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BRINGING
YOUR WORLD
TOGETHER
INNOVATION IN COMMUNICATIONS, INFORMATION AND ENTERTAINMENT
ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

Table of contents

  • Page 1
    BRINGING YOUR WORLD TOGETHER INNOVATION IN COMMUNICATIONS, INFORMATION AND ENTERTAINMENT ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 2
    ...IN 2008 DOUBLE-DIGIT REVENUE GROW TH FREE C ASH FLOW GROW TH DIVIDEND INCREASES GAIN HIGHER VALUE WIRELESS SUBSCRIBERS What We Said: Leverage networks, channels and brand to deliver 11% or greater revenue growth. What We Did: 12% consolidated revenue growth with Wireless, Cable Operations and Media...

  • Page 3
    ... The Shopping Channel, Canada's only nationally televised shopping service. Media's Publishing group produces 70 well-known consumer magazines and trade and professional publications in Canada. Media's Sports Entertainment assets include the Toronto Blue Jays Baseball Club and Rogers Centre, Canada...

  • Page 4
    ...% Wireless Data 15% Prepaid Voice Equipment sales 4% 8% 2006 2007 2008 2006 2007 2008 REVENUE ($ in billions) ADJUSTED OPER ATING PROFIT ($ in billions) F Y20 08 REVENUE: $3.8 billion 3.2 3.6 3.8 0.9 1.0 1.2 Core Cable 44% High-Speed Internet 18% Business Solutions 14% Home Phone 13...

  • Page 5
    ... communications and media company engaged in three primary lines of business. Rogers Wireless is Canada's largest wireless voice and data communications services provider and the country's only national carrier operating on the world standard GSM and HSPA technology platforms. Rogers Cable is Canada...

  • Page 6
    ... Rogers Communications into the country's largest wireless company and largest cable services provider, with significant media properties including 52 radio stations, numerous television properties including five Citytv stations, five OMNI multicultural channels, Rogers Sportsnet and The Shopping...

  • Page 7
    ROG ERS COMMU N I C AT I ONS I NC . 20 0 8 A N N UAL REP O R T 3

  • Page 8
    ... smartphone adoption. Our subscriber growth continued at healthy rates in 2008 reflecting the quality of our service offerings and the increasing daily relevance of our products to consumers and businesses. Our wireless subscribers now total nearly 8 million, while Internet, digital TV and cable...

  • Page 9
    ... stock actively trades on the TSX and NYSE, with average daily trading volume greater than three million shares. Each share pays an annualized dividend of $1.16 per share in 2009. Track Record of Value Creation Proven 30-year public market track record of long-term index-beating shareholder value...

  • Page 10
    6 ROG ERS COMMU N I C AT I ONS I NC . 20 0 8 A N N UAL REP O R T

  • Page 11
    ... HSPA network delivering the fastest data speeds in the country, high-speed wireless connectivity to the corporate network is now just an everyday part of doing business. WIRELESS VOICE HOME PHONE TEX T & INSTANT MESSAGING HOME & MOBILE E-MAIL BUSINESS TELEPHONY VIDEO C ALLING BUSINESS IP...

  • Page 12
    ... on the world through an expansive selection of unique and informative broadcast, print and on-line content from Rogers Media. HIGH-SPEED INTERNET SMARTPHONES BUSINESS IP SOLUTIONS SPECIALT Y CONTENT DATA NET WORKING WIRELESS BROADBAND T V, R ADIO & PRINT MEDIA NEWS, WEATHER & SPORTS LOC AL...

  • Page 13
    ROG ERS COMMU N I C AT I ONS I NC . 20 0 8 A N N UAL REP O R T 9

  • Page 14
    10 ROG ERS COMMU N I C AT I ONS I NC . 20 0 8 A N N UAL REP O R T

  • Page 15
    ...Parents can access a vast selection of children's programming and block unsuitable programming with the push of a button. Whether Canadians are enjoying TV at home, watching video on their mobile devices or over the Internet, listening to their favourite radio station on the way to work, or relaxing...

