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 Rogers Communications Reports Fourth Quarter and Full-Year 2017 Results; Announces 2018 Financial Guidance
   Thursday, January 25, 2018 7:00:00 AM ET

-- Excellent financial and subscriber performance in full-year 2017, largely driven by Wireless

-- Wireless service revenue growth of 7% and AOP growth of 8% - the highest since 2009

-- Wireless postpaid net additions of 354,000 and churn of 1.20% - the best results since 2010

-- Strong financial performance in the fourth quarter 2017

-- Total service revenue growth of 4% and adjusted operating profit (AOP) growth of 6%

-- Wireless service revenue growth of 7% and AOP growth of 9%; AOP margin up 60 basis points

-- Postpaid net additions of 72,000 and churn of 1.48%

-- Cable revenue growth of 2% and AOP growth of 3%; AOP margin up 80 basis points

-- Internet revenue growth of 9% and net additions of 17,000

-- 2018 guidance reflects accelerated growth in adjusted EBITDA and free cash flow



-- Growth in revenue of 3% to 5%, adjusted EBITDA of 5% to 7%, and free cash flow of 3% to 5%; capex of $2.65 to $2.85 billion, focused on network investments

Rogers Communications Inc. today announced its unaudited financial and operating results for the fourth quarter ended December 31, 2017.

Consolidated Financial Highlights

                                                   Three months ended December 31   Twelve months ended December 31
(In millions of Canadian dollars, except per share 2017       2016       % Chg      2017       2016       % Chg
amounts, unaudited)
Total revenue                                      3,632      3,510      3          14,143     13,702     3
Total service revenue 1                            3,430      3,306      4          13,560     13,027     4
Adjusted operating profit 2                        1,340      1,259      6          5,379      5,092      6
Net income (loss)                                  419        (9)        n/m        1,711      835        105
Adjusted net income 2                              455        382        19         1,821      1,481      23
Basic earnings (loss) per share                    $0.81      ($0.02)    n/m        $3.32      $1.62      105
Adjusted basic earnings per share 2                $0.88      $0.74      19         $3.54      $2.88      23
Cash provided by operating activities              1,142      1,053      8          3,938      3,957      --
Free cash flow 2                                   244        392        (38)       1,746      1,705      2
n/m - not meaningful
1  As defined. See "Key Performance Indicators".
2 As defined. See "Non-GAAP Measures". These measures should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies.

"We delivered excellent results in 2017, with the best financial and subscriber performance in many years," said Joe Natale, President and CEO. "We also reported strong financial results in the fourth quarter, including growth in revenue, adjusted operating profit and margins. Our 2018 guidance reflects accelerated growth in profit and free cash flow along with well-timed, strategic investments in our networks. We enter 2018 bullish about the growth in our core business and with a clear plan focused on enhancing our customers’ experience and capturing cost efficiencies to drive sustainable growth."

Key Financial Highlights

Higher revenue Revenue increased 3% this quarter, largely driven by Wireless service revenue growth of 7% as a result of subscriber growth and a greater number of subscribers on higher-rate plans from our various brands, including Rogers Share Everything plans.

Cable revenue increased 2% this quarter due to continued strong Internet revenue growth of 9%.

Media revenue decreased 4% this quarter primarily as a result of lower revenue from the Toronto Blue Jays, primarily due to the postseason success in 2016, and lower publishing-related revenue due to the strategic shift to digital media announced last year, partially offset by higher Sportsnet revenue and increased sales at Today’s Shopping Choice (TSC).

Higher adjusted operating profit and margins Adjusted operating profit increased 6% this quarter, primarily as a result of Wireless adjusted operating profit growth of 9% due to the strong flow-through of service revenue growth described above and various cost efficiencies.

Cable adjusted operating profit increased 3% this quarter as a result of strong Internet revenue growth, the ongoing product mix shift to higher-margin Internet services, and various cost efficiencies.

Media adjusted operating profit decreased 20% this quarter primarily as a result of lower revenue from the Toronto Blue Jays, as discussed above, and lower publishing-related revenue due to the strategic shift to digital media announced late last year, partially offset by higher Sportsnet revenue.

Our adjusted operating profit margin increased to 36.9% this quarter, an expansion of 100 basis points. This increase was primarily driven by Wireless, with a 60 basis point expansion to 43.2%, and Cable, with an 80 basis point expansion to 51.5%.

Higher net income and adjusted net income Net income increased this quarter as a result of losses incurred last year related to the discontinuation of the development of our legacy IPTV product and higher adjusted operating profit. Adjusted net income increased 19% this quarter primarily due to higher adjusted operating profit and lower depreciation and amortization.

Substantial free cash flow affords financial flexibility This quarter, we continued to generate substantial cash flow from operating activities and free cash flow of $1,142 million and $244 million, respectively. Free cash flow decreased as a result of greater capital expenditures this quarter compared to last year.

We ended the fourth quarter with a debt leverage ratio (adjusted net debt / adjusted operating profit) of 2.8, which improved from a ratio of 3.0 as at the end of the same period last year. See "Managing our Liquidity and Financial Resources" for more information.

Our solid financial results enabled us to continue to make investments in our network and still return substantial dividends to shareholders. We paid $247 million in dividends this quarter.

Achieved 2017 Guidance

The following table outlines guidance ranges that we had previously provided and our actual results and achievements for the selected full-year 2017 financial metrics.

(In millions of dollars, except percentages)                             2016   2017                     2017        Achievement
                                                                         Actual Guidance Ranges          Actual
Consolidated Guidance 1
                       Revenue                                           13,702 Increase of 3% to  5%    14,143 3.2% ?^s
                       Adjusted operating profit 2                       5,092  Increase of 5% to  6%    5,379  5.6% ?^s
                       Additions to property, plant and equipment, net 3 2,352  2,350          to  2,450 2,436  n/m  ?^s
                       Free cash flow 2                                  1,705  Increase of 2% to  4%    1,746  2.4% ?^s
1 The table outlines guidance ranges for selected full-year 2017 consolidated financial metrics provided in our January 26, 2017 earnings release and subsequently updated on October 19, 2017. Guidance ranges presented as percentages reflect percentage increases over 2016 actual results.
2 Adjusted operating profit and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.
3 Includes additions to property, plant and equipment net of proceeds on disposition, but does not include expenditures for spectrum licences.

2018 Outlook

For the full-year 2018, we expect steady growth in revenue and adjusted EBITDA to drive higher free cash flow, despite higher net additions to property, plant and equipment. In 2018, we expect to have the financial flexibility to maintain our network advantages, to further reduce debt, and to continue to return cash to shareholders.

Effective January 1, 2018, the Company will commence using adjusted earnings before interest, tax, depreciation, and amortization (adjusted EBITDA) as the key measure of profit for the purpose of assessing performance for each segment and to make decisions about the allocation of resources. As such, we plan to introduce adjusted EBITDA as a new non-GAAP measure in our financial reports commencing January 1, 2018. This measure will replace our existing adjusted operating profit non-GAAP measure. We believe adjusted EBITDA better reflects segment and consolidated profitability. The difference between adjusted operating profit and adjusted EBITDA is that adjusted EBITDA will include stock-based compensation expense. We also believe that our decision-making processes will not be significantly affected through the use of adjusted EBITDA. Additionally, use of this measure will change our current definition of free cash flow. For detailed reconciliations, please see "Non-GAAP Measures".

(In millions of dollars, except percentages)                             2017    2018 Guidance Ranges based on
                                                                         Actuals a comparable basis prior to the
                                                                                 adoption of IFRS 15 1
Consolidated Guidance
                       Revenue                                           14,143  Increase of 3% to 5%
                       Adjusted EBITDA 2                                 5,318   Increase of 5% to 7%
                       Additions to property, plant and equipment, net 3 2,436   2,650          to 2,850
                       Free cash flow 2                                  1,685   Increase of 3% to 5%
1 Guidance ranges presented as percentages reflect percentage increases over full-year 2017 results. 2018 amounts for purposes of assessing our performance against guidance will be calculated consistently with revenue recognition accounting policies prior to adopting IFRS 15, Revenue from contracts with customers.
2 Effective January 1, 2018, free cash flow will be calculated using adjusted EBITDA as a result of our adoption of this profit measure instead of adjusted operating profit. Free cash flow presented above reflects this change. The difference between adjusted EBITDA and adjusted operating profit is that adjusted EBITDA will include stock-based compensation expense. Adjusted EBITDA and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them
3 Includes additions to property, plant and equipment net of proceeds on disposition, but does not include expenditures for spectrum licences.

The above table outlines guidance ranges for selected full-year 2018 consolidated financial metrics. These ranges take into consideration our current outlook and our 2017 results and are not expected to be impacted by the adoption of IFRS 15 on January 1, 2018. The purpose of the financial outlook is to assist investors, shareholders, and others in understanding certain financial metrics relating to expected 2018 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 2018 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.

About Rogers

Rogers is a leading diversified Canadian communications and media company that’s working to deliver a great experience to our customers every day. We are Canada’s largest provider of wireless communications services and one of Canada’s leading providers of cable television, high-speed Internet, information technology, and telephony services to consumers and businesses. Through Rogers Media, we are engaged in radio and television broadcasting, sports, televised and online shopping, magazines, and digital media. Our shares are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (RCI ).

Quarterly Investment Community Teleconference

Our fourth quarter 2017 results teleconference with the investment community will be held on:

-- January 25, 2018

-- 8:00 a.m. Eastern Time

-- webcast available at investors.rogers.com

-- media are welcome to participate on a listen-only basis

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

For More Information

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

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

About this Earnings Release

This earnings release contains important information about our business and our performance for the three and twelve months ended December 31, 2017, 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, 2017, which we intend to file with securities regulators in Canada and the US in the coming weeks. These statements will be made available on the investors.rogers.com, sedar.com, and sec.gov websites 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 2016 Annual MD&A, our 2016 Audited Consolidated Financial Statements, our 2017 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.

