Rogers 2003 Annual Report Download - page 66

2003 Annual Report Rogers Communications Inc.
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Distribution of Cable’s Products and Services
Wireless has agreed to provide retail field support to Cable and to represent Cable in the promotion and sales of its busi-
ness products and services. Under the retail field support agreement, Wireless’ retail sales representatives receive sales
commissions for achieving sales targets with respect to Cable products and services, the cost of which to Wireless is reim-
bursed by Cable.
Transmission Facilities
Wireless has entered into agreements with Cable to share the construction and operating costs of certain co-located
fibre-optic transmission and microwave facilities. The costs of these facilities are allocated based on usage or ownership,
as applicable. Since there are significant fixed costs associated with these transmission links, Wireless and Cable have
achieved economies of scale by sharing these facilities resulting in reduced capital costs. In addition, Wireless receives
payments from Cable for the use of its data, circuits, data transmission and links. The price of these services is based on
usage or ownership, as applicable.
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, is the consideration of the expansion of inter-company
arrangements relating to sales and marketing activities as well as other arrangements that may result in greater integra-
tion with other companies within the Rogers group. Cable also may receive billing and other services from Rogers
Wireless in connection with its launch of voice-over-cable telephony services. If Rogers Telecom assumes responsibility
for providing voice-over cable telephony services, Cable would enter into an agreement with Rogers Telecom relating to,
among other things, the use of Cable’s network. In the future, market conditions may require RCI to further strengthen its
arrangements to better coordinate and integrate its sales and marketing and operational activities within the company.
AT&T Arrangements
In November 1996, Wireless entered into a long-term strategic alliance with AT&T Corp., its affiliate AT&T Canada Enterprises
Inc. (“AT&T Canada Enterprises”) and its then affiliates, AWE and AT&T Canada. AT&T Canada, now renamed Allstream Inc.,
offers local and long-distance telephone and data transmission services to business customers in Canada. This strategic
alliance included, among other things, a brand licence agreement under which Wireless was granted a licence to use, on a
co-branded basis, the AT&T brand in connection with the marketing of its wireless communications services.
In 1999, Wireless entered into a renewed long-term strategic alliance with AWE, AT&T Canada Enterprises and
AT&T Canada involving a number of agreements. In January 2003, the Company’s supply and marketing agreement and
non-competition agreement with AT&T Canada were terminated. The relevant agreements between Wireless and AWE,
AT&T Canada Enterprises or AT&T Canada, as applicable, are described below.
Brand Licence Agreement
Wireless entered into an amended brand licence agreement with AT&T Canada Enterprises under which it was granted a
licence to use the AT&T brand on a co-branded basis in connection with the marketing of Wireless’ services. In December
2003, Wireless and AT&T Canada Enterprises amended the brand licence agreement to permit Wireless to terminate the
agreement at any time, but not later than March 31, 2004. Wireless has given notice of termination that will become effec-
tive March 8, 2004. Following a windup period of nine months, Wireless will cease to use the AT&T brand and will thereafter
carry on business as Rogers Wireless. Wireless is required to pay a royalty of approximately $2.5 million per month to
AT&T Canada Enterprises during the windup period until Rogers Wireless ceases to advertise using the AT&T brand.
AWE Investment in Rogers Wireless
In 1999, as part of the renewed strategic alliance, AT&T and British Telecommunications plc (“BT”) created JVII, a partner-
ship that was 50% indirectly owned by each of AT&T and BT, and, through JVII, they acquired an equity interest of
approximately 331/3% in Rogers for a purchase price of approximately $1.4 billion in 1999. In preparation for its spin-off of
AWE, AT&T transferred its interest in JVII to AWE. In June 2001, AWE acquired BT’s interest in JVII. Also in 2001, through JVII,
AWE participated in an equity rights offering to finance Wireless’ acquisition of additional spectrum licences. AWE’s
equity interest is currently approximately 34.2%. As described below, there are certain rights and restrictions associated
with any future sale of this interest in Wireless that JVII might contemplate.
Mobile Wireless Marketing, Technology and Services Agreement
Wireless entered into an amended and restated mobile wireless marketing, technology and services agreement with AWE
that enables them to share marketing and technology information and requires the parties to work together to develop
networks with common features for their respective subscribers. This agreement may be terminated at any time by either
party. No amounts are payable under the agreement.
Roaming Agreement
Wireless maintains a reciprocal roaming agreement with AWE whereby AWE provides wireless communications services
to Wireless’ subscribers when they travel to the U.S. and the Company provides the same services to AWE subscribers
when they travel to Canada. This agreement may be terminated upon short notice by either party.
Management’s Discussion and Analysis