  • Page 16
    ... of local stores and reliable dealers, call centres staffed by trained professionals in Canada, and live on-line chat support, Rogers places a premium on providing customers with the help they need when and where it's convenient for them. Whether it's providing uninterrupted network service, being...

  • Page 17
    ROG ERS COMMU N I C AT I ONS I NC . 20 0 8 A N N UAL REP O R T 13

  • Page 18
    14 ROG ERS COMMU N I C AT I ONS I NC . 20 0 8 A N N UAL REP O R T

  • Page 19
    ... keep children safe on Halloween through Rogers Pumpkin Patrol. We are also a long-term supporter of local food banks, helping Canada's neediest families during times of hardship. As the official wireless sponsor of the "Phones for Food" cell phone recycling program, Rogers has helped generate funds...

  • Page 20
    ...governance structures and practices are deserving of the confidence of the public equity markets. With the December 2008 passing of company founder and CEO Ted Rogers, his voting control of RCI passed to a trust of which members of the Rogers family are beneficiaries. This trust holds voting control...

  • Page 21
    ... processes that strike a healthy balance of being supportive of the business' continued success, making common business sense, and benefiting all shareholders." Alan D. Horn Chairman of the Board Rogers Communications Inc. "Rogers has a long tradition of strong independent voices and directors...

  • Page 22
    ...Chief Operating Officer, Communications Group Rogers Communications The Hon. David R. Peterson, PC, QC Senior Partner and Chairman Cassels Brock & Blackwell LLP Edward S. Rogers President, Rogers Cable Loretta A. Rogers Company Director I N M EM O R I A M Edward "Ted" S. Rogers, OC 1933 - 2008...

  • Page 23
    ... Human Resources Officer Rogers Communications Anthony P. Viner President and Chief Executive Officer, Rogers Media DIREC TOR SENIOR CORPOR ATE OFFICER See rogers.com for an expanded listing and biographical information of Rogers' corporate and operating company management teams. ROG ERS COMMU...

  • Page 24
    ... Apple iPhone 3G in Canada selling 385,000 high ARPU units in less than six months INTERNET AND DIGITAL SERVICES PENETR ATION Grew high-speed Internet and digital cable penetration levels to 68% and 67% of basic subscribers, respectively C ABLE TELEPHONY PENETR ATION Increased penetration of cable...

  • Page 25
    ... and Operating Results 31 2009 Financial and Operating Guidance Segment Review 31 Wireless 37 Cable 48 Media Consolidated Liquidity and Financing 50 Liquidity and Capital Resources 53 Interest Rate and Foreign Exchange Management 54 Outstanding Common Share Data 54 Dividends and Other Payments on...

  • Page 26
    ... FINANCING Our Business Our Strategy Acquisitions Consolidated Financial and Operating Results 2009 Financial and Operating Guidance Wireless Cable Media Liquidity and Capital Resources Interest Rate and Foreign Exchange Management Outstanding Common Share Data Dividends and Other Payments on RCI...

  • Page 27
    ... to the Investor Relations section of rogers.com. 1. CORPORATE OVERVIEW OUR BUSINESS We are a diversified Canadian communications and media company. We are engaged in wireless voice and data communications services through Rogers Wireless, Canada's largest wireless provider and the operator of...

  • Page 28
    ... enhance operating efficiencies by sharing infrastructure, corporate services and sales distribution channels. We continue to develop brand awareness and promote the "Rogers" brand as a symbol of quality, innovation and value of a diversified Canadian media and communications company. ADDITIONS TO...

  • Page 29
    ... Canada, and particularly in Ontario, has negatively impacted the results of our Wireless, Cable and Media lines of business during 2008. The challenging economic conditions have resulted in lower subscriber additions, predominantly in our Cable business, as well as declines of advertising, roaming...

  • Page 30
    ... of Rogers Business Solutions ("RBS"), and the closure of certain Rogers Retail stores. (5) One-time charge resulting from the renegotiation of an Internet-related services agreement. See the section entitled "Cable Operations Operating Expenses". (6) Relates to an adjustment for CRTC Part II fees...