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 25, 2018 and was approved by our Board of Directors (Board). This earnings release includes forward-looking statements and assumptions. See "About Forward-Looking Information" for more information.

We, us, our, Rogers, Rogers Communications, and the Company refer to Rogers Communications Inc. and its subsidiaries. RCI refers to the legal entity Rogers Communications Inc., not including its subsidiaries. Rogers also holds interests in various investments and ventures.

In this earnings release, this quarter, the quarter, or the fourth quarter refer to the three months ended December 31, 2017, the first quarter refers to the three months ended March 31, 2017, the second quarter refers to the three months ended June 30, 2017, the third quarter refers to the three months ended September 30, 2017, and year to date or full-year refer to the twelve months ended December 31, 2017. All results commentary is compared to the equivalent periods in 2016 or as at December 31, 2016, as applicable, unless otherwise indicated.

Reporting Segments We report our results of operations in four reporting segments. Each segment and the nature of its business is as follows:

Segment            Principal activities
Wireless           Wireless telecommunications operations for Canadian consumers and businesses.
Cable              Cable telecommunications operations, including Internet, television, and telephony (phone) services for Canadian consumers and businesses.
Business Solutions 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 enterprise, public sector, and carrier wholesale markets.
Media              A diversified portfolio of media properties, including sports media and entertainment, television and radio broadcasting, specialty channels, multi-platform shopping, digital media, and publishing.

Wireless, Cable, and Business Solutions are operated by our wholly-owned subsidiary, Rogers Communications Canada Inc. (RCCI), and certain of our other wholly-owned subsidiaries. Media is operated by our wholly-owned subsidiary, Rogers Media Inc., and its subsidiaries.

We intend to redefine our reporting segments effective January 1, 2018 as a result of technological evolution and the increased overlap between the various product offerings within our Cable and Business Solutions reporting segments, as well as how we allocate resources amongst, and the general management of, our reporting segments. Effective January 1, 2018, the results of our existing Cable segment, Business Solutions segment, and our Smart Home Monitoring products will be presented within a redefined Cable segment. Financial results related to our Smart Home Monitoring product are currently reported within Corporate items and intercompany eliminations. We will retrospectively amend our 2017 comparative segment results in 2018 to account for this redefinition.

Summary of Consolidated Financial Results

                                                                         Three months ended December 31   Twelve months ended December 31
(In millions of dollars, except margins and per share                    2017       2016       % Chg      2017       2016       % Chg
amounts)
Revenue
                           Wireless                                      2,189      2,058      6          8,343      7,916      5
                           Cable                                         871        858        2          3,466      3,449      --
                           Business Solutions                            99         96         3          387        384        1
                           Media                                         526        550        (4)        2,153      2,146      --
                           Corporate items and intercompany eliminations (53)       (52)       2          (206)      (193)      7
Revenue                                                                  3,632      3,510      3          14,143     13,702     3
Total service revenue 1                                                  3,430      3,306      4          13,560     13,027     4
Adjusted operating profit
                           Wireless                                      860        792        9          3,561      3,285      8
                           Cable                                         449        435        3          1,709      1,674      2
                           Business Solutions                            32         30         7          128        123        4
                           Media                                         39         49         (20)       139        169        (18)
                           Corporate items and intercompany eliminations (40)       (47)       (15)       (158)      (159)      (1)
Adjusted operating profit 2                                              1,340      1,259      6          5,379      5,092      6
Adjusted operating profit margin 2                                       36.9%      35.9%      1.0 pts    38.0%      37.2%      0.8 pts
Net income (loss)                                                        419        (9)        n/m        1,711      835        105
Basic earnings (loss) per share                                          $0.81      ($0.02)    n/m        $3.32      $1.62      105
Diluted earnings (loss) per share                                        $0.81      ($0.04)    n/m        $3.31      $1.62      104
Adjusted net income 2                                                    455        382        19         1,821      1,481      23
Adjusted basic earnings per share 2                                      $0.88      $0.74      19         $3.54      $2.88      23
Adjusted diluted earnings per share 2                                    $0.88      $0.74      19         $3.52      $2.86      23
Additions to property, plant and equipment, net                          841        604        39         2,436      2,352      4
Cash provided by operating activities                                    1,142      1,053      8          3,938      3,957      --
Free cash flow 2                                                         244        392        (38)       1,746      1,705      2
1 As defined. See "Key Performance Indicators".
2 Adjusted operating profit, adjusted operating profit margin, adjusted net income, adjusted basic and diluted earnings per share, and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.

Results of our Reporting Segments

WIRELESS

Wireless Financial Results

                                                            Three months ended December 31   Twelve months ended December 31
(In millions of dollars, except margins)                    2017       2016       % Chg      2017       2016       % Chg
Revenue
                              Service revenue               1,990      1,858      7          7,775      7,258      7
                              Equipment revenue             199        200        (1)        568        658        (14)
Revenue                                                     2,189      2,058      6          8,343      7,916      5
Operating expenses
                              Cost of equipment             648        584        11         2,033      1,947      4
                              Other operating expenses      681        682        --         2,749      2,684      2
Operating expenses                                          1,329      1,266      5          4,782      4,631      3
Adjusted operating profit                                   860        792        9          3,561      3,285      8
Adjusted operating profit margin as a % of service revenue  43.2%      42.6%      0.6 pts    45.8%      45.3%      0.5 pts
Additions to property, plant and equipment                  269        153        76         806        702        15

Wireless Subscriber Results 1

                                                     Three months ended December 31   Twelve months ended December 31
(In thousands, except churn, postpaid ARPA, and      2017       2016       Chg        2017       2016       Chg
blended ARPU)
Postpaid 2
                        Gross additions              456        436        20         1,599      1,521      78
                        Net additions                72         93         (21)       354        286        68
                        Total postpaid subscribers 3 8,704      8,557      147        8,704      8,557      147
                        Churn (monthly)              1.48%      1.35%      0.13 pts   1.20%      1.23%      (0.03 pts)
                        ARPA (monthly)               $126.54    $119.90    $6.64      $124.75    $117.37    $7.38
Prepaid
                        Gross additions              165        172        (7)        782        761        21
                        Net (losses) additions       (8)        38         (46)       61         111        (50)
                        Total prepaid subscribers 3  1,778      1,717      61         1,778      1,717      61
                        Churn (monthly)              3.22%      2.62%      0.60 pts   3.48%      3.32%      0.16 pts
Blended ARPU (monthly) 2                             $63.46     $60.72     $2.74      $62.31     $60.42     $1.89
1 Subscriber counts, subscriber churn, postpaid ARPA, and blended ARPU are key performance indicators. See "Key Performance Indicators".
2 Effective October 1, 2017, and on a prospective basis, we reduced our Wireless postpaid subscriber base by 207,000 subscribers to remove a low-ARPU public services customer that is in the process of migrating to another service provider. We believe adjusting our base for a customer of this size that migrates off our network provides a more meaningful reflection of the underlying organic performance of our Wireless business.
3 As at end of period.

Service revenue

The 7% increase in service revenue this quarter was a result of:

-- higher blended ARPU, primarily as a result of the increased mix of subscribers on higher-rate plans from our various brands, which includes the customer-friendly Rogers Share Everything plans, and increased data usage. Our higher-rate plans typically generate higher ARPU, may allow users to pool and manage their data usage across multiple devices, and provide access to some of our other offerings, such as Roam Like Home, Fido Roam, Rogers NHL LIVE, Fido Data Bytes, and Spotify; and

-- larger postpaid and prepaid subscriber bases.

The 6% increase in postpaid ARPA this quarter was primarily a result of the continued adoption of Rogers Share Everything plans and the increasing number of lines per customer account. Customers on Share Everything plans have increasingly utilized the advantages of premium offerings and access their shareable plans with multiple devices on the same account.

The 5% increase in blended ARPU this quarter was a result of the increased service revenue, as discussed above, and the adjustment to our postpaid subscriber base pertaining to the migration of a public services customer.

The increase in postpaid churn this quarter was primarily a result of heightened competitive intensity, particularly during the holiday season.

Equipment revenue The 1% decrease in equipment revenue this quarter was a result of:

-- larger average investments in higher-blended-ARPU-generating customers who purchased devices under term contracts, in part due to the heightened competitive intensity this quarter; partially offset by

-- a 7% increase in device upgrades by existing subscribers; and

-- higher postpaid gross additions.

Operating expenses

Cost of equipment

The 11% increase in the cost of equipment this quarter was a result of:

-- a continued shift in the product mix of device sales towards higher-cost smartphones as more devices launched and we continue to invest in higher-blended-ARPU-generating customers;

-- the increase in device upgrades by existing subscribers as discussed above; and

-- higher postpaid gross additions.

Other operating expenses

Other operating expenses were stable this quarter as a result of:

-- various cost efficiencies and productivity initiatives; offset by

-- higher costs related to increased revenue, as discussed above.

Adjusted operating profit The 9% increase in adjusted operating profit this quarter was a result of the strong flow-through of service revenue growth discussed above.

