and assess facts about the Transaction. The Competition Bureau invited interested parties to share their information or experiences confidentially by October 29, 2021. The Federal Court also issued orders requiring Xplornet Communications Inc., BCE Inc., TELUS Corporation, and Quebecor Inc. to produce records and written information related to mobile wireless services that are relevant to the Competition Bureau's review of the Transaction, which is ongoing.

In accordance with the conditions of Shaw's spectrum licences, Rogers and Shaw filed joint applications with Innovation, Science and Economic Development Canada (ISED Canada) for approval of the indirect transfer of those spectrum licences by the Minister of Innovation, Science and Industry. ISED Canada's review is ongoing.

The Transaction is subject to a number of additional risks. For more information, see "Updates to Risks and Uncertainties - Shaw Transaction".

About Rogers

Rogers is a proud Canadian company dedicated to making more possible for Canadians 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 contact  Media contact  
  
Paul Carpino   Andrew Garas
647.435.6470 647.242.7924
paul.carpino@rci.rogers.com     andrew.garas@rci.rogers.com
  

Quarterly Investment Community Teleconference

Our fourth quarter 2021 results teleconference with the investment community will be held on:

  • January 27, 2022
  • 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, environmental, social, and governance (ESG) 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, 2021, 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, 2021, 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 2020 Annual MD&A, our 2020 Audited Consolidated Financial Statements, our 2021 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 26, 2022 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, 2021, first quarter refers to the three months ended March 31, 2021, second quarter refers to the three months ended June 30, 2021, third quarter refers to the three months ended September 30, 2021, and year to date or full-year refer to the twelve months ended December 31, 2021. All results commentary is compared to the equivalent periods in 2020 or as at December 31, 2020, as applicable, unless otherwise indicated.

™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. ©2022 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, 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) 2021  2020 % Chg   2021  2020 % Chg 
        
Revenue       
Wireless 2,415  2,291 5   8,768  8,530 3 
Cable 1,023  1,019    4,072  3,946 3 
Media 516  409 26   1,975  1,606 23 
Corporate items and intercompany eliminations (35) (39)(10)  (160) (166)(4)
Revenue 3,919  3,680 6   14,655  13,916 5 
Total service revenue 1 3,232  3,023 7   12,533  11,955 5 
        
Adjusted EBITDA       
Wireless 1,086  1,034 5   4,214  4,067 4 
Cable 518  520    2,013  1,935 4 
Media (26) 82 n/m  (127) 51 n/m
Corporate items and intercompany eliminations (56) (46)22   (213) (196)9 
Adjusted EBITDA 1,522  1,590 (4)  5,887  5,857 1 
Adjusted EBITDA margin 2 38.8% 43.2%(4.4 pts)  40.2% 42.1%(1.9 pts)
        
Net income 405  449 (10)  1,558  1,592 (2)
Basic earnings per share$0.80 $0.89 (10) $3.09 $3.15 (2)
Diluted earnings per share$0.80 $0.89 (10) $3.07 $3.13 (2)
        
Adjusted net income 3 486  500 (3)  1,803  1,725 5 
Adjusted basic earnings per share 3$0.96 $0.99 (3) $3.57 $3.42 4 
Adjusted diluted earnings per share$0.96 $0.99 (3) $3.56 $3.40 5 
        
Capital expenditures 846  656 29   2,788  2,312 21 
Cash provided by operating activities 1,147  947 21   4,161  4,321 (4)
Free cash flow 468  568 (18)  1,671  2,366 (29)

n/m - not meaningful
1 As defined. See "Key Performance Indicators".
2 Adjusted EBITDA margin is a supplementary financial measure. See "Non-GAAP and Other Financial Measures" for an explanation as to the composition of this measure.
3 Adjusted basic earnings per share is a non-GAAP ratio. Adjusted net income is a non-GAAP financial measure and is a component of adjusted basic earnings per share. This is not standardized financial measure under IFRS and might not be comparable to similar financial measures disclosed by other companies. See "Non-GAAP and Other Financial Measures" for more information about this measure.

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)2021 2020 % Chg 2021 2020 % Chg 
        
Revenue       
Service revenue1,735 1,637 6 6,666 6,579 1 
Equipment revenue680 654 4 2,102 1,951 8 
Revenue2,415 2,291 5 8,768 8,530 3 
        
Operating expenses       
Cost of equipment713 654 9 2,142 1,932 11 
Other operating expenses616 603 2 2,412 2,531 (5)
Operating expenses1,329 1,257 6 4,554 4,463 2 
        
Adjusted EBITDA1,086 1,034 5 4,214 4,067 4 
        
Adjusted EBITDA service margin 162.6%63.2%(0.6 pts) 63.2%61.8%1.4 pts
Adjusted EBITDA margin 245.0%45.1%(0.1 pts) 48.1%47.7%0.4 pts
Capital expenditures501 337 49 1,515 1,100 38 

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

Wireless Subscriber Results1

(In thousands, except churn, blended ABPU, and blended ARPU)Three months ended December 31  Twelve months ended December 31 
 2021  2020  Chg   2021  2020  Chg 
        
Postpaid       
Gross additions 476  458  18   1,565  1,381  184 
Net additions 130  114  16   448  245  203 
Total postpaid subscribers 2 10,131  9,683  448   10,131  9,683  448 
Churn (monthly) 1.15% 1.19%(0.04 pts)  0.95% 1.00%(0.05 pts)
Prepaid       
Gross additions 145  127  18   512  550  (38)
Net losses (21) (40) 19   (94) (142) 48 
Total prepaid subscribers 2 1,166  1,260  (94)  1,166  1,260  (94)
Churn (monthly) 4.66% 4.31%0.35 pts  4.20% 4.38%(0.18 pts)
Blended ABPU (monthly) 3$64.62 $62.82 $1.80  $63.45 $63.24 $0.21 
Blended ARPU (monthly) 4$51.47 $50.02 $1.45  $50.26 $50.75  ($0.49)

1 Subscriber counts and subscriber churn are key performance indicators. See "Key Performance Indicators".
2 As at end of period.
3 Blended ABPU is a non-GAAP ratio. Adjusted Wireless service revenue is a non-GAAP financial measure and is a component of blended ABPU. This is not a standardized financial measure under IFRS and might not be comparable to similar financial measures disclosed by other companies. See "Non-GAAP and Other Financial Measures" for more information about this measure.
4 Blended ARPU is a supplementary financial measure. See "Non-GAAP and Other Financial Measures" for an explanation as to the composition of this measure.

Service revenue
The 6% increase in service revenue this quarter was primarily a result of:

  • a larger postpaid subscriber base; and
  • higher roaming revenue as COVID-19-related global travel restrictions were generally less strict than last year.

The 3% increases in blended ARPU and blended ABPU this quarter were a result of the increased roaming revenue.

The increase in postpaid gross additions, the higher postpaid net additions, and the improved postpaid churn this quarter were a result of strong execution and an increase in market activity by Canadians with the ongoing opening of the economy.

Equipment revenue
The 4% increase in equipment revenue this quarter was a result of:

  • higher device upgrades by existing customers; and
  • higher gross additions; partially offset by
  • increased promotional activity during key selling periods due to increased market activity.

Operating expenses
Cost of equipment
The 9% increase in the cost of equipment this quarter was a result of:

  • higher device upgrades by existing customers; and
  • higher gross additions.

Other operating expenses
The 2% increase in other operating expenses this quarter was primarily a result of higher costs, including advertising and channel costs.

