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ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT 41
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The increases in other operating, general and administrative
expenses of $35 million in 2007, compared to 2006, are primarily the
result of an increase in overall information technology and network
maintenance costs.
Sales and marketing expenses increased by $5 million in 2007, com-
pared to 2006, as marketing efforts have primarily targeted the
small and medium business markets since early 2007.
RBS Adjusted Operating Profit
The changes described above resulted in RBS adjusted operating
profit of $12 million in 2007, compared to adjusted operating profit
of $49 million in 2006.
Integration and Restructuring Expenses
During 2007, most RBS new customer acquisition efforts in the
enterprise and larger business segments and outside of Cable’s
footprint were suspended, resulting in certain staff reductions and
the incurrence of approximately $20 million in severance costs. In
addition, consulting and contract termination costs of $4 million
related to the restructuring and $5 million of integration expenses
related to the acquisition of Call-Net were incurred. Capital spend-
ing requirements on information technology and network builds
were also reduced. RBS will continue to maximize operating profit
through its existing customer base while Cable will increase its sales
efforts on the smaller business portion of the market within its
traditional cable television footprint where it is able to serve cus-
tomers with voice and data telephony services provisioned over its
own infrastructure.
ROGERS RETAIL
Summarized Financial Results
In January 2007, Rogers Retail acquired approximately 170 retail
locations from Wireless. The results of the activities of these stores
has been included in the Rogers Retail results of operations since
January 1, 2007.
RBS Revenue
The decrease in RBS revenues is a result of a decline in long-distance
revenues partially offset by an increase in local service and data
revenue. During 2007, long-distance revenues declined by $41 mil-
lion compared to 2006 due to a decrease in both usage and average
revenue per minute. Local service revenue grew by $15 million com-
pared to 2006. In addition, data revenues (including hardware sales)
increased by $1 million compared to 2006.
RBS ended the year with 237,000 local line equivalents and 35,000
broadband data circuits in service at December 31, 2007, representing
year-over-year growth rates of 16% in both cases.
RBS Operating Expenses
Carrier charges are included in operating, general and administrative
expenses and decreased by $28 million in 2007, compared to 2006,
due to the decrease in revenue and product mix changes. Carrier
charges represented approximately 55% of revenue in 2007, com-
pared to 57% in 2006.
20072006
237205172
BUSINESS SOLUTIONS
LOCAL LINE EQUIVALENTS
(In thousands)
200
6
2007
2005
20072006
353122
BUSINESS SOLUTIONS
BROADBAND DATA CIRCUITS
(In thousands)
200
6
2007
2005
Years ended December 31,
(In millions of dollars) 2007 2006 % Chg
Rogers Retail operating revenue $ 393 $ 310 27
Operating expenses 397 297 34
Adjusted operating profit (loss) (1) (4) 13 n/m
Stock option plan amendment (2) (5) – n/m
Stock-based compensation expense (2) (1) – n/m
Restructuring expenses (3) – (6) n/m
Operating profit (loss) (1) $ (10) $ 7 n/m
Adjusted operating profit (loss) margin (1) (1.0%) 4.2%
(1) As defined. See the “Key Performance Indicators and Non-GAAP Measures” and “Supplementary Information: Non-GAAP Calculations” sections.
(2) See the section entitled “Stock-based Compensation Expense”.
(3) Costs related to the closure of 21 Retail stores in the first quarter of 2006.
Rogers Retail Revenue
The increase in Rogers Retail revenue of $83 million in 2007, com-
pared to 2006, was the result of the acquisition of 170 retail stores
from Wireless in January 2007, partially offset by a decline in video
rental and sales revenues of $8 million, resulting from fewer trans-
actions and customer visits, and a reduction in late fee revenue.
Rogers Retail Adjusted Operating Profit (Loss)
Rogers Retail recorded an adjusted operating loss of $4 million in
2007, compared to an adjusted operating profit of $13 million in
2006, which is the result of fewer customer visits and increased
sales and marketing expenses.