WAT Consulting: Assessment of Rogers WirelessTeam 31:

Yuhan Zhuang Trimaan Kaur Dang

Sulaiman Mohammad Shorya Kaushik

Catherine Hung

RoadmapFive Priorities1) Implement IASB/FASB proposed standards 2) Execute proposal 3 to improve retention3) Invest to improve customer service4) Develop LTE and differentiated products5) Bid in 2014 spectrum auction

Do not eliminate wireless contractsIFRS

Proposal

CRM

Spectrum

Products

Contract Y/N

IFRS Proposal CRM SpectrumProducts Contract Y/N

Implement IASB/FASB Proposed Standards

IFRS

Proposal

CRM

Spectrum

Products

Contract Y/N

Impact on Financial Statements and Metrics Options, Risks & Issues

Impact on Financial Statement

Consideration Stand Alone Allocated Transaction PriceCustomer A

(Direct)Customer B

(Indirect)Customer A

(Direct)Customer B

(Indirect)Customer A

(Direct)Customer B

(Indirect) $100.00 $100.00 $350.00 $475.00 $303.00 3 $385.00 1

$1,500.00 $1,500.00 $1,500.00 $1,500.00 $1,297.00 4 $1,215.00 2 $1,600.00 $1,600.00 $1,850.00 $1,975.00 $1,600.00 $1,600.00

HandsetWireless PlanTotal1 475/1,975 x 1,600 = 3852 1,600 – 385 = 1,2153350/1850*1600 = 30341600 – 303 = 1297

IFRS

Proposal

CRM

Spectrum

Products

Contrac

t Y/N

Impact on Financial Statement

Day 1 - Enter ContractContract Asset (Phone) 100.00$

Performance Obligation (Phone) 100.00$

Contract Asset (Service) 1,500.00$ Performance Obligation (Service) 1,500.00$

Receivable/Cash 100.00$ Contract Asset (Phone) 100.00$

Performance Obligation (Phone) 100.00$ Revenue (Phone) 100.00$

Month 2 to Month 24 - Payment of ServiceReceivable/Cash 62.50$

Contract Asset (Service) 62.50$ Performance Obligation (Service) 62.50$

Revenue (Service) 62.50$

Day 1 - Enter ContractContract Asset (Phone) 303.00$

Perf. Obligation (Phone) 303.00$

Contract Asset (Service) 1,297.00$ Perf. Obligation Month 1 (Service) 54.04$ Perf. Obligation Month 2 (Service) 54.04$ " " " "Perf. Obligation Month 24 (Service) 54.04$

Receivable/Cash 100.00$ Contract Asset (Phone) 100.00$

Perf. Obligation (Phone) 303.00$ Revenue (Phone) 303.00$

Month 2 to Month 24 - Payment of ServiceReceivable/Cash 62.50$

Contract Asset (Phone) 8.46$ Contract Asset (Service) 54.04$

Perf. Obligation Month 1 (Service) 54.04$ Revenue (Service) 54.04$

Current Proposed

IFRS

Proposal

CRM

Spectrum

Products

Contract Y/N

Impact on Financial Metrics Current Standards Proposed Standards

COA (Equipment cost less equipment revenue)= $225 - $100 = $225 - $303= $125 = ($78)

ARPU (average network service revenue earned per month divided by average number of subscribers per month)

= $62.50 = $54.04

Impact on Financial StatementConsideration Stand Alone Allocated Transaction Price

Customer A (Direct)

Customer B (Indirect)

Customer A (Direct)

Customer B (Indirect)

Customer A (Direct)

Customer B (Indirect)

$100.00 $100.00 $350.00 $475.00 $303.00 3 $385.00 1 $1,500.00 $1,500.00 $1,500.00 $1,500.00 $1,297.00 4 $1,215.00 2 $1,600.00 $1,600.00 $1,850.00 $1,975.00 $1,600.00 $1,600.00