Adjusted EBITDA
The 5% increase 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)2021 2020 % Chg 2021 2020 % Chg 
        
Revenue       
Service revenue1,016 1,016  4,052 3,936 3 
Equipment revenue7 3 133 20 10 100 
Revenue1,023 1,019  4,072 3,946 3 
        
Operating expenses505 499 1 2,059 2,011 2 
        
Adjusted EBITDA518 520  2,013 1,935 4 
        
Adjusted EBITDA margin50.6%51.0%(0.4 pts) 49.4%49.0%0.4 pts
Capital expenditures237 227 4 913 940 (3)


Cable Subscriber Results
1

 Three months ended December 31  Twelve months ended December 31 
(In thousands, except ARPA and penetration) 2021  2020  Chg   2021  2020  Chg 
        
Internet 2       
Net additions 14  19  (5)  49  57  (8)
Total Internet subscribers 3,4 2,665  2,598  67   2,665  2,598  67 
Ignite TV       
Net additions 56  71  (15)  244  218  26 
Total Ignite TV subscribers 3 788  544  244   788  544  244 
        
Homes passed 3 4,700  4,578  122   4,700  4,578  122 
Customer relationships       
Net additions 10  11  (1)  31  12  19 
Total customer relationships 3,4 2,581  2,530  51   2,581  2,530  51 
ARPA (monthly) 5$131.63 $134.43  ($2.80) $132.58 $130.70 $1.88 
        
Penetration 3 54.9% 55.3%(0.4 pts) 54.9% 55.3%(0.4 pts)

1 Subscriber results are key performance indicators. See "Key Performance Indicators".
2 Internet subscriber results include Smart Home Monitoring subscribers.
3 As at end of period.
4 On September 1, 2021, we acquired approximately 18,000 Internet subscribers and 20,000 customer relationships as a result of our acquisition of Seaside Communications, which are not included in net additions, but do appear in the ending total balance for December 31, 2021.
5 ARPA is a supplementary financial measure. See "Non-GAAP and Other Financial Measures" for an explanation as to the composition of this measure.

Service revenue
The stable service revenue and 2% decrease in ARPA this quarter were a result of:

  • the movement of Internet customers to higher speed and usage tiers in our Ignite Internet offerings and the increase in total customer relationships over the past year, due to growth in our Internet and Ignite TV subscriber bases; 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 achieved significant growth in our Ignite TV subscriber base. The next steps on our roadmap to help keep our customers connected include adding more apps and content to Ignite TV and launching more new products.

Operating expenses
The 1% increase in operating expenses this quarter was primarily a result of higher customer care costs.

Adjusted EBITDA
The stable 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)2021 2020 % Chg 2021 2020 % Chg
        
Revenue516 409 26 1,975 1,606 23
Operating expenses542 327 66 2,102 1,555 35
        
Adjusted EBITDA(26)82 n/m (127)51 n/m
        
Adjusted EBITDA margin(5.0)%20.0%(25.0 pts)(6.4)%3.2%(9.6 pts)
Capital expenditures38 36 6 115 79 46


Revenue

The 26% increase in revenue this quarter was a result of:

  • higher advertising and subscription revenue, primarily as a result of the delayed starts of the 2020-2021 NHL and NBA seasons; partially offset by
  • lower Today's Shopping Choice™ revenue.

Operating expenses
The 66% increase in operating expenses this quarter was a result of:

  • higher programming and production costs as a result of the delayed starts of the 2020-2021 NHL and NBA seasons; and
  • higher other general operating costs as a result of the resumption of sports and increased activities as COVID-19 restrictions eased.

Adjusted EBITDA
The decrease 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)2021 2020 % Chg 2021 2020 % Chg 
        
Wireless501 337 49 1,515 1,100 38 
Cable237 227 4 913 940 (3)
Media38 36 6 115 79 46 
Corporate70 56 25 245 193 27 
        
Capital expenditures 1846 656 29 2,788 2,312 21 
        
Capital intensity 221.6%17.8%3.8 pts 19.0%16.6%2.4 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 Capital intensity is a supplementary financial measure. See "Non-GAAP and Other Financial Measures" for an explanation as to the composition of this measure.

Wireless
The increase in capital expenditures in Wireless this quarter was a result of investments made to upgrade our wireless network to continue to deliver reliable performance for our customers. We continued to emphasize our 5G deployments in the 600 MHz band and other bands as we have deployed our 5G network in more than 1,500 communities and we completed the roll out of our 5G standalone core network in Montreal, Ottawa, Toronto, and Vancouver.

Cable
The increase in capital expenditures in Cable this quarter reflects continued investments in our network infrastructure, 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, including service footprint expansion and upgrades to our DOCSIS 3.1 platform to offer increased download speeds over time.

Media
The increase in capital expenditures in Media this quarter was primarily a result of higher broadcast infrastructure expenditures, partially offset by lower stadium and facility investments at the Toronto Blue Jays™ and lower investments in new production studios as we completed our new Sportsnet™ NHL Studio prior to the start of the 2021-22 NHL season this quarter.

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

Capital intensity
Capital intensity increased this quarter as a result of higher capital expenditures, partially offset by higher 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)2021 2020% Chg  20212020% Chg 
        
Adjusted EBITDA1,522 1,590(4) 5,8875,8571 
Deduct (add):       
Depreciation and amortization658 666(1) 2,5852,618(1)
Restructuring, acquisition and other101 7338  32418575 
Finance costs218 228(4) 849881(4)
Other (income) expense(12)2n/m 21100 
Income tax expense152 172(12) 569580(2)
        
Net income405 449(10) 1,5581,592(2)


Depreciation and amortization

 Three months ended December 31  Twelve months ended December 31 
(In millions of dollars)20212020% Chg  20212020% Chg 
        
Depreciation of property, plant and equipment586605(3) 2,3222,390(3)
Depreciation of right-of-use assets665814  24621713 
Amortization63100  171155 
        
Total depreciation and amortization658666(1) 2,5852,618(1)


Restructuring, acquisition and other

This quarter, we incurred $101 million (2020 - $73 million) in restructuring, acquisition and other expenses, which included $62 million (2020 - nil) of certain costs related to the Transaction, including certain costs related to the committed credit facility. The remaining costs in 2021 were primarily severance costs associated with the targeted restructuring of our employee base. In 2020, these costs were primarily 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.

Finance costs

 Three months ended December 31  Twelve months ended December 31 
(In millions of dollars)2021 2020 % Chg  2021 2020 % Chg 
        
Interest on borrowings 1188 195 (4) 745 780 (4)
Interest on lease liabilities20 18 11  74 70 6 
Interest on post-employment benefits liability3 3   14 13 8 
Loss (gain) on foreign exchange1 (8)n/m 10 107 (91)
Change in fair value of derivative instruments3 16 (81) (6)(97)(94)
Capitalized interest(5)(4)25  (17)(19)(11)
Other8 8   29 27 7 
        
Total finance costs218 228 (4) 849 881 (4)

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

The 4% decrease this quarter in interest on borrowings was primarily a result of the repayment of our $1.45 billion senior notes at maturity in March 2021.

Income tax expense

 Three months ended December 31  Twelve months ended December 31 
(In millions of dollars, except tax rates)2021 2020  2021 2020 
      
Statutory income tax rate26.5%26.6% 26.5%26.6%
Income before income tax expense557 621  2,127 2,172 
Computed income tax expense148 165  564 578 
Increase (decrease) in income tax expense resulting from:     
Non-deductible stock-based compensation1 3  1  
Non-deductible portion of equity losses 3  12 10 
Income tax adjustment, legislative tax change (3)  (3)
Non-taxable income from security investments(3)(3) (11)(10)
Other items6 7  3 5 
      
Total income tax expense152 172  569 580 
      
Effective income tax rate27.3%27.7% 26.8%26.7%
Cash income taxes paid25 175  700 418 


Cash income taxes decreased this quarter due to the timing of installment payments.

Net income

 Three months ended December 31  Twelve months ended December 31 
(In millions of dollars, except per share amounts) 2021 2020% Chg   2021 2020% Chg 
        
Net income 405 449(10)  1,558 1,592(2)
Basic earnings per share$0.80$0.89(10) $3.09$3.15(2)
Diluted earnings per share$0.80$0.89(10) $3.07$3.13(2)


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) 2021  2020% Chg   2021 2020% Chg 
        
Adjusted EBITDA 1,522  1,590(4)  5,887 5,8571 
Deduct:       
Depreciation and amortization 658  666(1)  2,585 2,618(1)
Finance costs 218  228(4)  849 881(4)
Other (income) expense (12) 2n/m  2 1100 
Income tax expense 1 172  194(11)  648 6323 
        
Adjusted net income 486  500(3)  1,803 1,7255 
        
Adjusted basic earnings per share$0.96 $0.99(3) $3.57$3.424 
Adjusted diluted earnings per share$0.96 $0.99(3) $3.56$3.405 

1 Income tax expense excludes recoveries of $20 million and $79 million (2020 - recoveries of $22 million and $52 million) for the three and twelve months ended December 31, 2021 related to the income tax impact for adjusted items.