CABLE

Cable Financial Results

                                               Three months ended December 31   Twelve months ended December 31
(In millions of dollars, except margins)       2017       2016       % Chg      2017       2016       % Chg
Revenue
                      Internet                 413        378        9          1,606      1,495      7
                      Television               372        386        (4)        1,501      1,562      (4)
                      Phone                    84         93         (10)       353        386        (9)
                      Service revenue          869        857        1          3,460      3,443      --
                      Equipment revenue        2          1          100        6          6          --
Revenue                                        871        858        2          3,466      3,449      --
Operating expenses
                      Cost of equipment        --         1          n/m        2          3          (33)
                      Other operating expenses 422        422        --         1,755      1,772      (1)
Operating expenses                             422        423        --         1,757      1,775      (1)
Adjusted operating profit                      449        435        3          1,709      1,674      2
Adjusted operating profit margin               51.5%      50.7%      0.8 pts    49.3%      48.5%      0.8 pts
Additions to property, plant and equipment     379        284        33         1,172      1,085      8

Cable Subscriber Results 1

                                          Three months ended December 31   Twelve months ended December 31
(In thousands)                            2017       2016       Chg        2017       2016       Chg
Internet
           Net additions                  17         30         (13)       85         97         (12)
           Total Internet subscribers 2   2,230      2,145      85         2,230      2,145      85
Television
           Net losses                     (13)       (13)       --         (80)       (76)       (4)
           Total Television subscribers 2 1,740      1,820      (80)       1,740      1,820      (80)
Phone
           Net additions                  9          4          5          14         4          10
           Total Phone subscribers 2      1,108      1,094      14         1,108      1,094      14
Cable homes passed 2                      4,307      4,241      66         4,307      4,241      66
Total service units 3
           Net additions                  13         21         (8)        19         25         (6)
           Total service units 2          5,078      5,059      19         5,078      5,059      19
1 Subscriber counts are key performance indicators. See "Key Performance Indicators".
2 As at end of period.
3 Includes Internet, Television, and Phone subscribers.

Revenue The 2% increase in revenue this quarter was a result of:

-- the movement of Internet customers to higher speed and usage tiers; and

-- the impact of service pricing changes; partially offset by

-- a lower subscriber base for our Television products.

Internet revenue The 9% increase in Internet revenue this quarter was a result of:

-- general movement of customers to higher speed and usage tiers of our Internet offerings, with 54% of our residential Internet base on plans of 100 megabits per second or higher (2016 - 46%);

-- a larger Internet subscriber base; and

-- the impact of Internet service pricing changes; partially offset by

-- more promotional pricing provided to subscribers.

Television revenue The 4% decrease in Television revenue this quarter was a result of:

-- the decline in Television subscribers over the past year; partially offset by

-- the impact of Television service pricing changes, net of discounts.

Phone revenue The 10% decrease in Phone revenue this quarter was a result of the impact of pricing.

Operating expenses Operating expenses were stable this quarter as a result of:

-- various cost efficiencies and productivity initiatives; offset by

-- higher costs related to increased revenue, as discussed above.

Adjusted operating profit The 3% increase in adjusted operating profit this quarter was a result of the revenue changes discussed above.

BUSINESS SOLUTIONS

Business Solutions Financial Results

                                            Three months ended December 31   Twelve months ended December 31
(In millions of dollars, except margins)    2017       2016       % Chg      2017       2016       % Chg
Revenue
                      Next generation       84         77         9          322        307        5
                      Legacy                14         17         (18)       58         71         (18)
                      Service revenue       98         94         4          380        378        1
                      Equipment revenue     1          2          (50)       7          6          17
Revenue                                     99         96         3          387        384        1
Operating expenses                          67         66         2          259        261        (1)
Adjusted operating profit                   32         30         7          128        123        4
Adjusted operating profit margin            32.3%      31.3%      1.0 pts    33.1%      32.0%      1.1 pts
Additions to property, plant and equipment  40         37         8          131        146        (10)

Revenue The 4% increase in service revenue this quarter was a result of the increase in higher-margin, next generation on-net and near-net IP-based services revenue, partially offset by the continued decline in our legacy and off-net voice business.

We expect legacy service revenue will continue to decrease as we focus on migrating customers to more advanced, cost-effective IP-based services and solutions. Next generation services, which include our data centre operations, represented 86% of service revenue in the quarter (2016 - 82%).

Operating expenses Operating expenses this quarter were in line with fourth quarter operating expenses of 2016.

Adjusted operating profit The 7% increase in adjusted operating profit this quarter was a result of the 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)   2017       2016       % Chg      2017       2016       % Chg
Revenue                                    526        550        (4)        2,153      2,146      --
Operating expenses                         487        501        (3)        2,014      1,977      2
Adjusted operating profit                  39         49         (20)       139        169        (18)
Adjusted operating profit margin           7.4%       8.9%       (1.5 pts)  6.5%       7.9%       (1.4 pts)
Additions to property, plant and equipment 39         19         105        83         62         34

Revenue The 4% decrease in revenue this quarter was a result of:

-- lower revenue at the Toronto Blue Jays due to the postseason in 2016; and

-- lower publishing-related revenue as a result of the strategic shift to digital media announced last year; partially offset by

-- higher Sportsnet revenue; and

-- higher TSC merchandise sales.

Operating expenses The 3% decrease in operating expenses this quarter was a result of:

-- lower publishing-related costs as a result of the strategic shift described above; and

-- lower Toronto Blue Jays costs due to costs associated with the 2016 postseason; partially offset by

-- higher TSC merchandise costs.

Adjusted operating profit The 20% decrease in adjusted operating profit this quarter was a result of the revenue and expense changes discussed above.

ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT, NET

                                                      Three months ended December 31   Twelve months ended December 31
(In millions of dollars, except capital intensity)    2017       2016       % Chg      2017       2016       % Chg
Additions to property, plant and equipment
                           Wireless                   269        153        76         806        702        15
                           Cable                      379        284        33         1,172      1,085      8
                           Business Solutions         40         37         8          131        146        (10)
                           Media                      39         19         105        83         62         34
                           Corporate                  114        111        3          318        357        (11)
Total additions to property, plant and equipment 1    841        604        39         2,510      2,352      7
Proceeds from disposition of property, plant and      --         --         n/m        (74)       --         n/m
equipment
Total additions to property, plant and equipment, net 841        604        39         2,436      2,352      4
Capital intensity 2                                   23.2%      17.2%      6.0 pts    17.2%      17.2%      -- pts
1 Additions to property, plant and equipment do not include expenditures for spectrum licences.
2 As defined. See "Key Performance Indicators".

Wireless The increase in additions to property, plant and equipment in Wireless this quarter was a result of investments made to upgrade our wireless network to continue delivering worry-free, reliable performance for our customers. We are augmenting our existing LTE network with 4.5G technology investments that are also designed to migrate to a 5G environment. This quarter, we began upgrading our radio infrastructure and made investments to activate the AWS-1 spectrum licence acquired earlier in 2017.

Cable The increase in additions to property, plant and equipment in Cable this quarter was a result of higher investments in network and information technology infrastructure, partially related to our forthcoming Ignite TV product (previously referred to as the X1 IP-based video platform), and to enhance the quality of our cable network. This quarter, we began upgrading our hybrid fibre-coaxial infrastructure with additional fibre deployments and further DOCSIS technology enhancements. These deployments and enhancements 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.

Business Solutions The increase in additions to property, plant and equipment in Business Solutions this quarter was a result of higher investments in network infrastructure.

Media The increase in additions to property, plant and equipment this quarter reflect higher investments in our broadcast infrastructure and the Rogers Centre.

Corporate The increase in additions to property, plant and equipment in Corporate this quarter was a result of higher investments in premise improvements.

Capital intensity Capital intensity increased this quarter as a result of higher net additions to property, plant and equipment as discussed above, partially offset by higher total revenue.

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)                             2017       2016       % Chg      2017       2016       % Chg
Adjusted operating profit 1                          1,340      1,259      6          5,379      5,092      6
Deduct (add):
              Stock-based compensation               14         16         (13)       61         61         --
              Depreciation and amortization          531        555        (4)        2,142      2,276      (6)
              Gain on disposition of property, plant --         --         n/m        (49)       --         n/m
              and equipment
              Restructuring, acquisition and other   31         518        (94)       152        644        (76)
              Finance costs                          184        188        (2)        746        761        (2)
              Other expense (income)                 3          (4)        n/m        (19)       191        n/m
              Income tax expense (recovery)          158        (5)        n/m        635        324        96
Net income (loss)                                    419        (9)        n/m        1,711      835        105
1 Adjusted operating profit is a non-GAAP measure and should not be considered a substitute or alternative for GAAP measures. It is not a defined term under IFRS and does not have a standard meaning, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about this measure, including how we calculate it.

Stock-based compensation Our stock-based compensation, which includes stock options (with stock appreciation rights), restricted share units, and deferred share units, is generally driven by:

-- the vesting of stock options and share units; and

-- changes in the market price of RCI Class B shares; offset by

-- the impact of certain equity derivative instruments designed to hedge a portion of the stock price appreciation risk for our stock-based compensation programs. See "Financial Risk Management" for more information about equity derivatives.

                                            Three months ended December 31  Twelve months ended December 31
(In millions of dollars)                    2017            2016            2017            2016
Impact of vesting                           13              19              61              70
Impact of change in price                   2               (22)            74              24
Equity derivatives, net of interest receipt (1)             19              (74)            (33)
Total stock-based compensation              14              16              61              61

Depreciation and amortization

                                    Three months ended December 31   Twelve months ended December 31
(In millions of dollars)            2017       2016       % Chg      2017       2016       % Chg
Depreciation                        518        538        (4)        2,087      2,183      (4)
Amortization                        13         17         (24)       55         93         (41)
Total depreciation and amortization 531        555        (4)        2,142      2,276      (6)

Total depreciation and amortization decreased this quarter primarily as a result of certain assets becoming fully amortized.

Restructuring, acquisition and other This quarter, we incurred $31 million (2016 - $518 million) in restructuring, acquisition and other expenses. The costs this quarter were primarily a result of severance costs associated with the targeted restructuring of our employee base and certain contract termination costs. In 2016, these costs were primarily a result of the $484 million charge for asset impairment and related onerous contracts related to our legacy IPTV product. In 2017, this charge has been reported within restructuring, acquisition and other compared to a separate classification as impairment of assets and related onerous contract charges reported in 2016.

