Rogers 2006 Annual Report Download - page 71

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67
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
ARRANGEMENTS BETWEEN OUR SUBSIDIARIES
Invoicing of Common Customers
Pursuant to an agreement with Cable and Telecom, Wireless pur-
chases the accounts receivable and provides invoicing and subscriber
account collection services for common subscribers who receive a
consolidated invoice and for all cable telephony subscribers. Wireless
is compensated for costs of bad debts, billing costs and services and
other determinable costs by purchasing these receivables at a dis-
count. The discount is based on actual costs incurred for the services
provided and is reviewed periodically.
Distribution of Wireless’ Produc ts and Ser vices
Wireless and Cable and Telecom have entered into an agreement
for the sale of their products and services through Rogers Retail,
a segment of Cable and Telecom. Wireless pays Cable and Telecom
commissions for new subscriptions equivalent to amounts paid to
third-party distributors. Effective January 2007, the Rogers Video
segment of Cable and Telecom acquired the approximately 170
Wireless-owned retail locations. This segment, now known as Rogers
Retail, will provide our customers with a single direct retail channel
featuring all of our wireless and cable products and services. The com-
bined entity will continue to be a segment of Cable and Telecom.
Distribution of Cable and Telecom’s Produc t s and Ser vices
Wireless has agreed to provide retail field support to Cable and
Telecom and to represent Cable and Telecom in the promotion and
sales of its business products and services. Under the retail field sup-
port agreement, Wireless’ retail sales representatives receive sales
commissions for achieving sales targets with respect to Cable and
Telecom products and services, the cost of which is reimbursed by
Cable and Telecom to Wireless.
Transmission Facilities
Wireless has entered into agreements with Cable and Telecom 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 transmis-
sion links, Wireless and Cable and Telecom have achieved economies
of scale by sharing these facilities resulting in reduced capital costs.
In addition, Wireless receives payments from Cable and Telecom for
the use of its data, circuits, data transmission and links. The price of
these services is based on usage or ownership, as applicable.
Long Distance
Cable and Telecom terminates long distance minutes in both North
American and international markets for Wireless. These transactions
are priced at fair value wholesale rates.
Adver tising
Wireless and Cable and Telecom advertise their products and services
through radio stations and other media outlets owned by Media.
They receive a discount from the customary rates of Media. Media
has also agreed to compensate Cable and Telecom for the placement
of Media advertising on one or more of Cable and Telecom’s televi-
sion channels.
Transfer of Subsc ribers to Wireless
RTHI and Fido were subject to an agreement whereby RTHI resold
the wireless services of Fido. During 2005, the resale agreement
was terminated and Wireless purchased the wireless subscriber base
and related working capital items of RTHI for cash consideration of
$6 million.
Summary of Charges from (to) Related Parties
We have entered into the following transactions in the normal course of business with certain broadcasters in which we have an equity interest:
Years ended December 31,
(In millions of dollars) 2006 2005
Access fees paid to broadcasters accounted for by the equity method $ 19 $ 18
In addition, we entered into certain transactions with companies, the partners or senior officers of which are or have been directors of RCI
or our subsidiary companies as follows:
Years ended December 31,
(In millions of dollars) 2006 2005
Legal services and commissions paid on premiums for insurance coverage $ 2 $ 5
Telecommunications and programming services – 2
Interest charges and other financing fees – 22
$ 2 $ 29
We made payments to companies controlled by our controlling shareholder as follows:
Years ended December 31,
(In millions of dollars) 2006 2005
Charges to the Company for business use of aircraft and other administrative services $ 1 $ 1