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)2021 2020  2021 2020 
Cash provided by operating activities before changes in net operating assets and liabilities, income taxes paid, and interest paid1,453 1,581  5,626 5,880 
Change in net operating assets and liabilities(50)(265) 37 (333)
Income taxes paid(25)(175) (700)(418)
Interest paid(231)(194) (802)(808)
      
Cash provided by operating activities1,147 947  4,161 4,321 
      
Investing activities:     
Capital expenditures(846)(656) (2,788)(2,312)
Additions to program rights(13)(12) (54)(57)
Changes in non-cash working capital related to capital expenditures and intangible assets12 97  67 (37)
Acquisitions and other strategic transactions, net of cash acquired(2,661)(95) (3,404)(103)
Other16 11  46 (49)
      
Cash used in investing activities(3,492)(655) (6,133)(2,558)
      
Financing activities:     
Net (repayment of) proceeds received from short-term borrowings(172)256  971 (1,146)
Net issuance of long-term debt2,000   550 2,540 
Net proceeds (payments) on settlement of debt derivatives and forward contracts8   (8)80 
Transaction costs incurred(20)(1) (31)(23)
Principal payments of lease liabilities(75)(58) (269)(213)
Dividends paid(253)(253) (1,010)(1,011)
      
Cash provided by (used in) financing activities1,488 (56) 203 227 
      
Change in cash and cash equivalents(857)236  (1,769)1,990 
Cash and cash equivalents, beginning of period1,572 2,248  2,484 494 
      
Cash and cash equivalents, end of period715 2,484  715 2,484 


Operating activities

The 21% increase in cash provided by operating activities this quarter was primarily affected by a lower investment in net operating assets as we recover from the COVID-19 impacts that took hold last year and lower income taxes paid.

Investing activities
Capital expenditures
During the quarter, we incurred $846 million on capital expenditures before changes in non-cash working capital items. See "Capital Expenditures" for more information.

Acquisitions and other strategic transactions
This quarter, we made the final payment of $2.66 billion related to the acquisition of 3500 MHz spectrum licences.

Financing activities
During the quarter, we received net amounts of $1,816 million (2020 - received $255 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, our short-term non-revolving credit facilities, and our US dollar-denominated commercial paper (US CP) program. Below is a summary of our short-term borrowings as at December 31, 2021 and December 31, 2020.

 As at
December 31
As at
December 31
(In millions of dollars)20212020
   
Receivables securitization program800650
Non-revolving credit facility borrowings507
US commercial paper program (net of the discount on issuance)893571
   
Total short-term borrowings2,2001,221


The tables below summarize the activity relating to our short-term borrowings for the three and twelve months ended December 31, 2021 and 2020.

  Three months ended
December 31, 2021
   Twelve months ended
December 31, 2021
 
 NotionalExchangeNotional  NotionalExchangeNotional 
(In millions of dollars, except exchange rates)(US$)rate(Cdn$)  (US$)rate(Cdn$) 
        
Proceeds received from US commercial paper611 1.257768  2,568 1.2603,235 
Repayment of US commercial paper(744)1.261(938) (2,314)1.259(2,914)
Net (repayment of) proceeds received from US commercial paper  (170)   321 
        
Proceeds received from non-revolving credit facilities (US$)800 1.2511,001  1,200 1.2531,503 
Repayment of non-revolving credit facilities (US$)(800)1.254(1,003) (800)1.254(1,003)
Net (repayment of) proceeds received from non-revolving credit facilities  (2)   500 
        
Proceeds received from receivables securitization      150 
Net proceeds received from receivables securitization      150 
        
Net (repayment of) proceeds received from short-term borrowings  (172)   971 


  Three months ended
December 31, 2020
  Twelve months ended
December 31, 2020
 
 NotionalExchangeNotional NotionalExchangeNotional 
(In millions of dollars, except exchange rates)(US$)rate(Cdn$) (US$)rate(Cdn$) 
        
Proceeds received from US commercial paper2001.280256 3,316 1.3294,406 
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)

Concurrent with our US CP issuances and non-revolving credit facility borrowings, 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.

In June 2021, we entered into non-revolving credit facilities with an aggregate limit of US$1.6 billion that mature in June 2022. Any borrowings under these facilities will be recorded as short-term borrowings as they will be due within 12 months. Borrowings under the facilities are unsecured, guaranteed by RCCI, and rank equally in right of payment with all of our senior notes and debentures. In December 2021, we terminated the undrawn non-revolving credit facilities with an aggregate limit of US$1.2 billion.

In March 2021, in connection with the Transaction, we entered into a binding commitment letter for a committed credit facility with a syndicate of banks in an amount up to $19 billion. The commitment remains subject to the satisfaction of conditions to effectiveness and drawing, including, without limitation, the completion of credit documentation in respect of such commitment and the completion of the Transaction. The commitment is only available to be drawn to fund part of the acquisition cost of the Transaction and to pay fees and expenses related to the Transaction. If drawn, any drawings must be repaid within 364 days. If undrawn, the facility terminates on the closing date of the acquisition. As a result of entering into the Shaw term loan facility during the second quarter (see "Long-term debt" below), the maximum amount we can draw on this committed facility decreased to $13 billion. As at December 31, 2021, we had not drawn against the facility.

Long-term debt
Our long-term debt consists of amounts outstanding under our bank and letter of credit facilities and the senior notes, debentures, and subordinated notes we have issued. The tables below summarize the activity relating to our long-term debt for the three and twelve months ended December 31, 2021 and 2020.

  Three months ended
December 31, 2021
  Twelve months ended
December 31, 2021
 
(In millions of dollars, except exchange rates)

NotionalExchangeNotional NotionalExchangeNotional 
(US$)rate(Cdn$) (US$)rate(Cdn$) 
        
Senior note repayments (Cdn$)     (1,450)
Subordinated note issuances (Cdn$)  2,000   2,000 
        
Net issuance of long-term debt  2,000   550 


  Three months ended
December 31, 2020
  Twelve months ended
December 31, 2020
 
(In millions of dollars, except exchange rates)

NotionalExchangeNotional NotionalExchangeNotional 
(US$)rate(Cdn$) (US$)rate(Cdn$) 
        
Credit facility borrowings (US$) 970 1.4281,385 
Credit facility repayments (US$) (970)1.406(1,364)
        
Net borrowings under credit facilities     21 
        
Senior note issuances (Cdn$)     1,500 
Senior note issuances (US$) 750 1.3591,019 
        
Net issuance of senior notes     2,519 
        
Net issuance of long-term debt     2,540 


 Three months ended December 31  Twelve months ended December 31 
(In millions of dollars)2021 2020  2021 2020 
      
Long-term debt net of transaction costs, beginning of period16,761 18,747  18,201 15,967 
Net issuance of long-term debt2,000   550 2,540 
Gain on foreign exchange(58)(549) (50)(297)
Deferred transaction costs incurred(20)(1) (31)(23)
Amortization of deferred transaction costs5 4  18 14 
      
Long-term debt net of transaction costs, end of period18,688 18,201  18,688 18,201 

In April 2021, we entered into a $6 billion Shaw term loan facility consisting of three tranches of $2 billion each. The facility cannot be drawn upon until the closing date of the Transaction. The first tranche matures three years after the Transaction closing date and subsequent tranches mature in years four and five thereafter, respectively. At tranche maturity, any outstanding borrowings under that tranche must be repaid.

In April 2021, we amended our revolving credit facility to, among other things, increase the total credit limit and extend the maturity dates. We increased the total credit limit from $3.2 billion to $4 billion by increasing the limits of the two tranches to $3 billion and $1 billion (from $2.5 billion and $700 million), respectively. We also extended the maturity date of the $3 billion tranche to April 2026 and the $1 billion tranche to April 2024, both from March 2022.

Issuance of senior and subordinated notes and related debt derivatives
Below is a summary of the senior and subordinated notes we issued this quarter. We did not issue senior or subordinated notes in the three months ended December 31, 2020.

(In millions of dollars, except interest rates and discounts)   
Date issued Principal
amount
Due dateInterest rateDiscount/
premium at
issuance
Total gross
proceeds 1
(Cdn$)
Transaction costs and
discounts 2
(Cdn$)
        
2021 issuances       
December 17, 2021 2,00020815.000%At par2,00020

1 Gross proceeds before transaction costs, discounts, and premiums.
2 Transaction costs, discounts, and premiums are included as deferred transaction costs and discounts in the carrying value of the long-term debt, and recognized in net income using the effective interest method over a five-year period.