  • Page 31
    ... granted options. The SAR feature allows the option holder to elect to receive in cash an amount equal to the intrinsic value, being the excess market price of the Class B Non-Voting share over the exercise price of the option, instead of exercising ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT 27

  • Page 32
    ...and amortization Operating profit Stock option plan amendment Stock-based compensation (recovery) expense Integration and restructuring expenses Adjustment for CRTC Part II fees decision Contract renegotiation fee Adjusted operating profit 28 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT $ 1,002...

  • Page 33
    ... fair value of the derivative instruments were primarily the result of the impact of the changes in the value of the Canadian dollar relative to that of the U.S. dollar related to the cross-currency interest rate exchange agreements ("Cross-Currency ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT 29

  • Page 34
    ...costs of $16 million during 2008 due to the fees and expenses incurred in connection with the US$1.75 billion investment grade debt offerings that were closed on August 6, 2008. Interest on Long-Term Debt Wireless and Cable both contributed to the increase in adjusted operating profit for the year...

  • Page 35
    ... prepaid payment options. In addition, the network provides customers 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, video calling and two-way short messaging service...

  • Page 36
    ... DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS thousands of 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...

  • Page 37
    ... from monthly fees, airtime and long-distance charges, optional service charges, system access fees and roaming charges; • prepaid (voice and data), which consists of revenues generated principally from airtime, usage and long-distance charges; and • o ne-way messaging, which...

  • Page 38
    ... direct overheads related to these activities; and Summarized Wireless Financial Results Years ended December 31, (In millions of dollars, except margin) • Operating, general and administrative expenses, consisting primarily of network operating expenses, customer care expenses, retention costs...

  • Page 39
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS • Wireless announced the launch of its Fido UNO and Rogers Home Calling Zone plans that allow customers to make unlimited calls within their home using their wireless phone via a home WiFi broadband connection...

  • Page 40
    ... 2008, compared to 2007, excluding retention spending discussed below, were partially driven by growth in the Wireless subscriber base. In addition, there were higher costs to support increased usage of wireless data services, as well as increases in information technology, customer care and credit...

  • Page 41
    ... subscriber lines at December 31, 2008. The RBS segment offers local and long-distance telephone, enhanced voice and data services, and IP access to Canadian businesses and governments, as well as making some of these offerings HSPA 34% Network 49% Other 16% Inukshuk 1% ROGERS COMMUNICATIONS...

  • Page 42
    ... locations, Cable markets its services and products through a variety of additional channels, including call centres, outbound telemarketing, field agents, direct mail, television advertising, its own direct sales force, exclusive and non-exclusive agents, as well as through business associations...

  • Page 43
    ... subscribers, revenue, operating profit, and return on invested capital by leveraging its technologically advanced cable network to meet the information, entertainment and communications needs of its residential and small business customers, from ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT...

  • Page 44
    ... and the Canadian Programming Production Funds; • Internet interconnectivity and usage charges and the cost of operating Cable's Internet service; • intercarrier payments for interconnect to the local access and long-distance carriers related to cable and circuit-switched telephony...

  • Page 45
    ... we acquired 100% of the outstanding shares of Aurora Cable. Aurora Cable passes approximately 26,000 homes and provides cable television, Internet and telephony services in the Town of Aurora and the community of Oak Ridges, in Richmond Hill, Ontario. ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT...

  • Page 46
    ... interface. • Increased download speeds for Internet access services, and also implemented monthly usage allowances and monitoring tools, while usage-based billing on a per gigabyte basis for very heavy usage customers was phased in. C ABLE OPER ATIONS Summarized Financial Results Years ended...

  • Page 47
    ...package cable television, high-speed Internet and Rogers Home Phone services, contributed to the growth in the digital subscriber base of 197,000 in 2008. HDTV subscribers at Cable were up 37% from December 31, 2006 2007 2008 2007 to December 31, 2008, to 568,000, helped in part by an HD digital box...

  • Page 48
    ... Internet services price increases made during the previous twelve months and incremental revenue from additional usage charges. The average monthly revenue per Internet subscriber has increased in 2008 compared to 2007 due to various pricing adjustments over the prior year. With the high-speed...

  • Page 49
    ... for 2008 compared to 2007 was primarily driven by the increases in the digital cable, Internet and Rogers Home Phone subscriber bases, resulting in higher costs associated with programming content, customer care, network operations, information technology and credit and collections. Additionally...