HandsetWireless PlanTotal1 475/1,975 x 1,600 = 3852 1,600 – 385 = 1,2153350/1850*1600 = 30341600 – 303 = 1297IFRS

Proposal

CRM

Spectrum

Products

Contrac

t Y/N

Options, Risks, and Issues

IFRS

Proposal

CRM

Spectrum

Products

Contract Y/N

Options• One perf. obligation vs. monthly perf. obligations• Contract-by-contract vs. portfolio of like contractsRisks/Issues• Transaction Price Estimates• Comparability and Reliability of financial statements

and shareholder implications• Implementation Costs

Execute Proposal 3

Impact on LTV

Incremental Increase of $42.52

Highest ARPU

IFRS

Proposal

CRM

Spectrum

Products

Contract Y/N

Impact on LTV

IFRS

Proposal

CRM

Spectrum

Products

Contract Y/N

Before Proposal Proposal 3 Proposal 1 Proposal 2

Churn 1.22% 1.20% 1.20% 1.20%

Average Lifetime in years 6.83 6.94 6.94 6.94

Annual ARPU $725.16 $727.11 $732.91 $724.96

Less: Annual Ops Expenses per user ($276.32) ($277.91) ($285.15) ($277.84)

Annual Net Cash Flow per user $448.84 449.21 $447.75 $447.11

Discount Rate 5.02% 5.02% 5.02% 5.02%

PV Net Cash Flow per user $2,542.12 $2,579.80 $2,571.46 $2,567.78

Less: Cost of Acquisition ($349.00) ($344.16) ($349.53) ($349.42)

Lifetime Value per User (LTV) $2,193.12 $2,235.64 $2,221.93 $2,218.36

% Increase from Before Proposal - 1.94% 1.31% 1.15%

Impact on Forecast       

  In millions of dollars, except ARPU figures. Subscribers in thousands Original Proposal 3 Proposal 1 Proposal 2  

  Postpaid Subscribers              Total postpaid subscribers (000s end of period) 8096.53 8111.74 8111.74 8111.23      Monthly churn 1.22% 1.20% 1.20% 1.20%      Monthly average revenue per user (APRU) 68.33 68.50 69.07 68.29      Smartphone % of postpaid 73.06% 74.88% 73.11% 72.93%                   Prepaid Subscribers              Total prepaid subscribers (000s end of period) 1428.70 1428.70 1428.70 1428.70                   Total subscribers (000s end of period) 9525.23 9540.44 9540.44 9539.93                   Network revenue 6820.22 6842.99 6897.38 6822.59    Other operating expenses (includes Retention Spend) 2632.00 2651.35 2720.50 2650.60    Net operating profit on network services 4188.22 4191.64 4176.88 4171.99                   Non-GAAP Performance Metrics            ARPU x 12 725.16 734.48 732.91 724.96    ARPU blend postpaid and prepaid 60.43 61.21 61.08 60.41                 

IFRS

Proposal

CRM

Spectrum

Products

Contrac

t Y/N

Invest to improve customer service

• Investment into automated conflict resolution IT system and call center training

IFRS

Proposal

CRM

Spectrum

Products

Contract Y/N

Develop LTE and differentiated products

IFRS

Proposal

CRM

Spectrum

Products

Contract Y/N

Acquire companies or invest into proprietary and relevant bundled services to jumpstart ARPU

Bid in 2014 spectrum auction

IFRS

Proposal

CRM

Spectrum

Products

Contract Y/N

Wireless Contract elimination Y/N?

IFRS

Proposal

CRM

Spectrum

Products

Contract Y/N

Long Term Goals

Financial Reporting Stakeholders

Do not eliminate contracts

Five Priorities1) Implement IASB/FASB proposed standards 2) Execute proposal 33) Invest to improve customer service4) Bid in 2014 spectrum auction5) Develop LTE and differentiated products

Continue wireless contracts use

Recap

Questions?