In December 2021, we issued $2 billion subordinated notes due 2081 with an initial coupon of 5% for the first five years. The subordinated notes can be redeemed at par on the five-year anniversary or on any subsequent interest payment date. The subordinated notes are unsecured and subordinated obligations of RCI. Payment on these notes will, under certain circumstances, be subordinated to the prior payment in full of all of our senior indebtedness, including our senior notes, debentures, and bank credit facilities. In addition, upon the occurrence of certain events involving a bankruptcy or insolvency of RCI, the outstanding principal and interest of such subordinated notes would automatically convert into preferred shares. We understand that S&P Global Ratings Services (S&P), Moody's Investors Service (Moody's), and Fitch Ratings (Fitch) will only include 50% of the outstanding principal amount of these subordinated notes in their leverage ratio calculation for at least the first five years after their issuance. We used the proceeds to partially fund the remaining payment required to obtain the 3500 MHz spectrum licences. Concurrently, we terminated the $750 million bond forwards entered into in July 2021 to hedge the interest rate risk associated with future debt issuances.

Dividends
Below is a summary of the dividends declared and paid on RCI's outstanding Class A Voting common shares (Class A Shares) and Class B Non-Voting common shares (Class B Non-Voting Shares) in 2021 and 2020. On January 26, 2022, the Board declared a dividend of $0.50 per Class A Share and Class B Non-Voting Share to be paid on April 1, 2022 to shareholders of record on March 10, 2022.

Declaration dateRecord datePayment dateDividend per
share (dollars)
Dividends paid
(in millions of dollars)
     
January 27, 2021March 10, 2021April 1, 20210.50252
April 20, 2021June 10, 2021July 2, 20210.50253
July 20, 2021September 9, 2021October 1, 20210.50253
October 20, 2021December 10, 2021January 4, 20220.50252
     
January 21, 2020March 10, 2020April 1, 20200.50252
April 21, 2020June 10, 2020July 2, 20200.50253
July 21, 2020September 9, 2020October 1, 20200.50253
October 21, 2020December 10, 2020January 4, 20210.50252


Free cash flow

 Three months ended December 31  Twelve months ended December 31 
(In millions of dollars)20212020% Chg  20212020% Chg 
        
Adjusted EBITDA1,5221,590(4) 5,8875,8571 
Deduct:       
Capital expenditures 184665629  2,7882,31221 
Interest on borrowings, net of capitalized interest183191(4) 728761(4)
Cash income taxes 225175(86) 70041867 
        
Free cash flow468568(18) 1,6712,366(29)

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 Cash income taxes are net of refunds received.

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

Financial Condition

Available liquidity
Below is a summary of our available liquidity from our cash and cash equivalents, bank credit facilities, letter of credit facilities, and short-term borrowings as at December 31, 2021 and December 31, 2020.

As at December 31, 2021Total sources
Drawn
Letters of credit
US CP program 1
Net available
(In millions of dollars)
      
Cash and cash equivalents715715
Bank credit facilities 2:     
Revolving4,00088943,098
Non-revolving507507
Outstanding letters of credit7272
Receivables securitization 21,200800400
      
Total6,4941,307808944,213

1 The US CP program amounts are gross of the discount on issuance.
2 The total liquidity sources under our bank credit facilities and receivables securitization represents the total credit limits per the relevant agreements. The amount drawn and letters of credit are currently outstanding under those agreements. The US CP program amount represents our currently outstanding US CP borrowings that are backstopped by our revolving credit facility.

As at December 31, 2020Total sources
Drawn
Letters of credit
US CP program 1
Net available
(In millions of dollars)
      
Cash and cash equivalents2,4842,484
Bank credit facilities 2:     
Revolving3,20085732,619
Outstanding letters of credit101101
Receivables securitization 21,200650550
      
Total6,9856501095735,653

1 The US CP program amounts are gross of the discount on issuance.
2 The total liquidity sources under our bank credit facilities and receivables securitization represents the total credit limits per the relevant agreements. The amount drawn and letters of credit are currently outstanding under those agreements. The US CP program amount represents our currently outstanding US CP borrowings that are backstopped by our revolving credit facility.

Subsequent to the final payment for the 3500 MHz spectrum licence acquisition in December 2021, we cancelled $360 million of letters of credit and US$1.2 billion non-revolving credit facilities, which reduced total liquidity sources to $6.5 billion as at December 31, 2021.

In addition to the sources of available liquidity noted above, we held $1,581 million of marketable securities in publicly traded companies as at December 31, 2021 (December 31, 2020 - $1,535 million).

Weighted average cost of borrowings
Our weighted average cost of borrowings was 3.95% as at December 31, 2021 (December 31, 2020 - 4.09%) and our weighted average term to maturity was 11.6 years (December 31, 2020 - 12.8 years). These figures reflect the repayment of our subordinated notes on the five-year anniversary.

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, 2021.

IssuanceS&PMoody'sFitch
Corporate credit issuer default ratingBBB+ Rating Watch NegativeBaa1 under reviewBBB+ Rating Watch Negative
Senior unsecured debtBBB+ Rating Watch NegativeBaa1 under reviewBBB+ Rating Watch Negative
Subordinated debtBBB- Credit Watch NegativeBaa3 under reviewBBB- Rating Watch Negative
US commercial paperA-2 Rating Watch NegativeP-2 under reviewN/A 1

1 We have not sought a rating from Fitch for our short-term obligations.

As a result of our agreement to acquire Shaw and the related commitments in connection with the Transaction, both S&P and Fitch have placed us on credit watch with negative implications. Moody's has placed our credit ratings on review for downgrade. We expect S&P, Moody's, and Fitch to complete their reviews upon closing of the Transaction. See "Shaw Transaction" and "Updates to Risks and Uncertainties - Shaw Transaction" for more information on our agreement with Shaw and the Transaction.

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)2021 2020 
   
Long-term debt 118,873 18,373 
Subordinated notes adjustment 2(1,000) 
Net debt derivative assets valued without any adjustment for credit risk 3(1,278)(1,101)
Short-term borrowings2,200 1,221 
Lease liabilities1,957 1,835 
Cash and cash equivalents(715)(2,484)
   
Adjusted net debt 2,420,037 17,844 
Divided by: trailing 12-month adjusted EBITDA5,887 5,857 
   
Debt leverage ratio 43.4 3.0 

1 Includes current and long-term portion of long-term debt before deferred transaction costs and discounts. See "Reconciliation of adjusted net debt" in "Non-GAAP and Other Financial Measures" for the calculation of this amount.
2 For the purposes of calculating adjusted net debt and debt leverage ratio, we believe adjusting 50% of the value of our subordinated notes is appropriate as this methodology factors in certain circumstances with respect to priority for payment and this approach is commonly used to evaluate debt leverage by rating agencies.
3 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.
4 Adjusted net debt and debt leverage ratio are capital management measures. See "Non-GAAP and Other Financial Measures" for more information about these measures.

Outstanding common shares

 As at
December 31
As at
December 31
 20212020
   
Common shares outstanding 1  
Class A Voting Shares111,153,411111,154,811
Class B Non-Voting Shares393,771,907393,770,507
   
Total common shares504,925,318504,925,318
   
Options to purchase Class B Non-Voting Shares  
Outstanding options6,494,0014,726,634
Outstanding options exercisable2,373,7171,470,383

1 Holders of 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 2020 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 89.3% of our outstanding debt, including short-term borrowings, as at December 31, 2021 (December 31, 2020 - 93.6%).

Debt derivatives
We use cross-currency interest rate agreements and foreign exchange forward agreements (collectively, 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 CP 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 or interest rate risk associated with specific issued and forecast 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, 2021 and 2020.

  Three months ended
December 31, 2021
   Twelve months ended
December 31, 2021
 
(In millions of dollars, except exchange rates)Notional
(US$)
Exchange
rate
Notional
(Cdn$)
  Notional
(US$)
Exchange
rate
Notional
(Cdn$)
 
        
Credit facilities       
Debt derivatives entered8001.2511,001  1,2001.2531,503 
Debt derivatives settled8001.2541,003  8001.2541,003 
Net cash paid on settlement  (2)   (2)
        
US commercial paper program       
Debt derivatives entered6121.255768  2,5681.2603,235 
Debt derivatives settled7441.259937  2,3121.2592,911 
Net cash received (paid) on settlement  1    (15)


  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 9701.4281,385 
Debt derivatives settled 9701.4061,364 
Net cash paid on settlement     (21)
        
US commercial paper program       
Debt derivatives entered2001.280256 3,3161.3294,406 
Debt derivatives settled 4,0911.3305,441 
Net cash received on settlement     101 

As at December 31, 2021, we had US$400 million and US$704 million notional amount of debt derivatives outstanding relating to our credit facility borrowings and US CP program (December 31, 2020 - nil and US$448 million), respectively.