Finance costs

                                               Three months ended December 31   Twelve months ended December 31
(In millions of dollars)                       2017       2016       % Chg      2017       2016       % Chg
Interest on borrowings 1                       184        185        (1)        740        758        (2)
Interest on post-employment benefits liability 3          2          50         12         9          33
Loss (gain) on foreign exchange                8          32         (75)       (107)      13         n/m
Change in fair value of derivatives            (10)       (34)       (71)       99         (16)       n/m
Capitalized interest                           (5)        (3)        67         (18)       (18)       --
Other                                          4          6          (33)       20         15         33
Total finance costs                            184        188        (2)        746        761        (2)
1 Interest on borrowings includes interest on short-term borrowings and on long-term debt.

Interest on borrowings Interest on borrowings decreased this quarter as a result of a marginally lower weighted average cost of financing on a lower average debt balance. See "Managing our Liquidity and Financial Resources" and "Financial Condition" for more information about our debt and related finance costs.

Income tax expense (recovery)

                                                                                   Three months ended December 31  Twelve months ended December 31
(In millions of dollars, except tax rates)                                         2017            2016            2017            2016
Statutory income tax rate                                                          26.7%           26.6%           26.7%           26.6%
Income (loss) before income tax expense (recovery)                                 577             (14)            2,346           1,159
Computed income tax expense (recovery)                                             154             (4)             626             308
Increase (decrease) in income tax expense resulting from:
                             Non-(taxable) deductible stock-based compensation     --              (2)             9               5
                             Non-deductible portion of equity losses               2               2               --              18
                             Non-deductible loss on available-for-sale investments --              --              7               --
                             Income tax adjustment, legislative tax change         2               --              2               3
                             Non-taxable portion of capital gain                   --              --              (10)            (7)
                             Other items                                           --              (1)             1               (3)
Total income tax expense (recovery)                                                158             (5)             635             324
Effective income tax rate                                                          27.4%           35.7%           27.1%           28.0%
Cash income taxes paid                                                             76              81              475             295

The effective income tax rate for the quarter was higher than the statutory tax rate primarily as a result of non-deductible equity losses recognized on certain of our investments and an increase in income tax expense as a result of a legislative tax change.

Cash income taxes paid decreased this quarter as a result of the timing of installment payments.

Net income (loss)

                                                   Three months ended December 31   Twelve months ended December 31
(In millions of dollars, except per share amounts) 2017       2016       % Chg      2017       2016       % Chg
Net income (loss)                                  419        (9)        n/m        1,711      835        105
Basic earnings (loss) per share                    $0.81      ($0.02)    n/m        $3.32      $1.62      105
Diluted earnings (loss) per share                  $0.81      ($0.04)    n/m        $3.31      $1.62      104

Adjusted net income We calculate adjusted net income from adjusted operating profit as follows:

                                                        Three months ended December 31   Twelve months ended December 31
(In millions of dollars, except per share amounts)      2017       2016       % Chg      2017       2016       % Chg
Adjusted operating profit 1                             1,340      1,259      6          5,379      5,092      6
Deduct:
                          Depreciation and amortization 531        555        (4)        2,142      2,276      (6)
                          Finance costs                 184        188        (2)        746        761        (2)
                          Other expense (income) 2      3          (4)        n/m        1          40         (98)
                          Income tax expense 3          167        138        21         669        534        25
Adjusted net income 1                                   455        382        19         1,821      1,481      23
Adjusted basic earnings per share 1                     $0.88      $0.74      19         $3.54      $2.88      23
Adjusted diluted earnings per share 1                   $0.88      $0.74      19         $3.52      $2.86      23
1 Adjusted operating profit, adjusted net income, and adjusted basic and diluted earnings per share are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.
2 Other income for the twelve months ended December 31, 2017 excludes a $20 million provision reversal on the wind down of shomi. Other expense for the twelve months ended December 31, 2016 excludes an $11 million net loss on divestitures pertaining to investments and a $140 million loss on the wind down of our shomi joint venture.
3 Income tax expense excludes an $11 million recovery (2016 - $143 million recovery) for the quarter and a $36 million recovery (2016 - $213 million recovery) for the year to date related to the income tax impact for adjusted items. Income tax expense also excludes expenses as a result of legislative tax changes of $2 million (2016 - nil) for the quarter and $2 million (2016 - $3 million) for the year to date.

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)                                                                             2017            2016            2017            2016
Cash provided by operating activities before changes in non-
cash working capital items, income taxes paid, and interest paid                                     1,358           1,276           5,302           4,994
                                 Change in non-cash operating working capital items                  (15)            (18)            (154)           14
Cash provided by operating activities before income taxes paid                                       1,343           1,258           5,148           5,008
and interest paid
                                 Income taxes paid                                                   (76)            (81)            (475)           (295)
                                 Interest paid                                                       (125)           (124)           (735)           (756)
Cash provided by operating activities                                                                1,142           1,053           3,938           3,957
Investing activities:
                                 Additions to property, plant and equipment, net                     (841)           (604)           (2,436)         (2,352)
                                 Additions to program rights                                         (21)            (3)             (59)            (46)
                                 Changes in non-cash working capital related to property,            101             44              109             (103)
                                 plant and equipment and intangible assets
                                 Acquisitions and other strategic transactions, net of cash acquired --              --              (184)           --
                                 Other                                                               21              49              (60)            45
Cash used in investing activities                                                                    (740)           (514)           (2,630)         (2,456)
Financing activities:
                                 Net (repayment of) proceeds received on short-term borrowings       (163)           (250)           858             --
                                 Net repayment of long-term debt                                     (3)             (57)            (1,034)         (538)
                                 Net proceeds (payments) on settlement of debt derivatives           40              (28)            (79)            (45)
                                 and forward contracts
                                 Transaction costs incurred                                          --              (17)            --              (17)
                                 Dividends paid                                                      (247)           (247)           (988)           (988)
                                 Other                                                               --              --              --              5
Cash used in financing activities                                                                    (373)           (599)           (1,243)         (1,583)
Change in cash and cash equivalents                                                                  29              (60)            65              (82)
(Bank advances) cash and cash equivalents, beginning of period                                       (35)            (11)            (71)            11
Bank advances, end of period                                                                         (6)             (71)            (6)             (71)

Operating activities The 8% increase in cash provided by operating activities this quarter was primarily a result of higher net income.

Investing activities Additions to property, plant and equipment, net

We spent $841 million this quarter on net additions to property, plant and equipment, before changes in non-cash working capital items, which was higher than the same period in 2016. See "Additions to Property, Plant and Equipment, net" for more information.

Financing activities During the quarter, we repaid net amounts of $126 million (2016 - $335 million) on our short-term borrowings, long-term debt, and related derivatives. 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 accounts receivable securitization program and under our US dollar-denominated commercial paper (US CP) program. Below is a summary of our short-term borrowings as at December 31, 2017 and 2016.

                                           As at       As at
                                           December 31 December 31
(In millions of dollars)                   2017        2016
Accounts receivable securitization program 650         800
US commercial paper program                935         --
Total short-term borrowings                1,585       800

Below is a summary of the activity relating to our short-term borrowings for the three and twelve months ended December 31, 2017 and 2016.

                                                          Three months ended         Twelve months ended
                                                          December 31, 2017          December 31, 2017
                                                          Notional Exchange Notional Notional Exchange Notional
(In millions of dollars, except exchange rates)           (US$)    rate     (Cdn$)   (US$)    rate     (Cdn$)
Proceeds received from accounts receivable securitization                   --                         530
Repayment of accounts receivable securitization                             (390)                      (680)
Net repayment of accounts receivable securitization                         (390)                      (150)
Proceeds received from US commercial paper                2,142    1.2750   2,731    8,267    1.2958   10,712
Repayment of US commercial paper                          (1,958)  1.2789   (2,504)  (7,530)  1.2887   (9,704)
Net proceeds received from US commercial paper                              227                        1,008
Net (repayment of) proceeds received on short-term                          (163)                      858
borrowings
                                                          Three months ended         Twelve months ended
                                                          December 31, 2016          December 31, 2016
                                                          Notional Exchange Notional Notional Exchange Notional
(In millions of dollars, except exchange rates)           (US$)    rate     (Cdn$)   (US$)    rate     (Cdn$)
Proceeds received from accounts receivable securitization                   --                         295
Repayment of accounts receivable securitization                             (250)                      (295)
Net repayment of accounts receivable securitization                         (250)                      --
Net repayment of short-term borrowings                                      (250)                      --

In March 2017, we entered into a US CP program that allowed us to issue up to a maximum aggregate principal amount of US$1 billion. In December 2017, we increased the maximum aggregate principal amount allowed under our US CP program to US$1.5 billion. Funds can be borrowed under this program with terms to maturity ranging from 1 to 397 days, subject to ongoing market conditions. Any issuances made under the US CP program will be issued at a discount. See "Financial Condition" for more information.

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

Long-term debt Our long-term debt consists of amounts outstanding under our bank credit facilities and letter of credit facilities and the senior notes and debentures we have issued. Below is a summary of the activity relating to our long-term debt for the three and twelve months ended December 31, 2017 and 2016.

