Rogers 2003 Annual Report Download - page 64

2003 Annual Report Rogers Communications Inc.
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INTERCOMPANY AND RELATED PARTY TRANSACTIONS
RCI Arrangements with its Subsidiaries
The Company has entered into a number of agreements with its subsidiaries, including Wireless, Cable and Media. These
agreements govern the management, commercial and cost-sharing arrangements that the Company has with its sub-
sidiaries. The Company monitors intercompany and related party agreements to ensure they remain beneficial to the
Company. The Company continually evaluates the expansion of existing arrangements and the entry into new agreements.
The Company’s agreements with its subsidiaries have historically focused on areas of operation in which joint or
combined services provide efficiencies of scale or other synergies. For example, in late 2001, the Company began manag-
ing the call centre operations of Wireless and Cable, with a goal of improving productivity, increasing service levels and
reducing costs. More recently, the Company’s arrangements are increasingly focusing on sales and marketing activities.
In February 2004, the board of directors of Rogers Cable and Rogers Wireless approved two additional arrangements.
•Distribution Rogers Wireless will provide management services to Rogers Cable in connection with the distribution
of Rogers Cable products and services through retail outlets and dealer channels and will also manage Rogers Cable’s
e-commerce relationships. Rogers Wireless may manage other distribution relationships for Rogers Cable if mutually
agreed upon by both partners.
•Rogers Business Services Rogers Wireless will establish a division, Rogers Business Solutions, that will provide a
single point of contact to offer the full range of Rogers Wireless products and services and Rogers Cable’s products and
services to small and medium businesses and, in the case of telecommunication virtual private network services, to cor-
porate and business accounts and employees.
The definitive terms and conditions of the agreements between Rogers Cable and Rogers Wireless relating to these
arrangements will be subject to the approval of the audit committees of both Rogers Wireless’ and Rogers Cable’s boards
of directors.
In addition, the Company continues to look for other operations and activities that can be shared or jointly oper-
ated with other companies within the Rogers group. Specifically, the expansion of inter-company arrangements relating
to sales and marketing activities as well as other arrangements that may result in greater integration with other compa-
nies with the Rogers group are being considered. In the future, market conditions may require the Company to further
strengthen its arrangements to better coordinate and integrate its sales and marketing and operational activities with its
affiliated companies. Any new arrangements will be entered into only if the Company believes such arrangements are in
each company’s best interest.
Management Services Agreement
Each of Wireless, Cable and Media has entered into a management services agreement with Rogers under which Rogers
agrees to provide executive, administrative, financial, strategic planning, information technology and various other ser-
vices to each subsidiary. Those services relate to, among other things, assistance with tax advice, Canadian regulatory
matters, financial advice (including the preparation of business plans and financial projections and the evaluation of PP&E
expenditure proposals), treasury services, service on the subsidiary’s Boards of Directors and on committees of the
Boards of Directors, advice and assistance in relationships with employee groups, internal audits, investor relations, pur-
chasing and legal services. In return for these services, each of the subsidiaries has agreed to pay Rogers fees, which, in
the case of Cable and Media, is an amount equal to 2% of their respective consolidated revenue for each fiscal quarter,
subject to certain exceptions, and, in the case of Wireless, is an amount equal to the greater of $8 million per year
(adjusted for changes in the Canadian Consumer Price Index from January 1, 1991) and an amount determined by both
Rogers and the independent directors serving on the Audit Committee of Wireless.
Call Centres
The Company is a party to agreements with Wireless and Cable pursuant to which the Company provides customer service
functions through its call centres. Wireless and Cable pay the Company commissions for new subscriptions, products and
service options purchased by subscribers through the call centres. The Company is reimbursed for the cost of providing
these services based on the actual costs incurred. The Company, under the agreement, cannot charge additional amounts
that exceed an agreed upon cost per call rate multiplied by actual call volume. The assets used in the provision of these
services are owned by Wireless and Cable. This agreement is for an indefinite term and is terminable upon 90 days notice.
Accounts Receivable
The Company manages the subscriber account collection of activities of Wireless and Cable. Wireless and Cable are
responsible, however, for the costs incurred in the collection and handling of their accounts.
Management’s Discussion and Analysis