Senior notes
Below is a summary of the debt derivatives we entered into related to senior notes last year. We did not enter into any debt derivatives related to senior notes issued this year.

(In millions of dollars, except interest rates)   
  US$ Hedging effect
Effective datePrincipal/Notional
amount (US$)
Maturity dateCoupon rate Fixed hedged (Cdn$)
interest rate 1
Equivalent (Cdn$)
       
2020 issuances      
June 22, 20207502022USD LIBOR + 0.60% 0.955%1,019

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

As at December 31, 2021, we had US$9,050 million (December 31, 2020 - US$9,050 million) in US dollar-denominated senior notes and debentures, of which all the associated foreign exchange risk had been hedged using debt derivatives.

This year, we also entered into forward starting cross-currency swaps to hedge the foreign exchange risk on US$2 billion of anticipated US dollar-denominated note issuances. These derivatives have been designated as hedges for accounting purposes.

Lease liabilities
Below is a summary of the debt derivatives we entered into and settled related to our outstanding lease liabilities for the three and twelve months ended December 31, 2021 and 2020.

 Three months ended December 31, 2021 Twelve months ended December 31, 2021
(In millions of dollars, except exchange rates)Notional
(US$)
Exchange
rate
Notional
(Cdn$)
 Notional
(US$)
Exchange
rate
Notional
(Cdn$)
        
Debt derivatives entered331.33344 1321.273168
Debt derivatives settled251.32033 811.333108


 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 entered251.28032 1151.374158
Debt derivatives settled131.46219 431.37259

As at December 31, 2021, we had US$193 million notional amount of debt derivatives outstanding relating to our outstanding lease liabilities (December 31, 2020 - US$142 million) with terms to maturity ranging from January 2022 to December 2024 (December 31, 2020 - January 2021 to December 2023) at an average rate of $1.301/US$ (December 31, 2020 - $1.352/US$).

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

Interest rate derivatives
From time to time, we use bond forward derivatives or interest rate swap derivatives (collectively, interest rate derivatives) to hedge interest rate risk on current and future debt instruments. Our interest rate derivatives are designated as hedges for accounting purposes.

We entered into interest rate swap derivatives this year associated with the Transaction, including:

  • $1,250 million bond forwards to hedge the underlying Government of Canada (GoC) interest rate risk that will form a portion of the interest rate risk associated with anticipated future debt issuances;
  • interest rate swap derivatives to hedge the interest rate risk on an additional $3.25 billion of debt instruments we expect to issue in the future; and
  • interest rate swap derivatives to hedge the interest rate risk on US$2 billion of debt instruments we expect to issue in the future.

Concurrent with our issuance of $2 billion subordinated notes, we terminated $750 million of bond forwards and received $9 million upon settlement. As at December 31, 2021, we had $500 million of bond forwards outstanding.

See "Mark-to-market value" for more information about our interest rate 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, 2021 and 2020.

 Three months ended December 31, 2021 Twelve months ended December 31, 2021
(In millions of dollars, except exchange rates)Notional
(US$)
Exchange
rate
Notional
(Cdn$)
 Notional
(US$)
Exchange
rate
Notional
(Cdn$)
        
Expenditure derivatives entered1081.241134 4381.244545
Expenditure derivatives settled2251.360306 9601.3601,306


 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 entered2941.286378 1,5601.3432,095
Expenditure derivatives settled2051.298266 9401.2991,221

As at December 31, 2021, we had US$1,068 million notional amount of expenditure derivatives outstanding (December 31, 2020 - US$1,590 million) with terms to maturity ranging from January 2022 to December 2023 (December 31, 2020 - January 2021 to December 2022) at an average rate of $1.287/US$ (December 31, 2020 - $1.342/US$).

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, 2021, we had equity derivatives outstanding for 5.0 million (December 31, 2020 - 4.6 million) Class B Non-Voting Shares with a weighted average price of $53.10 (December 31, 2020 - $51.82).

We did not enter into or settle any equity derivatives during the three months ended December 31, 2021 or 2020.

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, 2021 
(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 assets5,8591.13696,6611,453 
As liabilities5,3831.30257,011(343)
Short-term debt derivatives not accounted for as hedges:    
As assets1,1041.25781,38911 
Net mark-to-market debt derivative asset   1,121 
Interest rate derivatives accounted for as cash flow hedges:    
As assets (Cdn$)3,25040 
As liabilities (Cdn$)500(6)
As liabilities (US$)2,000(277)
Net mark-to-market interest rate derivative liability   (243)
Expenditure derivatives accounted for as cash flow hedges:    
As assets4381.245354511 
As liabilities6301.3151829(30)
Net mark-to-market expenditure derivative liability   (19)
Equity derivatives not accounted for as hedges:    
As assets26536 
     
Net mark-to-market asset   895 


 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 assets4,5501.07954,9121,405 
As liabilities4,6421.33586,201(307)
Short-term debt derivatives not accounted for as hedges:    
As liabilities4491.2995583(12)
Net mark-to-market debt derivative asset   1,086 
Expenditure derivatives accounted for as cash flow hedges:    
As liabilities1,5901.34212,134(109)
Equity derivatives not accounted for as hedges:    
As assets23834 
     
Net mark-to-market asset   1,011 


Updates to Risks and Uncertainties

See our 2020 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 4, 2021, which should be reviewed in conjunction with this earnings release. The following factors may contribute to those risks and uncertainties.

Outbreak of COVID-19 and related pandemic
In early 2021, public health restrictions that were implemented in late 2020 were lifted to certain extents across the country. In March, several Canadian provinces declared a third wave of COVID-19 had commenced and provinces adjusted restrictions. In the third quarter, provinces generally began relaxing certain public health restrictions implemented in the first half of 2021 as vaccines became more widely available in Canada and vaccination rates continued to increase across the country. In August 2021, Canada entered a fourth wave of COVID-19 and several Canadian provinces introduced proof of vaccination requirements to access non-essential businesses and services. Late in the fourth quarter, the Omicron variant re-accelerated the spread of COVID-19 and many Canadian provinces reintroduced various restrictions, including placing capacity limits on organized gatherings and retail stores.

Additionally, COVID-19 has caused a global semiconductor chip shortage due to supply chain disruptions and an increase in demand for electronics. Although we are taking proactive steps to minimize its impacts, this has resulted, and could continue to result, in increased lead times on our network equipment and wireless devices.

Due to the uncertainty surrounding the duration and potential outcomes of COVID-19, including the results of measures taken to slow the spread and the broader impact COVID-19 may have on the Canadian and global economies or financial markets, it is difficult 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 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 (2019 Order), the CRTC set final rates for facilities-based carriers' wholesale high-speed access services, including Rogers' third-party Internet access (TPIA) service. The 2019 Order set final rates for Rogers that were significantly lower than the interim rates that were previously billed and it further determined that these final rates would have applied retroactively to March 31, 2016.

We did not believe the final rates set by the CRTC were just and reasonable as required by the Telecommunications Act as we believe they were below cost. On May 27, 2021, the CRTC released Telecom Decision CRTC 2021-181 Requests to review and vary Telecom Order 2019-288 regarding final rates for aggregated wholesale high-speed access services (2021 Decision). The CRTC decided to adopt the interim rates in effect prior to the 2019 Order as the final rates, with certain modifications, including the removal of the supplementary markup of 10% for incumbent local exchange carriers.

The final rates are lower than the rates we previously billed to the resellers for the period of March 31, 2016 to October 6, 2016. We have recognized a refund of amounts previously billed to the resellers of approximately $25 million, representing the impact on a retroactive basis for that period.

On May 28, 2021, a wholesale Internet Service Provider (ISP) petitioned the Governor in Council to, among other things, restore the 2019 Order and make the rates established in that order final. In addition, on June 28, 2021, the same wholesale ISP filed a motion seeking leave to appeal the 2021 Decision to the Federal Court of Appeal, which was granted in September 2021. We, along with several other cable companies, have intervened in these matters.

Videotron Ltd.
In October 2021, Videotron Ltd. launched a lawsuit against Rogers in the Quebec Superior Court, in connection with the agreement entered into by the parties in 2013 for the development and operation of a joint LTE network in the province of Quebec. The lawsuit involves allegations by Videotron Ltd. that Rogers has breached its contractual obligations by developing its own network in the territory. Videotron is seeking compensatory damages in the amount of $850 million. We intend to vigorously defend this lawsuit. We have not recognized a liability for this contingency.