                                                Three months ended         Twelve months ended
                                                December 31, 2017          December 31, 2017
(In millions of dollars, except exchange rates) Notional Exchange Notional Notional Exchange Notional
                                                (US$)    rate     (Cdn$)   (US$)    rate     (Cdn$)
Credit facility borrowings (Cdn$)                                 --                         1,730
Credit facility borrowings (US$)                100      1.25     125      960      1.32     1,269
Total credit facility borrowings                                  125                        2,999
Credit facility repayments (Cdn$)                                 --                         (1,830)
Credit facility repayments (US$)                (100)    1.28     (128)    (1,110)  1.31     (1,453)
Total credit facility repayments                                  (128)                      (3,283)
Net repayments under credit facilities                            (3)                        (284)
Senior note repayments (Cdn$)                                     --                         (750)
Net repayment of long-term debt                                   (3)                        (1,034)
                                                Three months ended         Twelve months ended
                                                December 31, 2016          December 31, 2016
(In millions of dollars, except exchange rates) Notional Exchange Notional Notional Exchange Notional
                                                (US$)    rate     (Cdn$)   (US$)    rate     (Cdn$)
Credit facility borrowings (Cdn$)                                 325                        1,140
Credit facility borrowings (US$)                303      1.31     398      2,188    1.31     2,877
Total credit facility borrowings                                  723                        4,017
Credit facility repayments (Cdn$)                                 (225)                      (1,540)
Credit facility repayments (US$)                (914)    1.34     (1,226)  (2,038)  1.32     (2,686)
Total credit facility repayments                                  (1,451)                    (4,226)
Net repayments under credit facilities                            (728)                      (209)
Senior note issuances (US$)                     500      1.34     671      500      1.34     671
Senior note repayments (Cdn$)                                     --                         (1,000)
Net issuance (repayment) of senior notes                          671                        (329)
Net repayment of long-term debt                                   (57)                       (538)
                                                       Three months ended December 31  Twelve months ended December 31
(In millions of dollars)                               2017            2016            2017            2016
Long-term debt net of transaction costs, beginning of  14,402          15,927          16,080          16,870
period
Net repayment of long-term debt                        (3)             (57)            (1,034)         (538)
Loss (gain) on foreign exchange                        46              224             (608)           (245)
Deferred transaction costs incurred                    --              (17)            (3)             (12)
Amortization of deferred transaction costs             3               3               13              5
Long-term debt net of transaction costs, end of period 14,448          16,080          14,448          16,080

Certain funds were borrowed under our revolving and non-revolving credit facilities in US dollars to take advantage of a favourable interest rate spread; we have entered into debt derivatives related to these borrowings to convert all the interest and principal payment obligations to Canadian dollars. See "Financial Risk Management" for more information.

Dividends Below is a summary of the dividends we declared and paid on our outstanding Class A Voting and Class B Non-Voting shares in 2017 and 2016.

Declaration date Record date        Payment date    Dividend per    Dividends paid
                                                    share (dollars) (in millions of dollars)
January 26, 2017 March 13, 2017     April 3, 2017   0.48            247
April 18, 2017   June 12, 2017      July 4, 2017    0.48            247
August 17, 2017  September 15, 2017 October 3, 2017 0.48            247
October 19, 2017 December 11, 2017  January 2, 2018 0.48            247
January 27, 2016 March 13, 2016     April 1, 2016   0.48            247
April 18, 2016   June 12, 2016      July 4, 2016    0.48            247
August 11, 2016  September 11, 2016 October 3, 2016 0.48            247
October 20, 2016 December 12, 2016  January 3, 2017 0.48            247

Free cash flow

                                                                  Three months ended December 31   Twelve months ended December 31
(In millions of dollars)                                          2017       2016       % Chg      2017       2016       % Chg
Adjusted operating profit 1                                       1,340      1,259      6          5,379      5,092      6
Deduct:
              Additions to property, plant and equipment, net 2   841        604        39         2,436      2,352      4
              Interest on borrowings, net of capitalized interest 179        182        (2)        722        740        (2)
              Cash income taxes 3                                 76         81         (6)        475        295        61
Free cash flow 1                                                  244        392        (38)       1,746      1,705      2
1 Adjusted operating profit and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.
2 Additions to property, plant and equipment, net do not include expenditures for spectrum licences.
3 Cash income taxes are net of refunds received.

The 38% decrease in free cash flow this quarter was a result of higher net additions to property, plant and equipment, partially offset by higher adjusted operating profit.

Financial Condition

Below is a summary of our total available liquidity under our bank credit facilities, letters of credit facilities, and short-term borrowings.

As at December 31, 2017                         Total available Drawn           Letters of credit US CP program     Net available
(In millions of dollars)
Bank credit facilities:
                  Revolving                     3,200           --              9                 935               2,256
                  Outstanding letters of credit 87              --              87                --                --
                  Bank advances                 --              6               --                --                (6)
Total bank credit facilities                    3,287           6               96                935               2,250
Accounts receivable securitization              1,050           650             --                --                400
Total                                           4,337           656             96                935               2,650
As at December 31, 2016                                         Total available Drawn             Letters of credit Net available
(In millions of dollars)
Bank credit facilities:
                  Revolving                                     2,500           --                9                 2,491
                  Non-revolving                                 301             301               --                --
                  Outstanding letters of credit                 59              --                59                --
                  Bank advances                                 --              71                --                (71)
Total bank credit facilities                                    2,860           372               68                2,420
Accounts receivable securitization                              1,050           800               --                250
Total                                                           3,910           1,172             68                2,670

In addition to the sources of available liquidity noted above, we held $1,465 million of marketable securities in publicly-traded companies as at December 31, 2017 (December 31, 2016 - $1,047 million).

Weighted average cost of borrowings Our borrowings had a weighted average cost of 4.70% as at December 31, 2017 (December 31, 2016 - 4.72%) and a weighted average term to maturity of 9.9 years (December 31, 2016 - 10.6 years).

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, 2017.

Issuance                                 Standard & Poor’s          Moody’s                    Fitch
Corporate credit issuer default rating 1 BBB+ with a stable outlook Baa1 with a stable outlook BBB+ with a stable outlook
Senior unsecured debt 1                  BBB+ with a stable outlook Baa1 with a stable outlook BBB+ with a stable outlook
US commercial paper 1                    A-2                        P-2                        N/A 2
1 Unchanged in the quarter.
2 We did not seek a rating from Fitch for our short-term obligations in 2017.

Financial Risk Management

This section should be read in conjunction with "Financial Risk Management" in our 2016 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 89.5% of our outstanding debt, including short-term borrowings, as at December 31, 2017 (December 31, 2016 - 91.2%).

Debt derivatives

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

Below is a summary of the debt derivatives we entered into and settled related to our credit facility borrowings and US CP program during the three and twelve months ended December 31, 2017 and 2016.

                                                 Three months ended                     Twelve months ended
                                                 December 31, 2017                      December 31, 2017
(In millions of dollars, except exchange rates)  Notional Exchange rate Notional        Notional Exchange Notional
                                                 (US$)                  (Cdn$)          (US$)    rate     (Cdn$)
Credit facilities
                        Debt derivatives entered 100      1.25          125             1,610    1.32     2,126
                        Debt derivatives settled 100      1.25          125             1,760    1.32     2,327
                        Net cash received (paid)                        4                                 (17)
Commercial paper program
                        Debt derivatives entered 2,140    1.28          2,732           8,266    1.30     10,711
                        Debt derivatives settled 1,955    1.28          2,500           7,521    1.29     9,692
                        Net cash received (paid)                        36                                (62)
                                                 Three months ended                     Twelve months ended
                                                 December 31, 2016                      December 31, 2016
(In millions of dollars, except exchange rates)  Notional Exchange rate Notional (Cdn$) Notional Exchange Notional
                                                 (US$)                                  (US$)    rate     (Cdn$)
Credit facilities
                        Debt derivatives entered 1,947    1.33          2,583           8,683    1.31     11,360
                        Debt derivatives settled 2,558    1.32          3,385           8,533    1.31     11,159
                        Net cash received                               25                                8

As at December 31, 2017, we had nil and US$746 million of debt derivatives outstanding relating to our credit facility borrowings and US CP program (December 31, 2016 - US$150 million and nil), respectively.

Senior notes During this quarter, we did not enter into or settle any debt derivatives related to senior notes.

Bond forwards During this quarter, we did not enter into or settle any bond forwards.

On November 4, 2016, we exercised a $500 million notional bond forward due January 4, 2017 in relation to the issuance of the US$500 million senior notes due 2026 and paid $53 million to settle the derivative. The amount paid represents the fair value of the bond forward at the time of settlement and will be reclassified into finance costs from the hedging reserve using the effective interest rate method over the life of the US$500 million senior notes due 2026.

Expenditure derivatives

Below is a summary of the expenditure derivatives we entered into and settled during the three and twelve months ended December 31, 2017 and 2016.

                                                Three months ended December 31, 2017    Twelve months ended December 31, 2017
(In millions of dollars, except exchange rates) Notional     Exchange rate Notional     Notional     Exchange     Notional
                                                (US$)                      (Cdn$)       (US$)        rate         (Cdn$)
Expenditure derivatives entered                 --           --            --           840          1.27         1,070
Expenditure derivatives settled                 225          1.33          300          930          1.33         1,240
                                                Three months ended December 31, 2016    Twelve months ended December 31, 2016
(In millions of dollars, except exchange rates) Notional     Exchange rate Notional     Notional     Exchange     Notional
                                                (US$)                      (Cdn$)       (US$)        rate         (Cdn$)
Expenditure derivatives entered                 240          1.32          316          990          1.33         1,318
Expenditure derivatives settled                 210          1.21          255          840          1.22         1,025

As at December 31, 2017, we had US$1,200 million of expenditure derivatives outstanding (December 31, 2016 - US$1,290 million) with terms to maturity ranging from January 2018 to December 2019 (December 31, 2016 - January 2017 to December 2018), at an average rate of $1.28/US$ (December 31, 2016 - $1.32/US$).

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

Equity derivatives As at December 31, 2017, we had equity derivatives outstanding for 5.4 million (December 31, 2016 - 5.4 million) RCI Class B shares with a weighted average price of $51.44 (December 31, 2016 - $50.30).

We did not enter into or settle any equity derivatives during the quarter. We have executed extension agreements for the remaining equity derivative contracts under substantially the same terms and conditions with revised expiry dates to April 2018 (from April 2017).

