Rogers 2006 Annual Report Download - page 29

25
RO GER S CO MMU NIC AT ION S IN C . 20 0 6 ANN UA L RE POR T
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The 2007 guidance ranges for Wireless, Cable and Telecom, and
Media reflect the impact of the following intercompany changes
and transactions, which have no impact on consolidated results.
(i) Effective January 2007, the Rogers Video segment of Cable
and Telecom acquired the approximately 170 Wireless-owned
retail locations with a carrying value of approximately $20 mil-
lion, for cash consideration of $73 million, which represented
fair value. This segment, now known as Rogers Retail, will pro-
vide customers with a single direct retail channel featuring all
of our wireless and cable products and services. The combined
operations will continue to be a segment of Cable and Telecom.
In 2007, this will have the impact of increasing revenue and
expenses of Rogers Retail by approximately $175 million, with
no impact on operating profit.
(ii) In late December 2006, Wireless transferred the Rogers Campus
(land and buildings) at fair market value to RCI. The Rogers
Campus is comprised of the properties at 333 Bloor Street East
and One Mount Pleasant Road in Toronto, Ontario. In early
January 2007, Wireless, Cable and Telecom, and Media trans-
ferred certain other land and buildings at fair market value to
RCI. As a result of these transfers, it is expected that net rent
expense for each of Wireless, Cable and Telecom, and Media
will increase in 2007 by approximately $16 million, $6 million,
and $3 million, respectively.
(iii) Effective December 31, 2006, we terminated the management
fee arrangements which had previously been in place between
RCI and each of Wireless, Cable and Telecom, and Media.
Management fees will no longer be paid by Wireless, Cable and
Telecom, or Media to RCI. Such fees paid by the three segments
to RCI totalled approximately $93 million in 2006.
2 SEG MENT REV IEW
W I R E LE S S
WIRELESS BUSINESS
Wireless is the largest Canadian wireless communications service
provider, serving approximately 6.8 million retail voice and data
subscribers at December 31, 2006 representing approximately 37%
of Canadian wireless subscribers. Wireless operates a Global System
for Mobile Communications/General Packet Radio Service (“GSM/
GPRS”) network, with Enhanced Data for GSM Evolution (“EDGE”)
technology. Wireless is Canada’s only carrier operating on the world
standard GSM technology platform. The GSM network provides cov-
erage to approximately 94% of Canada’s population. Wireless is also
in the process of deploying a next generation wireless data technol-
ogy called UMTS/HSDPA (“Universal Mobile Telephone System/High
Speed Downlink Packet Access”) across most of the major markets in
Canada and have recently launched the service in parts of Ontario.
Subscribers to its wireless services have access to these services
across the U.S. through roaming agreements with various wireless
operators. Its subscribers also have access to wireless voice service
internationally in 189 countries and wireless data service interna-
tionally in 99 countries, including throughout Europe, Asia, Latin
America, and Africa through roaming agreements with other GSM
wireless providers.
Wireless Products and Services
Wireless offers wireless voice, data and messaging services across
Canada. Wireless voice services are available in either postpaid or
prepaid payment options. In addition, the network provides cus-
tomers with advanced high-speed wireless data services, including
mobile access to the Internet, wireless e-mail, digital picture and
video transmission, mobile video, music downloading, and two-way
Short Messaging Service (“SMS”).
Wireless Distributio n Network
Wireless markets its products and services under both the Rogers
Wireless and Fido brands through an extensive nationwide distribu-
tion network of over 11,500 dealer and retail locations across Canada
(excluding the 297 Rogers Retail locations, which is a segment of
Cable and Telecom), which includes approximately 2,500 locations
selling subscriptions to service plans, handsets and prepaid cards
and approximately 9,000 additional locations selling prepaid cards.
Wireless’ nationwide distribution network includes an independent
dealer network, Rogers Wireless and Fido stores which, effective
January 2007, are managed by Rogers Retail, major retail chains, and
convenience stores. Wireless also offers many of its products and
services through a retail agreement with Rogers Retail, and on its
Rogers Wireless and Fido e-business websites.
Wireless Net works
Wireless is a facilities-based carrier operating its wireless networks
over a broad, national coverage area, much of which is interconnected
by its own fibre-optic and microwave transmission infrastructure.
The seamless, integrated nature of its networks enables subscribers
to make and receive calls and to activate network features anywhere
in Wireless’ coverage area and in the coverage area of roaming part-
ners as easily as if they were in their home area.
Wireless operates a digital wireless GSM network in the 1900 mega-
hertz (“MHz”) and 850 MHz frequency bands across its national
footprint, which was initially deployed in 2002. The GSM network,
which operates seamlessly between the two frequencies, provides
high-speed integrated voice and packet data transmission service
capabilities and utilizes GPRS and EDGE technologies for wireless data
transmission. In December 2005, Wireless initiated testing of UMTS/
HSDPA third generation (“3G”) wireless technology and is now in the
process of deploying this technology across its major markets and
has recently launched the service in parts of Ontario. UMTS/HSDPA is
the next phase of the evolution of the GSM/EDGE platform delivering
high mobility, high bandwidth wireless access for voice and data ser-
vices, as discussed in the “Wireless Additions to PP&E” section.
2006 WIRELESS NETWORK REVENUE MIX
(%)
Postpaid 95%
Prepaid 5%