  • Page 50
    ... broadband data circuits to Cable Operations' high-speed Internet subscriber base. These subscribers are not included in net additions for 2008. RBS Revenue The decrease in RBS revenues reï¬,ects a decline in long-distance and legacy data service businesses, with a shift in focus to increasing the...

  • Page 51
    ... premise equipment Scalable infrastructure Line extensions Upgrades and rebuild Support capital Total Cable Operations RBS Rogers Retail $ 284 279 48 35 183 829 36 21 $ 304 167 57 43 139 710 83 21 (7) 67 (16) (19) 32 17 (57) - 9 $ 886 $ 814 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT 47

  • Page 52
    ... of Radio and T V Markets MEDIA MEDIA'S BUSINESS Media operates our radio and television broadcasting businesses, our consumer and trade publishing operations, our televised home shopping service and Rogers Sports Entertainment. In addition to Media's more traditional broadcast and print media...

  • Page 53
    ... Media's PP&E additions in 2008 reï¬,ect the construction of a new television production facility for the combined Ontario operations of Citytv and OMNI, and are relatively the same as the year ended December 31, 2007. 2006 2007 2008 2006 2007 2008 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT...

  • Page 54
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Recent Media Developments Media announced that the CRTC had approved its application for a 24-hour news television channel to serve the City of Toronto and the Greater Toronto Area. The channel will reï¬,ect ...

  • Page 55
    ...order issued by the Ontario Securities Commission and will be included in calculating the number of Class B Non-Voting shares that RCI may purchase pursuant to the NCIB. In addition, in August and September 2008, RCI purchased an aggregate 77,400 of its outstanding Class B Non-Voting shares directly...

  • Page 56
    ... payments, are expected to increase from $38 million in 2008 to $64 million in 2009, subject to annual adjustments thereafter, due to various market factors and the assumption that staffing levels at the Company will remain relatively stable year- 52 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 57
    ... AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS over-year. We are contributing to the plans on this basis. As further discussed in the section of this MD&A entitled "Critical Accounting Estimates", changes in factors such as the discount rate, the rate of compensation increase and...

  • Page 58
    ... Class B Non-Voting shares and Class A Voting shares, such dividend to be paid on April 1, 2009, to shareholders of record on March 6, 2009, and is the first quarterly dividend to reï¬,ect the newly increased $1.16 per share annual dividend level. 54 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 59
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS During 2008, the Board declared dividends aggregating $1.00 per share on each of the outstanding Class B Non-Voting shares and Class A Voting shares, $0.25 per share of which were paid on January 2, 2009 to ...

  • Page 60
    ... 4. OPERATING ENVIRONMENT Industry Canada Additional discussion of regulatory matters and recent developments specific to the Wireless, Cable and Media segments follows. GOVERNMENT REGUL ATION AND REGUL ATORY DEVELOPMENTS Substantially all of our business activities, except for Cable's Rogers...

  • Page 61
    ... additional fees or charges that are not part of the subscriber's monthly fee or monthly rate plan. The bill would have also required the CRTC to inquire into, and make a report on, a wide range of issues including billing, cell phone locking, information regarding network speeds and limitations...

  • Page 62
    ...Policy CRTC 2009-40 issuing a directive to the wireless industry to complete the deployment of wireless Phase II enhanced E9-1-1 service in Canada by February 2010. Phase II allows wireless carriers to send more accurate location information with each 9-1-1 call. We are currently testing, developing...

  • Page 63
    ... of production music) should be set at a "double discount". A decision is anticipated in 2009. New Media Proceeding In February 2009, the CRTC announced that it intends to issue oneyear renewals for all private conventional television stations. This process will allow it to consider group-based...

  • Page 64
    ...line web information services, music downloading, MP3 players and on-line music streaming services, provide competition for broadcasting radio stations' audience share. On a product level, The Shopping Channel competes with various retail stores, catalog retailers, Internet retailers and direct mail...