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, 2017
(In millions of dollars, except exchange rates)             Notional Exchange Notional Fair value
                                                            amount   rate     amount   (Cdn$)
                                                            (US$)             (Cdn$)
Debt derivatives accounted for as cash flow hedges:
                              As assets                     5,200    1.0401   5,409    1,301
                              As liabilities                1,500    1.3388   2,008    (149)
Short-term debt derivatives not accounted for as hedges:
                              As liabilities                746      1.2869   960      (23)
Net mark-to-market debt derivative asset                                               1,129
Bond forwards accounted for as cash flow hedges:
                              As liabilities                --       --       900      (64)
Expenditure derivatives accounted for as cash flow hedges:
                              As assets                     240      1.2239   294      5
                              As liabilities                960      1.2953   1,243    (44)
Net mark-to-market expenditure derivative liability                                    (39)
Equity derivatives not accounted for as hedges:
                              As assets                     --       --       276      68
Net mark-to-market asset                                                               1,094
                                                            As at December 31, 2016
(In millions of dollars, except exchange rates)             Notional Exchange Notional Fair value
                                                            amount   rate     amount   (Cdn$)
                                                            (US$)             (Cdn$)
Debt derivatives accounted for as cash flow hedges:
                              As assets                     5,200    1.0401   5,409    1,751
                              As liabilities                1,500    1.3388   2,008    (68)
Short-term debt derivatives not accounted for as hedges:
                              As liabilities                150      1.3407   201      --
Net mark-to-market debt derivative asset                                               1,683
Bond forwards accounted for as cash flow hedges:
                              As liabilities                --       --       900      (51)
Expenditure derivatives accounted for as cash flow hedges:
                              As assets                     990      1.2967   1,284    40
                              As liabilities                300      1.4129   424      (21)
Net mark-to-market expenditure derivative asset                                        19
Equity derivatives not accounted for as hedges:
                              As assets                     --       --       270      8
Net mark-to-market asset                                                               1,659

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, and cash and cash equivalents or bank advances.

                                                                           As at       As at
                                                                           December 31 December 31
(In millions of dollars, except ratios)                                    2017        2016
Long-term debt 1                                                           14,555      16,197
Net debt derivative assets valued without any adjustment for credit risk 2 (1,146)     (1,740)
Short-term borrowings                                                      1,585       800
Bank advances                                                              6           71
Adjusted net debt 3                                                        15,000      15,328
Debt leverage ratio 3,4                                                    2.8         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 the section "Non-GAAP Measures" for the calculation of this amount.
2 For purposes of calculating adjusted net debt and debt leverage ratio, we believe including debt derivatives valued without adjustment for credit risk is commonly used to evaluate debt leverage and for market valuation and transactional purposes.
3 Adjusted net debt and debt leverage ratio are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.
4 Debt leverage ratio is measured using adjusted operating profit for the last twelve consecutive months.

In addition, we held $1,465 million of marketable securities in publicly-traded companies as at December 31, 2017 (December 31, 2016 - $1,047 million).

Our adjusted net debt decreased by $328 million from December 31, 2016 primarily as a result of a decrease in our outstanding long-term debt, partially offset by an increase in our short-term borrowings and reduction in the fair value of our net debt derivative asset.

Outstanding common shares

                                                       As at       As at
                                                       December 31 December 31
                                                       2017        2016
Common shares outstanding 1
                       Class A Voting                  112,407,192 112,411,992
                       Class B Non-Voting              402,403,433 402,396,133
Total common shares                                    514,810,625 514,808,125
Options to purchase Class B Non-Voting shares
                       Outstanding options             2,637,890   3,732,524
                       Outstanding options exercisable 924,562     1,770,784
1 Holders of our Class B Non-Voting shares are entitled to receive notice of and to attend shareholder meetings; however, they are not entitled to vote at these meetings except as required by law or stipulated by stock exchanges. If an offer is made to purchase outstanding Class A Voting 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 Voting shares may be made on different terms than the offer for the Class B Non-Voting shares.

Key Performance Indicators

We measure the success of our strategy using a number of key performance indicators that are defined and discussed in our 2016 Annual MD&A and this earnings release. We believe these key performance indicators allow us to appropriately measure our performance against our operating strategy as well as against the results of our peers and competitors. The following key performance indicators are not measurements in accordance with IFRS and should not be considered an alternative to net income or any other measure of performance under IFRS. They include:

-- Subscriber counts;

-- Subscriber churn (churn);

-- Postpaid average revenue per account (ARPA);

-- Blended average revenue per user (ARPU);

-- Capital intensity; and

-- Total service revenue.

Non-GAAP Measures

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

Effective January 1, 2018, we will commence using adjusted EBITDA as the key measure of profit for the purpose of assessing performance for each segment and to make decisions about the allocation of resources. As such, we plan to introduce adjusted EBITDA as a new non-GAAP measures in our financial reports commencing January 1, 2018. This measure will replace our existing adjusted operating profit non-GAAP measure. We believe adjusted EBITDA more fully reflects segment and consolidated profitability. The difference between adjusted operating profit and adjusted EBITDA is that adjusted EBITDA will include stock-based compensation expense. We also believe that our decision-making processes will not be significantly affected through the use of adjusted EBITDA. Additionally, use of this measure will change our current definition of free cash flow.

Non-GAAP measure                       Why we use it                                                                                                                                                                                                                                                                                                       How we calculate it                                                                                                                                                                                                                                                                                                                                                                                        Most
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      comparable
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      IFRS financial
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      measure
Adjusted                               (EQNX::save_"-- ")To evaluate the performance of our businesses, and when making decisions about the ongoing operations of the business and our ability to generate cash flows.                                                                                                                                     Adjusted operating profit:                                                                                                                                                                                                                                                                                                                                                                                 Net income
operating profit                       (EQNX::save_"-- ")We believe that certain investors and analysts use adjusted operating profit to measure our ability to service debt and to meet other payment obligations.                                                                                                                                        Net income
Adjusted                               (EQNX::save_"-- ")We also use it as one component in determining short-term incentive compensation for all management employees.                                                                                                                                                                                    add (deduct)
operating profit                                                                                                                                                                                                                                                                                                                                           income tax expense (recovery); other expense (income); finance costs; restructuring, acquisition and other; loss (gain) on disposition of property, plant and equipment; depreciation and amortization; and stock-based compensation.
margin                                                                                                                                                                                                                                                                                                                                                     Adjusted operating profit margin:
                                                                                                                                                                                                                                                                                                                                                           Adjusted operating profit
                                                                                                                                                                                                                                                                                                                                                           divided by
                                                                                                                                                                                                                                                                                                                                                           revenue (service revenue for Wireless).
Adjusted net                           (EQNX::save_"-- ")To assess the performance of our businesses before the effects of the noted items, because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply that they are non-recurring. Adjusted net income:                                                                                                                                                                                                                                                                                                                                                                                       Net income
income                                                                                                                                                                                                                                                                                                                                                     Net income                                                                                                                                                                                                                                                                                                                                                                                                 Basic and
Adjusted basic                                                                                                                                                                                                                                                                                                                                             add (deduct)                                                                                                                                                                                                                                                                                                                                                                                               diluted
and diluted                                                                                                                                                                                                                                                                                                                                                stock-based compensation; 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; and income tax adjustments on these items, including adjustments as a result of legislative changes. earnings per
earnings per                                                                                                                                                                                                                                                                                                                                               Adjusted basic and diluted earnings per share:                                                                                                                                                                                                                                                                                                                                                             share
share                                                                                                                                                                                                                                                                                                                                                      Adjusted net income
                                                                                                                                                                                                                                                                                                                                                           divided by
                                                                                                                                                                                                                                                                                                                                                           basic and diluted weighted average shares outstanding.
Free cash flow                         (EQNX::save_"-- ")To show how much cash we have available to repay debt and reinvest in our company, which is an important indicator of our financial strength and performance.                                                                                                                                     Adjusted operating profit                                                                                                                                                                                                                                                                                                                                                                                  Cash provided
                                       (EQNX::save_"-- ")We believe that some investors and analysts use free cash flow to value a business and its underlying assets.                                                                                                                                                                                     deduct                                                                                                                                                                                                                                                                                                                                                                                                     by operating
                                                                                                                                                                                                                                                                                                                                                           additions to property, plant and equipment net of proceeds on disposition; interest on borrowings net of capitalized interest; and cash income taxes.                                                                                                                                                                                                                                                      activities
Adjusted net                           (EQNX::save_"-- ")To conduct valuation-related analysis and make decisions about capital structure.                                                                                                                                                                                                                 Total long-term debt                                                                                                                                                                                                                                                                                                                                                                                       Long-term
debt                                   (EQNX::save_"-- ")We believe this helps investors and analysts analyze our enterprise and equity value and assess our leverage.                                                                                                                                                                                     add (deduct)                                                                                                                                                                                                                                                                                                                                                                                               debt
                                                                                                                                                                                                                                                                                                                                                           current portion of long-term debt; deferred transaction costs and discounts; net debt derivative (assets) liabilities; credit risk adjustment related to net debt derivatives; bank advances (cash and cash equivalents); and short-term borrowings.
Adjusted net                           (EQNX::save_"-- ")To conduct valuation-related analysis and make decisions about capital structure.                                                                                                                                                                                                                 Adjusted net debt (defined above)                                                                                                                                                                                                                                                                                                                                                                          Long-term debt
debt / adjusted                        (EQNX::save_"-- ")We believe this helps investors and analysts analyze our enterprise and equity value and assess our leverage                                                                                                                                                                                      divided by                                                                                                                                                                                                                                                                                                                                                                                                 divided by net
operating profit (debt leverage ratio)                                                                                                                                                                                                                                                                                                                     12-month trailing adjusted operating profit (defined above).                                                                                                                                                                                                                                                                                                                                               income

