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91 ROGERS 2005 ANNUAL REPORT . MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Summary of Seasonality and Quarterly Results
Quarterly results and statistics for the previous eight quarters are outlined following this section.
Our operating results are subject to seasonal fluctuations that materially impact quarter-to-quarter operating
results. As a result, one quarter’s operating results are not necessarily indicative of what a subsequent quarter’s operating
results will be. Each of Wireless, Cable, Telecom, and Media has unique seasonal aspects to their businesses.
Wireless’ operating results are subject to seasonal fluctuations that materially impact quarter-to-quarter operating
results. In particular, this seasonality generally results in relatively lower fourth quarter operating profits due primarily
to increased marketing and promotional expenditures and relatively higher levels of subscriber additions, resulting in
higher subscriber acquisition and activation-related expenses in that period. Seasonal fluctuation also typically occurs in
the third quarter of each year because higher usage and roaming result in higher network revenue and operating profit.
The operating results from Cable and Internet services are subject to modest seasonal fluctuations in subscriber
additions and disconnections which are largely attributable to movements of university and college students, individuals
temporarily suspending service due to extended vacations, and the timing of promotional activity. Video operations may
also experience modest fluctuations from quarter-to-quarter due to the timing of popular titles available throughout
the year. However, the fourth quarter has historically been the strongest quarter due to increased consumer activity in
the retail cycle.
Telecom does not have any unique seasonal aspect to its business, but there are various factors such as holiday
periods that may cause seasonal shifts in traffic patterns between consumers versus business customers at Telecom. The
overall impact on Telecom’s financial results is not material.
The seasonality at Media is a result of fluctuations in advertising and related retail cycles since they relate to
periods of increased consumer activity as well as fluctuations associated with the Major League Baseball season where
revenues are generally concentrated in the spring, summer and fall months.
In addition to the seasonal trends, the most notable trend has been the quarter-by-quarter improvements in
revenue and operating profit across the Wireless, Cable, Telecom, and Media businesses.
Much of the 2005 versus 2004 growth in Wireless operating results and statistics from fourth quarter of 2004
reflects Rogers Wireless’ acquisition of Fido. Wireless revenue and operating profit growth reflects the increasing
number of wireless voice and data subscribers and the increase in blended postpaid and prepaid ARPU. Wireless has
continued its strategy of targeting higher-value postpaid subscribers and selling prepaid handsets at higher price points,
which has also contributed over time to the significantly heavier mix of postpaid versus prepaid subscribers. Meanwhile,
the successful growth in customer base and increased market penetration have been met by increasing customer service
and retention expenses and increasing credit and collection costs. However, these costs have been offset by operating
efficiencies and increasing GSM network roaming revenues from our subscribers travelling outside of Canada, as well as
strong growth in roaming revenues from visitors to Canada utilizing our GSM network.
Cable services revenue and operating profit increased primarily due to price increases in July 2005 and August
2004, and increased penetration of its digital products and incremental programming packages. Similarly, the steady
growth of Internet revenues has been the result of a greater Internet penetration as a percentage of homes passed.
These increases have been somewhat offset by modest deterioration in Video stores revenue and operating profit due
to a continuing lack of hit movie titles as well as aggressive competition.
Media’s results are primarily attributable to a general upturn in demand for local advertising despite the
softness with respect to national advertising coupled with the impact of the NHL lockout.
Other fluctuations in net income from quarter-to-quarter can also be attributed to gain (losses) due to the sale or
write-down of expenses, non-operating foreign exchange gain (losses), changes in the fair value of derivative instruments,
losses on the repayment of long-term debt, and changes in income tax expense (recovery).
Summary of Fourth Quarter Results
During the three months ended December 31, 2005, consolidated operating revenue increased 35.4% to $2120.2 million
in 2005 compared to $1,566.3 million in the corresponding period in 2004, with all four operating segments contributing
to the year-over-year growth, including 35.0% growth at Wireless, 8.0% growth at Cable, 12.7% growth at Media and
the inclusion of $211.3 million at Telecom. Consolidated fourth quarter operating profit grew 14.0% year-over-year to