Rogers 2007 Annual Report Download - page 73

ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT 69
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY OF SEASONALIT Y 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 mate-
rially 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 and Media has unique seasonal aspects to its business.
Wireless’ operating results are subject to seasonal fluctuations
that materially impact quarter-to-quarter operating results. In
particular, operating results may be influenced by the timing of
our marketing and promotional expenditures and higher levels of
subscriber additions, resulting in higher subscriber acquisition and
activation-related expenses in certain periods.
The operating results of Cable Operations services are subject to
modest seasonal fluctuations in subscriber additions and discon-
nections, which are largely attributable to movements of university
and college students and individuals temporarily suspending ser-
vice due to extended vacations, or seasonal relocations, as well as
our concentrated marketing efforts generally conducted during the
fourth quarter. Rogers Retail operations may also experience mod-
est fluctuations from quarter-to-quarter due to the availability and
timing of release of popular titles throughout the year. However,
the fourth quarter has historically been the strongest quarter due
to increased consumer activity in the retail cycle. RBS does not have
any unique seasonal aspects to its business.
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 concen-
trated 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 and Media businesses.
Wireless revenue and operating profit growth reflects the increasing
number of wireless voice and data subscribers and 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 operat-
ing 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 Operations services revenue and operating profit increased
primarily due to price increases, increased penetration of its digi-
tal products and incremental programming packages, and the
scaling and rapid growth of our cable telephony service. Similarly,
the steady growth of Internet revenues has been the result of a
greater penetration of Internet subscribers as a percentage of
homes passed. The decrease in the RBS operating profit margin
reflects the pricing pressures on long-distance and higher carrier
costs. Rogers Retail revenue has increased as a result of acquiring
approximately 170 Wireless-owned stores on January 1, 2007, while
operating profit has decreased due to fewer customer transactions
relating to video sales and rentals.
Media’s results are primarily attributable to a general upturn in
demand for local advertising despite the softness with respect to
national advertising.
Other fluctuations in net income from quarter-to-quarter can also
be attributed to losses on repayment of debt, foreign exchange
gains or losses, changes in the fair value of derivative instruments,
other income and expenses, and changes in income tax expense.
SUMMARY OF FOURTH QUARTER 2007 RESULTS
During the three months ended December 31, 2007, consolidated
operating revenue increased 13% to $2,687 million in 2007 compared
to $2,370 million in the corresponding period in 2006, with all of
our operating segments contributing to the year-over-year growth,
including 17% growth at Wireless, 10% growth at Cable, and 15%
growth at Media. Consolidated fourth quarter adjusted operating
profit grew 25% year-over-year to $957 million, with 26% growth at
Wireless, 11% growth at Cable, and 31% growth at Media.
Consolidated operating income for the three months ended
December 31, 2007, totalled $476 million, compared to $357 million
in the corresponding period of 2006, reflecting growth across all
operating units.
We recorded net income of $254 million for the three months
ended December 31, 2007, or basic and diluted earnings per share
of $0.40, compared to a net income of $176 million or basic earn-
ings per share of $0.28 (diluted – $0.27) in the corresponding period
of 2006.