Reconciliation of adjusted operating profit

                                                                  Three months ended December 31  Twelve months ended December 31
(In millions of dollars)                                          2017            2016            2017            2016
Net income (loss)                                                 419             (9)             1,711           835
Add (deduct):
             Income tax expense (recovery)                        158             (5)             635             324
             Other expense (income)                               3               (4)             (19)            191
             Finance costs                                        184             188             746             761
             Restructuring, acquisition and other                 31              518             152             644
             Gain on disposition of property, plant and equipment --              --              (49)            --
             Depreciation and amortization                        531             555             2,142           2,276
             Stock-based compensation                             14              16              61              61
Adjusted operating profit                                         1,340           1,259           5,379           5,092

Reconciliation of adjusted operating profit margin

                                                 Three months ended December 31  Twelve months ended December 31
(In millions of dollars, except percentages)     2017            2016            2017            2016
Adjusted operating profit margin:
                       Adjusted operating profit 1,340           1,259           5,379           5,092
                       Divided by: total revenue 3,632           3,510           14,143          13,702
Adjusted operating profit margin                 36.9%           35.9%           38.0%           37.2%

Reconciliation of adjusted net income

                                                                  Three months ended December 31  Twelve months ended December 31
(In millions of dollars)                                          2017            2016            2017            2016
Net income (loss)                                                 419             (9)             1,711           835
Add (deduct):
             Stock-based compensation                             14              16              61              61
             Restructuring, acquisition and other                 31              518             152             644
             Net loss on divestitures pertaining to investments   --              --              --              11
             (Recovery) loss on wind down of shomi                --              --              (20)            140
             Gain on disposition of property, plant and equipment --              --              (49)            --
             Income tax impact of above items                     (11)            (143)           (36)            (213)
             Income tax adjustment, legislative tax change        2               --              2               3
Adjusted net income                                               455             382             1,821           1,481

Reconciliation of adjusted earnings per share

(In millions of dollars, except per share amounts; number of                         Three months ended December 31  Twelve months ended December 31
shares outstanding in millions)
                                                                                     2017            2016            2017            2016
Adjusted basic earnings per share:
                               Adjusted net income                                   455             382             1,821           1,481
                               Divided by:
                               Weighted average number of shares outstanding         515             515             515             515
Adjusted basic earnings per share                                                    $0.88           $0.74           $3.54           $2.88
Adjusted diluted earnings per share:
                               Adjusted net income                                   455             382             1,821           1,481
                               Divided by:
                               Diluted weighted average number of shares outstanding 517             517             517             517
Adjusted diluted earnings per share                                                  $0.88           $0.74           $3.52           $2.86

Reconciliation of free cash flow

                                                                             Three months ended December 31  Twelve months ended December 31
(In millions of dollars)                                                     2017            2016            2017            2016
Cash provided by operating activities                                        1,142           1,053           3,938           3,957
Add (deduct):
                   Additions to property, plant and equipment, net           (841)           (604)           (2,436)         (2,352)
                   Interest on borrowings, net of capitalized interest       (179)           (182)           (722)           (740)
                   Restructuring, acquisition and other                      31              518             152             644
                   Impairment of assets and related onerous contract charges --              (484)           --              (484)
                   Interest paid                                             125             124             735             756
                   Change in non-cash operating working capital items        15              18              154             (14)
                   Other adjustments                                         (49)            (51)            (75)            (62)
Free cash flow                                                               244             392             1,746           1,705

Reconciliation of adjusted net debt and debt leverage ratio

                                                                                  As at       As at
                                                                                  December 31 December 31
(In millions of dollars)                                                          2017        2016
Current portion of long-term debt                                                 1,756       750
Long-term debt                                                                    12,692      15,330
Deferred transaction costs and discounts                                          107         117
                                                                                  14,555      16,197
Add (deduct):
                     Net debt derivative assets                                   (1,129)     (1,683)
                     Credit risk adjustment related to net debt derivative assets (17)        (57)
                     Short-term borrowings                                        1,585       800
                     Bank advances                                                6           71
Adjusted net debt                                                                 15,000      15,328
                                                                                  As at       As at
                                                                                  December 31 December 31
(In millions of dollars, except ratios)                                           2017        2016
Debt leverage ratio
                     Adjusted net debt                                            15,000      15,328
                     Divided by: trailing 12-month adjusted operating profit      5,379       5,092
Debt leverage ratio                                                               2.8         3.0

Reconciliation of EBITDA and adjusted EBITDA (with respect to "2018 Outlook")

                                                               Twelve months ended December 31
(In millions of dollars)                                       2017       2016       % Chg
Net income                                                     1,711      835        105
Add:
         Income tax expense                                    635        324        96
         Finance costs                                         746        761        (2)
         Depreciation and amortization                         2,142      2,276      (6)
EBITDA                                                         5,234      4,196      25
Add (deduct):
         Other (income) expense                                (19)       191        n/m
         Restructuring, acquisition and other                  152        644        (76)
         Gain on disposition of property, plant and equipment  (49)       --         n/m
Adjusted EBITDA                                                5,318      5,031      6
         Add:
                                    Stock-based compensation   61         61         --
Adjusted operating profit                                      5,379      5,092      6

Reconciliation of free cash flow (with respect to "2018 Outlook")

                                               Twelve months ended December 31
(In millions of dollars)                       2017       2016       % Chg
Free cash flow as reported                     1,746      1,705      2
Less: Stock-based compensation                 61         61         --
Free cash flow calculated with adjusted EBITDA 1,685      1,644      2

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

                                                                                      2017                     2016
(In millions of dollars, except per share amounts)                                    Q4    Q3    Q2    Q1     Q4      Q3    Q2    Q1
Revenue
                            Wireless                                                  2,189 2,138 2,048 1,968  2,058   2,037 1,931 1,890
                            Cable                                                     871   870   870   855    858     865   870   856
                            Business Solutions                                        99    97    96    95     96      95    97    96
                            Media                                                     526   516   637   474    550     533   615   448
                            Corporate items and intercompany eliminations             (53)  (40)  (59)  (54)   (52)    (38)  (58)  (45)
Total revenue                                                                         3,632 3,581 3,592 3,338  3,510   3,492 3,455 3,245
Total service revenue 1                                                               3,430 3,450 3,466 3,214  3,306   3,328 3,308 3,085
Adjusted operating profit (loss)
                            Wireless                                                  860   964   924   813    792     884   846   763
                            Cable                                                     449   440   428   392    435     431   415   393
                            Business Solutions                                        32    33    32    31     30      31    31    31
                            Media                                                     39    65    63    (28)   49      79    90    (49)
                            Corporate items and intercompany eliminations             (40)  (39)  (37)  (42)   (47)    (40)  (35)  (37)
Adjusted operating profit 2                                                           1,340 1,463 1,410 1,166  1,259   1,385 1,347 1,101
Deduct (add):
                            Stock-based compensation                                  14    15    19    13     16      18    15    12
                            Depreciation and amortization                             531   531   535   545    555     575   572   574
                            Gain on disposition of property, plant and equipment      --    --    (49)  --     --      --    --    --
                            Restructuring, acquisition and other                      31    59    34    28     518     55    27    44
                            Finance costs                                             184   183   189   190    188     188   189   196
                            Other expense (income)                                    3     20    (31)  (11)   (4)     220   9     (34)
Net income (loss) before income tax expense (recovery)                                577   655   713   401    (14)    329   535   309
                            Income tax expense (recovery)                             158   188   182   107    (5)     109   141   79
Net income (loss)                                                                     419   467   531   294    (9)     220   394   230
Earnings (loss) per share:
                            Basic                                                     $0.81 $0.91 $1.03 $0.57  ($0.02) $0.43 $0.77 $0.45
                            Diluted                                                   $0.81 $0.91 $1.03 $0.57  ($0.04) $0.43 $0.76 $0.44
Net income (loss)                                                                     419   467   531   294    (9)     220   394   230
Add (deduct):
                            Stock-based compensation                                  14    15    19    13     16      18    15    12
                            Restructuring, acquisition and other                      31    59    34    28     518     55    27    44
                            (Recovery) loss on wind down of shomi                     --    --    (20)  --     --      140   --    --
                            Net loss (gain) on divestitures pertaining to investments --    --    --    --     --      50    --    (39)
                            Gain on disposition of property, plant and equipment      --    --    (49)  --     --      --    --    --
                            Income tax impact of above items                          (11)  (18)  (1)   (6)    (143)   (56)  (9)   (5)
                            Income tax adjustment, legislative tax change             2     --    --    --     --      --    --    3
Adjusted net income 2                                                                 455   523   514   329    382     427   427   245
Adjusted earnings per share 2:
                            Basic                                                     $0.88 $1.02 $1.00 $0.64  $0.74   $0.83 $0.83 $0.48
                            Diluted                                                   $0.88 $1.01 $1.00 $0.64  $0.74   $0.83 $0.83 $0.47
Additions to property, plant and equipment, net                                       841   658   451   486    604     549   647   552
Cash provided by operating activities                                                 1,142 1,377 823   596    1,053   1,185 1,121 598
Free cash flow 2                                                                      244   538   626   338    392     598   495   220
1 As defined. See "Key Performance Indicators".
2 Adjusted operating profit, adjusted net income, adjusted basic and diluted earnings per share, and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to compare us to other companies. See "Non-GAAP Measures" for information about these measures, including how we calculate them.