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.

Shaw Transaction
The Transaction with Shaw is subject to a number of additional risks not otherwise described in our 2020 Annual MD&A, many of which are outside the control of Rogers and Shaw. These risks are described below.

Key Regulatory Approvals and other conditions
To complete the Transaction, each of Rogers and Shaw must make certain filings with, and obtain certain consents and approvals from, various governmental and regulatory authorities, including the Competition Bureau, ISED Canada, and the CRTC. Rogers and Shaw have not yet obtained the Key Regulatory Approvals, all of which are required to complete the Transaction. In addition, governmental or regulatory agencies could deny permission for, or seek to block or challenge, the Transaction or the transfer or deemed transfer of specific assets, including spectrum licences, or impose material conditions relating to the Transaction or any such transfer. If any one of the Key Regulatory Approvals is not obtained, or any applicable law or order is in effect which makes the consummation of the Transaction illegal, the Transaction will not be completed.

In addition, a substantial delay in obtaining the Key Regulatory Approvals could result in the Transaction not being completed. In particular, if the Transaction is not completed by March 15, 2022 (subject to an extension of up to 90 days in certain circumstances), either Rogers or Shaw may terminate the arrangement agreement, in which case the Transaction may not be completed.

Under certain circumstances, if the Key Regulatory Approvals are not obtained, or any law or order relating to the Key Regulatory Approvals or the Competition Act is in effect that would make the consummation of the Transaction illegal, and the failure to obtain the Key Regulatory Approvals is not caused by, and is not a result of, the failure by Shaw to perform in all material respects any of its covenants or agreements under the arrangement agreement, we would be obligated to pay a $1.2 billion reverse termination fee to Shaw (see "Termination of the arrangement agreement, costs, and termination fee" below). We would also be responsible to reimburse Shaw for certain costs relating to the May 2021 exercise of our right to require Shaw to redeem its issued and outstanding preferred shares.

The completion of the Transaction is subject to a number of other conditions precedent, some of which are outside of the control of Rogers and Shaw, including there not having occurred a Material Adverse Effect or Purchaser Material Adverse Effect (as such terms are defined in the arrangement agreement) and the satisfaction of certain other customary closing conditions.

There can be no certainty, nor can Rogers or Shaw provide any assurance, that all conditions precedent to the Transaction will be satisfied or waived, nor can there be any certainty of the timing of their satisfaction or waiver.

Termination of the arrangement agreement, costs, and termination fee
The arrangement agreement may be terminated by Rogers or Shaw in certain circumstances, in which case the Transaction will not be completed. Accordingly, there is no certainty, nor can we provide any assurance, that the arrangement agreement will not be terminated by us or Shaw prior to completion of the Transaction.

We must pay certain costs relating to the Transaction, such as legal, accounting, tax, and financing-related fees, even if the Transaction is not completed, which may be significant. In addition, if the Transaction is not completed for certain reasons, we may be required to pay a reverse termination fee of $1.2 billion to Shaw and certain costs relating to the May 2021 exercise of our right to require Shaw to redeem its issued and outstanding preferred shares, the result of which could have a material adverse effect on our business, results of operations, financial position, and our ability to fund growth prospects and current operations.

If the Transaction is not completed or is delayed, our share price and future business and financial results could be negatively affected. Any non-completion or delay of the Transaction may also negatively impact the relationships we have with our employees (including a potential lack of focus on our business), suppliers, vendors, distributors, retailers, dealers, or customers, including that such groups could cease doing business with us or curtail their activities with us.

Financing and potential credit rating consequences
The arrangement agreement does not contain a financing condition. Although we have a binding commitment letter for a committed credit facility of up to $13 billion and the $6 billion Shaw term loan facility in order to finance the Transaction, the obligation of the lenders under each of the committed credit facility and the Shaw term loan facility to provide the financing is subject to certain conditions, including, in the case of the committed credit facility, the completion of credit documentation in respect of such commitment. In the event the Transaction cannot be completed due to a failure to obtain the financing required to close the Transaction, either because the conditions to the committed credit facility and/or the Shaw term loan facility are not satisfied or other events arise which prevent us from consummating the debt financing, we may be unable to fund the consideration required to complete the Transaction, in which case we would be required to pay the reverse termination fee of $1.2 billion and certain costs relating to the May 2021 exercise of our right to require Shaw to redeem its issued and outstanding preferred shares.

In addition to assuming approximately $6 billion of existing Shaw debt, we expect to issue up to $19 billion in new debt to finance the Transaction. As a result, we anticipate the combined company will have over $40 billion of consolidated debt upon closing. The increased level of debt could decrease our flexibility in responding to changing business and economic conditions, increase our interest expense, and potentially make it more difficult to obtain additional financing or refinance existing financing. The increase in our debt service obligations could adversely affect our results, financial condition, and our ability to fund growth prospects and could reduce our funds available for other business purposes.

Additionally, as a result of the significant increase in outstanding debt, there is a risk that our credit ratings could be adversely affected, including the potential for a downgrade below investment-grade. A downgrade in our credit ratings could result in difficulty issuing debt in the future or higher borrowing costs and may otherwise affect our share price. If Shaw's existing senior notes are subject to a downgrade below investment-grade constituting a "change of control trigger event" (as defined in Shaw's senior note indenture), Shaw would be required to offer to purchase its senior notes at 101% of their principal amount plus accrued interest following closing of the Transaction, potentially having an adverse impact on the combined company's financial condition.

Expected synergies and integration
Achieving the anticipated benefits of the Transaction depends on our ability to consolidate and integrate Shaw's businesses, operations, and workforce in a manner that facilitates growth opportunities and achieves the projected cost savings and revenue growth without adversely affecting the combined company's current operations. Even if we successfully integrate Shaw's businesses, the anticipated benefits of the Transaction may not be fully realized or they could take longer to realize than expected.

In addition to the day-to-day operations of Rogers, management will need to focus on the Transaction and all related activities, including integration. If completion of the Transaction is delayed, there could be adverse effects on our business, results of operations, or financial condition.

Shaw actions prior to closing
The arrangement agreement restricts Shaw from taking certain actions outside of the ordinary course of business while the Transaction is pending, including, among other things, certain acquisitions or dispositions of businesses and assets, entering into or amending certain contracts, repurchasing or issuing securities, making significant capital expenditures, and incurring indebtedness, in each case subject to certain exceptions. As a result of these restrictions, Shaw may not have the flexibility to appropriately respond to certain events, which may result in us recognizing lower-than-expected synergies once the Transaction closes.

Corporate Governance Updates

On October 22, 2021, the Board was reconstituted with the appointment of Jack Cockwell, Michael Cooper, Ivan Fecan, Jan Innes, and John Kerr. In addition, on November 16, 2021, Tony Staffieri was appointed as Interim President and Chief Executive Officer and subsequently, on January 10, 2022, appointed as President and Chief Executive Officer and as a member of the Board.

Key Performance Indicators

We measure the success of our strategy using a number of key performance indicators that are defined and discussed in our 2020 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, some of which are non-GAAP or other financial measures (see "Non-GAAP and Other Financial Measures"), 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.

Non-GAAP and Other Financial Measures

We use the following non-GAAP and other financial 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 standardized measures under IFRS, so may not be reliable ways to compare us to other companies.

Non-GAAP financial measures
Specified financial measureHow it is usefulHow we calculate itMost directly
comparable
IFRS financial
measure
Adjusted net
income
 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.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.
Net income
Adjusted Wireless service revenue To facilitate the calculation of Wireless blended average billings per user (see Non-GAAP ratios).Wireless service revenue
add (deduct)
amortization of contract assets and contract liabilities to accounts receivable; and financing receivable billings.
Wireless service revenue
      
Non-GAAP ratios
Specified financial measureHow it is usefulHow we calculate it
Adjusted basic
earnings per
share

Adjusted 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
divided by
basic weighted average shares outstanding.

Adjusted net income including the dilutive effect of stock-based compensation
divided by
diluted weighted average shares outstanding.
Wireless blended average billings per user (ABPU) To help us identify trends in our total monthly billings per subscriber and to measure our success in attracting and retaining higher-value subscribers.Adjusted Wireless service revenue
divided by
average total number of Wireless subscribers for the relevant period.
      
