Rogers 2003 Annual Report Download - page 39

2003 Annual ReportRogers Communications Inc. 37
Cable Operating Highlights and Significant Developments of 2003
• Total Cable revenues increased 10.8% and total operating profit increased 17.8% compared to 2002. Cable Operating
profit margin, excluding Video stores, grew by 240 basis points year-over-year to 42.9%.
• Basic subscriber levels remained relatively flat, as compared to year end 2002.
• Internet subscriber base increased by 23.6%, or 151,100 net new subscribers, and digital cable subscriber base increased
by 33.3%, or 133,800 net new subscribers during the year.
• The network rebuild project progressed further increasing to 96% of Cable’s homes passed being two-way address-
able, 99% of subscribers digital capable and more than 92% of the Cable plant capable of transmitting 750 MHz of
bandwidth or greater.
• Cable continued to expand the availability of its VOD service, “Rogers on Demand”, with availability reaching over 1.8 mil-
lion homes by year end 2003, while continuing to expand the number of VOD contract agreements with various
production studios to bring the total number of available titles to over 1,000.
• Cable increased the throughput of its Hi-Speed Internet service up to 3Mbps, introduced its first PVR, and launched
9new HDTV channels.
• Seven new Rogers Video stores were added, raising the total number of Rogers Video stores to 279.
• In January 2004, Cable announced an agreement with Yahoo! Inc. (“Yahoo”) to provide co-branded Internet services to
current and future customers of Cable’s Internet access services. Some ancillary agreements have not yet been final-
ized. Under the multi-year agreement, in return for payment by Cable of a monthly fee, Yahoo will assume operation
of Cable’s e-mail platform and provide a suite of customized Yahoo! content, products and services to Cable’s Internet
access customers. These content, products and services include the following: a customizable browsing environment;
personalized homepage; enhanced e-mail services such as spam control, parental controls, premium pop-up blocking
and storage; enhanced instant messaging capabilities; and multi-media services. Depending on the level of Internet
access service subscribed to, subscribers will receive some or all of these features as part of their subscription. The
agreement also contemplates Cable and Yahoo collaborating to offer premium packages of products and services to
Cable’s subscribers for an additional fee. A number of ancillary agreements have yet to be finalized.
• Cable issued US$350 million (Cdn. equivalent $470.4 million) 6.25% Senior (Secured) Second Priority Notes due 2013.
These funds were used by Cable to repay advances outstanding under its bank credit facility, intercompany debt owing
to RCI and to redeem US$74.8 million aggregate principal amount of its 10% Senior Secured Second Priority Debentures
due 2007 at a redemption price of 105.0% of the aggregate principal amount, and for general corporate purposes.
Cable Revenue and Subscribers
(Subscriber statistics in thousands)
Years Ended December 31, 2003 2002 Chg % Chg
Homes passed 3,215.4 3,103.2 112.213.6
Basic cable subscribers 2,269.4 2,270.4 (1.0) (0.0)
Basic cable, net additions (losses) (1.0) (16.0) 15.0 93.8
Internet subscribers 790.5 639.4 151.1 23.6
Internet, net additions 151.1 160.6 (9.5) (5.9)
Digital terminals in service 613.6 456.2 157.4 34.5
Digital terminals, net additions 157.4 142.1 15.3 10.8
Digital households 535.3 401.5 133.8 33.3
Digital households, net additions 133.8 129.4 4.4 3.4
VIP customers 661.6 593.0 68.6 11.6
VIP customers, net additions 68.6 95.5 (26.9) (28.2)
1 Homes passed for 2003 include adjustments based on a periodic audit process to reflect, among other things, new homes constructed. An
additional 32,002 homes were identified, which represents 28.7% of the increase.
Core Cable Revenue
Core cable revenue, which accounted for 66.0% of total Cable revenues in 2003, totaled $1,167.5 million, a $71.8 million, or
6.6%, increase over 2002. Analog cable service increased year-over-year by $29.7 million due to price increases in August 2003,
offset partially by lower installation revenues. The remaining $42.1 million increase is primarily attributable to increased rev-
enues related to the growing number of subscriptions to digital services and the rental of digital set-top terminal equipment.
Core cable average monthly revenue per subscriber was $42.99 in 2003, an increase from $40.29 in 2002. Cable
ended the year with 613,600 digital terminals in 535,300 households, increases of 34.5% and 33.3% over the prior year,
respectively. At December 31, 2003, the penetration of digital households as a percentage of basic households was 23.6%,
up from the December 31, 2002 penetration of 17.7%. The growth of digital cable subscribers, as well as of Internet sub-
scribers as discussed below, was supported by continued healthy sales of a suite of bundled offers combining analog
cable, digital cable and Internet that were launched during 2002. As of December 31, 2003, approximately 162,400 bundles
had been sold, up significantly from the over 84,000 bundles that had been sold at the end of 2002. Late in 2003, Cable and
Rogers Wireless jointly introduced Rogers’ first combined bundles which included both cable and wireless products.
Management’s Discussion and Analysis