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
                                                                               2017            2016            2017            2016
Revenue                                                                        3,632           3,510           14,143          13,702
Operating expenses:
                          Operating costs                                      2,306           2,267           8,825           8,671
                          Depreciation and amortization                        531             555             2,142           2,276
                          Gain on disposition of property, plant and equipment --              --              (49)            --
                          Restructuring, acquisition and other                 31              518             152             644
Finance costs                                                                  184             188             746             761
Other expense (income)                                                         3               (4)             (19)            191
Income (loss) before income tax expense (recovery)                             577             (14)            2,346           1,159
Income tax expense (recovery)                                                  158             (5)             635             324
Net income (loss) for the period                                               419             (9)             1,711           835
Earnings (loss) per share:
                          Basic                                                $0.81           ($0.02)         $3.32           $1.62
                          Diluted                                              $0.81           ($0.04)         $3.31           $1.62

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

                                                                As at       As at
                                                                December 31 December 31
                                                                2017        2016
Assets
Current assets:
                      Accounts receivable                       2,041       1,949
                      Inventories                               313         315
                      Other current assets                      197         215
                      Current portion of derivative instruments 421         91
Total current assets                                            2,972       2,570
Property, plant and equipment                                   11,143      10,749
Intangible assets                                               7,244       7,130
Investments                                                     2,561       2,174
Derivative instruments                                          953         1,708
Other long-term assets                                          82          98
Deferred tax assets                                             3           8
Goodwill                                                        3,905       3,905
Total assets                                                    28,863      28,342
Liabilities and shareholders’ equity
Current liabilities:
                      Bank advances                             6           71
                      Short-term borrowings                     1,585       800
                      Accounts payable and accrued liabilities  2,931       2,783
                      Income tax payable                        62          186
                      Current portion of provisions             4           134
                      Unearned revenue                          346         367
                      Current portion of long-term debt         1,756       750
                      Current portion of derivative instruments 133         22
Total current liabilities                                       6,823       5,113
Provisions                                                      35          33
Long-term debt                                                  12,692      15,330
Derivative instruments                                          147         118
Other long-term liabilities                                     613         562
Deferred tax liabilities                                        2,206       1,917
Total liabilities                                               22,516      23,073
Shareholders’ equity                                            6,347       5,269
Total liabilities and shareholders’ equity                      28,863      28,342

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
                                                                                                                       2017            2016            2017            2016
Operating activities:
                     Net income (loss) for the period                                                                  419             (9)             1,711           835
                     Adjustments to reconcile net income to cash provided by operating activities:
                                                             Depreciation and amortization                             531             555             2,142           2,276
                                                             Program rights amortization                               15              17              64              71
                                                             Finance costs                                             184             188             746             761
                                                             Income tax expense (recovery)                             158             (5)             635             324
                                                             Stock-based compensation                                  14              16              61              61
                                                             Post-employment benefits contributions, net of expense    28              28              4               (3)
                                                             Net loss on divestitures pertaining to investments        --              --              --              11
                                                             Gain on disposition of property, plant and equipment      --              --              (49)            --
                                                             (Recovery) loss on wind down of shomi                     --              --              (20)            140
                                                             Impairment of assets and related onerous contract charges --              484             --              484
                                                             Other                                                     9               2               8               34
                     Cash provided by operating activities before changes in non-cash working                          1,358           1,276           5,302           4,994
                     capital items, income taxes paid, and interest paid
                     Change in non-cash operating working capital items                                                (15)            (18)            (154)           14
                     Cash provided by operating activities before income taxes paid and interest                       1,343           1,258           5,148           5,008
                     paid
                     Income taxes paid                                                                                 (76)            (81)            (475)           (295)
                     Interest paid                                                                                     (125)           (124)           (735)           (756)
Cash provided by operating activities                                                                                  1,142           1,053           3,938           3,957
Investing activities:
                     Additions to property, plant and equipment, net                                                   (841)           (604)           (2,436)         (2,352)
                     Additions to program rights                                                                       (21)            (3)             (59)            (46)
                     Changes in non-cash working capital related to property, plant and equipment                      101             44              109             (103)
                     and intangible assets
                     Acquisitions and other strategic transactions, net of cash acquired                               --              --              (184)           --
                     Other                                                                                             21              49              (60)            45
Cash used in investing activities                                                                                      (740)           (514)           (2,630)         (2,456)
Financing activities:
                     Net (repayment of) proceeds received on short-term borrowings                                     (163)           (250)           858             --
                     Net repayment of long-term debt                                                                   (3)             (57)            (1,034)         (538)
                     Net proceeds (payments) on settlement of debt derivatives and forward contracts                   40              (28)            (79)            (45)
                     Transaction costs incurred                                                                        --              (17)            --              (17)
                     Dividends paid                                                                                    (247)           (247)           (988)           (988)
                     Other                                                                                             --              --              --              5
Cash used in financing activities                                                                                      (373)           (599)           (1,243)         (1,583)
Change in cash and cash equivalents                                                                                    29              (60)            65              (82)
(Bank advances) cash and cash equivalents, beginning of period                                                         (35)            (11)            (71)            11
Bank advances, end of period                                                                                           (6)             (71)            (6)             (71)

Investments

                                                As at       As at
                                                December 31 December 31
(In millions of dollars)                        2017        2016
Investments in:
                      Publicly traded companies 1,465       1,047
                      Private companies         167         169
Investments, available-for-sale                 1,632       1,216
Investments, associates and joint ventures      929         958
Total investments                               2,561       2,174

Long-Term Debt

                                                            Principal Interest As at       As at
                                                            amount    rate     December 31 December 31
(In millions of dollars, except interest rates) Due date                       2017        2016
Bank credit facilities                                                Floating --          100
Bank credit facilities                                   US revolving Floating --          201
Senior notes                                    2017        250       Floating --          250
Senior notes                                    2017        500       3.000%   --          500
Senior notes                                    2018     US 1,400     6.800%   1,756       1,880
Senior notes                                    2019        400       2.800%   400         400
Senior notes                                    2019        500       5.380%   500         500
Senior notes                                    2020        900       4.700%   900         900
Senior notes                                    2021        1,450     5.340%   1,450       1,450
Senior notes                                    2022        600       4.000%   600         600
Senior notes                                    2023     US 500       3.000%   627         671
Senior notes                                    2023     US 850       4.100%   1,066       1,141
Senior notes                                    2024        600       4.000%   600         600
Senior notes                                    2025     US 700       3.625%   878         940
Senior notes                                    2026     US 500       2.900%   627         671
Senior debentures 1                             2032     US 200       8.750%   251         269
Senior notes                                    2038     US 350       7.500%   439         470
Senior notes                                    2039        500       6.680%   500         500
Senior notes                                    2040        800       6.110%   800         800
Senior notes                                    2041        400       6.560%   400         400
Senior notes                                    2043     US 500       4.500%   627         671
Senior notes                                    2043     US 650       5.450%   816         873
Senior notes                                    2044     US 1,050     5.000%   1,318       1,410
                                                                               14,555      16,197
Deferred transaction costs and discounts                                       (107)       (117)
Less current portion                                                           (1,756)     (750)
Total long-term debt                                                           12,692      15,330
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, 2017 and 2016.

About Forward-Looking Information

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

Forward-looking information:

-- typically includes words like could, expect, may, anticipate, assume, believe, intend, estimate, plan, project, guidance, outlook, target, and similar expressions, although not all forward-looking information includes them;

-- includes conclusions, forecasts, and projections that are based on our current objectives and strategies and on estimates, expectations, assumptions, and other factors, most of which are confidential and proprietary and that we believe to have been reasonable at the time they were applied but may prove to be incorrect; and

-- was approved by our management on the date of this earnings release.

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

-- revenue;

-- adjusted operating profit;

-- additions to property, plant and equipment, net;

-- 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; and

-- all other statements that are not historical facts.

Specific forward-looking information included or incorporated in this document includes, but is not limited to, our information and statements under "2018 Outlook" relating to our 2018 consolidated guidance on revenue, adjusted EBITDA, additions to property, plant and equipment, net, and free cash flow. All other statements that are not historical facts are forward-looking statements.

We base our conclusions, forecasts, and projections on the following factors, among others:

-- general economic and industry growth rates;

-- currency exchange rates and interest rates;

-- product pricing levels and competitive intensity;

-- subscriber growth;

-- pricing, usage, and churn rates;

-- changes in government regulation;

-- technology deployment;

-- availability of devices;

-- timing of new product launches;

-- content and equipment costs;

-- the integration of acquisitions; and

-- industry structure and stability.

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 conditions;

-- unanticipated changes in content or equipment costs;

-- changing conditions in the entertainment, information, and communications industries;

-- the integration of acquisitions;

-- litigation and tax matters;

-- the level of competitive intensity;

-- the emergence of new opportunities; 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 2018 guidance

Our 2018 guidance ranges under "2018 Outlook" are based on many assumptions including, but not limited to, the following material assumptions for the full-year 2018:

-- continued intense competition in all segments in which we operate, consistent with our experience during the full-year 2017;

-- a substantial portion of our US dollar-denominated expenditures for 2018 is hedged at an average exchange rate of $1.30/US$;

-- key interest rates remain relatively stable throughout 2018;

-- no significant additional legal or regulatory developments, shifts in economic conditions, or macro changes in the competitive environment affecting our business activities. We note that regulatory decisions expected during 2018 could materially alter underlying assumptions around our 2018 Wireless, Cable, and/or Media results in the current and future years, the impacts of which are currently unknown and not factored into our guidance;

-- Wireless customers continue to adopt, and upgrade to, higher-value smartphones at similar rates in 2018 compared to 2017 and a similar proportion of customers remain on term contracts;

-- overall wireless market penetration in Canada grows in 2018 at a similar rate as in 2017;

-- our relative market share in Wireless and Cable is not negatively impacted by changing competitive dynamics;

-- continued subscriber growth in Wireless and Cable Internet; a decline in Cable Television subscribers; and a relatively stable Phone subscriber base;

-- Ignite TV launches in 2018;

-- in Media, continued growth in sports and declines in our traditional media businesses, including our print publishing offerings; and

-- with respect to the increase in net additions to property, plant and equipment:

-- we continue to invest appropriately to ensure we have competitive wireless and cable networks through (i) building a 4.5G to 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 the launch of Ignite TV in 2018.

Before making an investment decision

Before making any investment decisions and for a detailed discussion of the risks, uncertainties, and environment associated with our business, fully review the sections in our 2016 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 our website is not part of or incorporated into this earnings release.

SOURCE Rogers Communications Canada Inc. - English

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