Total of segments measures
Specified financial measure Most directly comparable IFRS financial measure
Adjusted EBITDANet income
      
Capital management measures
Specified financial measureHow it is useful
Free cash flow To show how much cash we generate that is available to repay debt and reinvest in our company, which is an important indicator of our financial strength and performance.
 We believe that some investors and analysts use free cash flow to value a business and its underlying assets.
Adjusted net debt We believe this helps investors and analysts analyze our debt and cash balances while taking into account the impact of debt derivatives on our US dollar-denominated debt.
Debt leverage ratio We believe this helps investors and analysts analyze our ability to service our debt obligations.
Available liquidity To help determine if we are able to meet all of our commitments, to execute our business plan, and to mitigate the risk of economic downturns.
    
Supplementary financial measures  
Specified financial measureHow we calculate it
Adjusted EBITDA marginAdjusted EBITDA
divided by
revenue.
Wireless blended average revenue per user (ARPU)Wireless service revenue
divided by
average total number of Wireless subscribers for the relevant period.
Cable average revenue per account (ARPA)Cable service revenue
divided by
average total number of customer relationships for the relevant period.
Capital intensityCapital expenditures
divided by
revenue.


Reconciliation of adjusted EBITDA

 Three months ended December 31  Twelve months ended December 31
(In millions of dollars)2021 2020  20212020
       
Net income405 449  1,5581,592
Add:      
Income tax expense152 172  569580
Finance costs218 228  849881
Depreciation and amortization658 666  2,5852,618
EBITDA1,433 1,515  5,5615,671
Add (deduct):      
Other (income) expense(12)2  21
Restructuring, acquisition and other101 73  324185
       
Adjusted EBITDA1,522 1,590  5,8875,857

Reconciliation of adjusted net income

 Three months ended December 31  Twelve months ended December 31 
(In millions of dollars)2021 2020  2021 2020 
      
Net income405 449  1,558 1,592 
Add (deduct):     
Restructuring, acquisition and other101 73  324 185 
Income tax impact of above items(20)(22) (79)(52)
      
Adjusted net income486 500  1,803 1,725 

Reconciliation of free cash flow

 Three months ended December 31
  Twelve months ended December 31 
(In millions of dollars)2021 2020  2021 2020 
      
Cash provided by operating activities1,147 947  4,161 4,321 
Add (deduct):     
Capital expenditures(846)(656) (2,788)(2,312)
Interest on borrowings, net of capitalized interest(183)(191) (728)(761)
Interest paid231 194  802 808 
Restructuring, acquisition and other101 73  324 185 
Program rights amortization(22)(23) (68)(77)
Change in net operating assets and liabilities50 265  (37)333 
Other adjustments 1(10)(41) 5 (131)
      
Free cash flow468 568  1,671 2,366 

1 Other adjustments consists of post-employment benefit contributions, net of expense, cash flows relating to other operating activities, and other (income) expense from our financial statements.

Reconciliation of adjusted net debt

 As at
December 31
 As at
December 31
 
(In millions of dollars)2021 2020 
   
Current portion of long-term debt1,551 1,450 
Long-term debt17,137 16,751 
Deferred transaction costs and discounts185 172 
 18,873 18,373 
Add (deduct):  
Subordinated notes adjustment 1(1,000) 
Net debt derivative assets 2(1,260)(1,086)
Credit risk adjustment related to net debt derivative assets 3(18)(15)
Short-term borrowings2,200 1,221 
Current portion of lease liabilities336 278 
Lease liabilities1,621 1,557 
Cash and cash equivalents(715)(2,484)
   
Adjusted net debt20,037 17,844 

1 For the purposes of calculating adjusted net debt, we believe adjusting 50% of the value of our subordinated notes is appropriate as this methodology factors in certain circumstances with respect to priority for payment and this approach is commonly used to evaluate debt leverage by rating agencies.
2 Net debt derivative assets consists of the net fair value of our debt derivatives on issued debt accounted for as hedges.
3 For accounting purposes in accordance with IFRS, we recognize the fair values of our debt derivatives using an estimated credit-adjusted mark-to-market valuation by discounting cash flows to measurement date. For purposes of calculating adjusted net debt, 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.

Reconciliation of adjusted Wireless service revenue and blended ABPU

 Three months ended December 31 Twelve months ended December 31
(In millions of dollars. except subscribers (in 000s) and months) 2021 2020  2021 2020
      
Wireless service revenue 1,735 1,637  6,666 6,579
Add (deduct):     
Amortization of contract assets and contract liabilities to accounts receivable 16 222  362 1,209
Financing receivable billings 428 197  1,388 410
      
Adjusted Wireless service revenue 2,179 2,056  8,416 8,198
Divided by:     
Average Wireless subscribers 11,239 10,909  11,054 10,804
Months per period 3 3  12 12
      
Blended ABPU$64.62$62.82 $63.45$63.24


Other Information

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

(In millions of dollars, except per share amounts) 2021   2020 
Q4Q3Q2Q1 Q4Q3Q2Q1
Revenue         
Wireless 2,415  2,215  2,064  2,074   2,291  2,228  1,934  2,077 
Cable 1,023  1,016  1,013  1,020   1,019  988  966  973 
Media 516  473  546  440   409  489  296  412 
Corporate items and intercompany eliminations (35) (38) (41) (46)  (39) (40) (41) (46)
Total revenue 3,919  3,666  3,582  3,488   3,680  3,665  3,155  3,416 
Total service revenue 1 3,232  3,149  3,131  3,021   3,023  3,086  2,797  3,049 
          
Adjusted EBITDA         
Wireless 1,086  1,107  1,008  1,013   1,034  1,089  918  1,026 
Cable 518  516  492  487   520  508  454  453 
Media (26) 33  (75) (59)  82  89  (35) (85)
Corporate items and intercompany eliminations (56) (56) (51) (50)  (46) (48) (43) (59)
Adjusted EBITDA 1,522  1,600  1,374  1,391   1,590  1,638  1,294  1,335 
Deduct (add):         
Depreciation and amortization 658  642  647  638   666  663  650  639 
Restructuring, acquisition and other 101  63  115  45   73  49  42  21 
Finance costs 218  207  206  218   228  219  214  220 
Other (income) expense (12) 20  (7) 1   2  6  7  (14)
Net income before income tax expense 557  668  413  489   621  701  381  469 
Income tax expense 152  178  111  128   172  189  102  117 
Net income 405  490  302  361   449  512  279  352 
          
Earnings per share:         
Basic$0.80 $0.97 $0.60 $0.71  $0.89 $1.01 $0.55 $0.70 
Diluted$0.80 $0.94 $0.60 $0.70  $0.89 $1.01 $0.54 $0.68 
          
Net income 405  490  302  361   449  512  279  352 
Add (deduct):         
Restructuring, acquisition and other 101  63  115  45   73  49  42  21 
Income tax impact of above items (20) (17) (30) (12)  (19) (13) (11) (6)
Income tax adjustment, legislative tax change          (3)      
Adjusted net income 486  536  387  394   500  548  310  367 
          
Adjusted earnings per share:         
Basic$0.96 $1.06 $0.77 $0.78  $0.99 $1.09 $0.61 $0.73 
Diluted$0.96 $1.03 $0.76 $0.77  $0.99 $1.08 $0.60 $0.71 
          
Capital expenditures 846  739  719  484   656  504  559  593 
Cash provided by operating activities 1,147  1,319  1,016  679   947  986  1,429  959 
Free cash flow 468  507  302  394   568  868  468  462 

1 As defined. See "Key Performance Indicators".

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
  2021  2020  2021 2020
      
Revenue 3,919  3,680  14,655 13,916
      
Operating expenses:     
Operating costs 2,397  2,090  8,768 8,059
Depreciation and amortization 658  666  2,585 2,618
Restructuring, acquisition and other 101  73  324 185
Finance costs 218  228  849 881
Other (income) expense (12) 2  2 1
      
Income before income tax expense 557  621  2,127 2,172
Income tax expense 152  172  569 580
      
Net income for the period 405  449  1,558 1,592
      
Earnings per share:     
Basic$0.80 $0.89 $3.09$3.15
Diluted$0.80 $0.89 $3.07$3.13


Rogers Communications Inc.

Interim Condensed Consolidated Statements of Financial Position
(In millions of dollars, unaudited)

 As at
December 31
As at
December 31
 20212020
   
Assets  
Current assets:  
Cash and cash equivalents7152,484
Accounts receivable3,8472,856
Inventories535479
Current portion of contract assets115533
Other current assets497516
Current portion of derivative instruments12061
Total current assets5,8296,929
   
Property, plant and equipment14,66614,018
Intangible assets12,2818,926
Investments2,4932,536
Derivative instruments1,4311,378
Financing receivables854748
Other long-term assets385346
Goodwill4,0243,973
   
Total assets41,96338,854
   
Liabilities and shareholders' equity  
Current liabilities:  
Short-term borrowings2,2001,221
Accounts payable and accrued liabilities3,4162,714
Income tax payable115344
Other current liabilities607243
Contract liabilities394336
Current portion of long-term debt1,5511,450
Current portion of lease liabilities336278
Total current liabilities8,6196,586
   
Provisions5042
Long-term debt17,13716,751
Lease liabilities1,6211,557
Other long-term liabilities5651,149
Deferred tax liabilities3,4393,196
Total liabilities31,43129,281
   
Shareholders' equity10,5329,573
   
Total liabilities and shareholders' equity41,96338,854


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 
 2021 2020  2021 2020 
Operating activities:     
Net income for the period405 449  1,558 1,592 
Adjustments to reconcile net income to cash provided by operating activities:     
Depreciation and amortization658 666  2,585 2,618 
Program rights amortization22 23  68 77 
Finance costs218 228  849 881 
Income tax expense152 172  569 580 
Post-employment benefits contributions, net of expense42 39  (5)13 
Other(44)4  2 119 
Cash provided by operating activities before changes in net operating assets and liabilities, income taxes paid, and interest paid1,453 1,581  5,626 5,880 
Change in net operating assets and liabilities(50)(265) 37 (333)
Income taxes paid(25)(175) (700)(418)
Interest paid(231)(194) (802)(808)
      
Cash provided by operating activities1,147 947  4,161 4,321 
      
Investing activities:     
Capital expenditures(846)(656) (2,788)(2,312)
Additions to program rights(13)(12) (54)(57)
Changes in non-cash working capital related to capital expenditures and intangible assets12 97  67 (37)
Acquisitions and other strategic transactions, net of cash acquired(2,661)(95) (3,404)(103)
Other16 11  46 (49)
      
Cash used in investing activities(3,492)(655) (6,133)(2,558)
      
Financing activities:     
Net (repayment of) proceeds received from short-term borrowings(172)256  971 (1,146)
Net issuance of long-term debt2,000   550 2,540 
Net proceeds (payments) on settlement of debt derivatives and forward contracts8   (8)80 
Transaction costs incurred(20)(1) (31)(23)
Principal payments of lease liabilities(75)(58) (269)(213)
Dividends paid(253)(253) (1,010)(1,011)
      
Cash provided by (used in) financing activities1,488 (56) 203 227 
      
Change in cash and cash equivalents(857)236  (1,769)1,990 
Cash and cash equivalents, beginning of period1,572 2,248  2,484 494 
      
Cash and cash equivalents, end of period715 2,484  715 2,484 

Change in net operating assets and liabilities

 Three months ended December 31  Twelve months ended December 31 
(In millions of dollars)2021 2020  2021 2020 
      
Accounts receivable, excluding financing receivables(125)30  (78)455 
Financing receivables(306)(540) (840)(1,658)
Contract assets36 256  417 1,170 
Inventories(139)(17) (56)(19)
Other current assets21 (60) 13 (132)
Accounts payable and accrued liabilities424 15  556 (326)
Other liabilities39 51  25 177 
      
Total change in net operating assets and liabilities(50)(265) 37 (333)

Investments

 As at
December 31
As at
December 31
(In millions of dollars)20212020
   
Investments in:  
Publicly traded companies1,5811,535
Private companies5397
Investments, measured at fair value through other comprehensive income1,6341,632
Investments, associates and joint ventures859904
   
Total investments2,4932,536

Long-term debt

   Principal
amount
Interest
rate
 As at
December 31
 As at
December 31
 
(In millions of dollars, except interest rates)Due date  2021 2020 
       
Senior notes2021 1,4505.340% 1,450 
Senior notes2022 6004.000%600 600 
Senior notes2022US750Floating951 955 
Senior notes2023US5003.000%634 637 
Senior notes2023US8504.100%1,078 1,082 
Senior notes2024 6004.000%600 600 
Senior notes2025US7003.625%886 890 
Senior notes2026US5002.900%634 637 
Senior notes2027 1,5003.650%1,500 1,500 
Senior notes2029 1,0003.250%1,000 1,000 
Senior debentures 12032US2008.750%254 255 
Senior notes2038US3507.500%444 446 
Senior notes2039 5006.680%500 500 
Senior notes2040 8006.110%800 800 
Senior notes2041 4006.560%400 400 
Senior notes2043US5004.500%634 637 
Senior notes2043US6505.450%823 827 
Senior notes2044US1,0505.000%1,331 1,337 
Senior notes2048US7504.300%951 955 
Senior notes2049US1,2504.350%1,585 1,592 
Senior notes2049US1,0003.700%1,268 1,273 
Subordinated notes 22081 2,0005.000%2,000  
     18,873 18,373 
Deferred transaction costs and discounts    (185)(172)
Less current portion    (1,551)(1,450)
       
Total long-term debt    17,137 16,751 

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, 2021 and December 31, 2020.
2 The subordinated notes can be redeemed at par on the five-year anniversary or on any subsequent interest payment date.

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;
  • includes conclusions, forecasts, and projections that are based on our current objectives and strategies and on estimates, expectations, assumptions, and other factors 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, 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;
  • our debt leverage ratio;
  • statements relating to plans we have implemented in response to COVID-19 and its impact on us;
  • the expected timing and completion of the Transaction;
  • the benefits expected to result from the Transaction, including corporate, operational, scale, and other synergies, and their anticipated timing; and
  • all other statements that are not historical facts.

Specific forward-looking information included in this document includes, but is not limited to, information and statements under "2022 Outlook" relating to our 2022 consolidated guidance on total service revenue, adjusted EBITDA, capital expenditures, and free cash flow. All other statements that are not historical facts are forward-looking statements.

Our conclusions, forecasts, and projections are based on a number of estimates, expectations, assumptions, and other factors, including, 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 and network 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;
  • sports-related work stoppages or cancellations and labour disputes;
  • 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;
  • risks related to the Transaction, including the timing, receipt, and conditions of the Key Regulatory Approvals; satisfaction of the various conditions to close the Transaction; financing the Transaction; and the anticipated benefits and successful integration of the businesses and operations of Rogers and Shaw; and the other risks outlined in "Updates to Risks and Uncertainties - Shaw Transaction" in this earnings release; 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.

Key assumptions underlying our full-year 2022 guidance
Our 2022 guidance ranges presented in "2022 Outlook" are based on many assumptions including, but not limited to, the following material assumptions for the full-year 2022:

  • a gradual improvement in the general COVID-19 environment throughout 2022, including the continued reopening of the economy, and no further significant restrictions, such as border closures and travel restrictions, capacity restrictions and sports venue closures, or stay-at-home orders and no material negative impact resulting from global supply chain interruptions;
  • continued competitive intensity in all segments in which we operate consistent with levels experienced in 2021;
  • no significant additional legal or regulatory developments, other shifts in economic conditions, or macro changes in the competitive environment affecting our business activities;
  • Wireless customers continue to adopt, and upgrade to, higher-value smartphones at similar rates in 2022 compared to 2021;
  • overall wireless market penetration in Canada grows in 2022 at a similar rate as in 2021;
  • continued subscriber growth in Internet;
  • declining Television subscribers, including the impact of customers migrating to Ignite TV from our legacy product, as subscription streaming services and other over-the-top providers continue to grow in popularity;
  • in Media, continued growth in sports and relative stability in other traditional media businesses;
  • no significant sports-related work stoppages or cancellations will occur and the current MLB lockout between the owners and the players' union will be resolved;
  • with respect to the increase in capital expenditures:
    • we continue to invest to ensure we have competitive wireless and cable networks through (i) expanding our 5G wireless network and (ii) upgrading our hybrid fibre-coaxial network to lower the number of homes passed per node, utilize the latest technologies, and deliver an even more reliable customer experience; and
    • we continue to make expenditures related to our Connected Home roadmap in 2022 and we make progress on our service footprint expansion projects;
  • a substantial portion of our 2022 US dollar-denominated expenditures is hedged at an average exchange rate of $1.29/US$;
  • key interest rates remain relatively stable throughout 2022; and
  • we retain our investment-grade credit ratings.

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, its operations, and its financial performance and condition, fully review the "Updates to Risks and Uncertainties" section in this earnings release and fully review the sections in our 2020 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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