  • Page 65
    ... Our Results of Operations in Wireless, Cable and Media. Prior to his death in December 2008, Edward S. "Ted" Rogers controlled Rogers Communications Inc. through his ownership of voting shares of a private holding company. RCI has been informed that under Mr. Rogers' estate arrangements, those...

  • Page 66
    ...day operations of our businesses are highly dependent on their information technology systems. An inability to enhance information technology systems to accommodate additional customer growth and support new products and services could have an adverse impact on our ability to acquire new subscribers...

  • Page 67
    ...Class Actions Act against providers of wireless communications services in Canada. The proceeding involves allegations of, among other things, breach of contract, misrepresentation and false advertising in relation to the 911 fee charged by us and the other wireless communication providers in Canada...

  • Page 68
    .... The National Wireless Tower Policy Could Increase Wireless' Costs or Delay the Expansion of Wireless' Networks. The CRTC's three-year Work Plan indicates their intent to review the issue of Long-Distance Equal Access for Wireless Carriers. If required, this may introduce additional competition in...

  • Page 69
    ...-speed Internet service. Failure to Obtain Access to Support Structures and Municipal Rights of Way Could Increase Cable's Costs and Adversely Affect Our Business. In December 2006, the CRTC released its Commercial Radio Policy 2006. While Canadian talent development contributions made by all radio...

  • Page 70
    ...-generating usage. We report wireless subscribers in two categories: postpaid and prepaid. Postpaid includes voice-only and data-only subscribers, as well as subscribers with service plans integrating both voice and data, while prepaid includes voice-only subscribers. Internet, Rogers Home Phone and...

  • Page 71
    ... subscriber relationships, including retention costs, inter-carrier payments to roaming partners and long-distance carriers, network maintenance costs, programming related costs, the CRTC contribution levy, Internet and e-mail services and printing and production cost. In the wireless and cable...

  • Page 72
    ...; and • Discounts provided to customers related to combined purchases of Wireless, Cable, and Media products and services are charged directly to the revenue for the products and services to which they relate. We offer certain products and services as part of multiple deliverable arrangements...

  • Page 73
    ...Purchase Price Allocations We operate within a highly-competitive industry and generally incur significant costs to attract new subscribers and retain existing subscribers. All sales and marketing expenditures related to subscriber acquisitions, retention and contract renewals, such as commissions...

  • Page 74
    ... profitability of related companies, tax planning strategies that are 70 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT Rogers' Cross-Currency Swaps are recorded using an estimated credit-adjusted mark-to-market valuation which is determined by increasing the treasury-related discount rates used to...

  • Page 75
    ...are equivalent to the corresponding provisions of IFRS IAS 38, Intangible Assets. This new standard is effective for our Interim and Annual Consolidated Financial Statements commencing January 1, 2009. We are assessing the impact of the new standard. ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT 71

  • Page 76
    ...of impacts on other areas of the business completed. Communication is ongoing. Systems, process and internal control changes implemented and training complete in time for parallel run in 2010. Testing of internal controls for 2010 comparatives completed by Q1 2011. Preliminary assessment of required...

  • Page 77
    ... Financial Statements. The significant differences in accounting relate to Differences in business combinations and consolidation accounting; Gain on Sale of Cable Systems; Pre-Operating Costs Capitalized; Capitalized Interest; Financial Instruments; Stock-Based Compensation; • Pensions...

  • Page 78
    ... operations before changes in working capital amounts. (4) Prior period shares and per share amounts have been retroactively adjusted to reï¬,ect a two-for-one-split of the Company's Class A Voting and Class B Non-Voting shares on December 29, 2006. 74 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 79
    ... 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...

  • Page 80
    ... Operating profit before the undernoted Wireless Cable Media Corporate and eliminations Stock option plan amendment (1) Stock-based compensation recovery (expense)(1) Integration and restructuring expenses (2) Adjustment for CRTC Part II fees decision (3) Contract renegotiation fee (4) Operating...

  • Page 81
    ... the adoption of a cash settlement feature for employee stock options, stock-based compensation expense, integration and restructuring costs, an adjustment to CRTC Part II fees related to prior periods, a one-time charge related to the renegotiation of an Internet-related services agreement, losses...

  • Page 82
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Changes in Internal Control Over Financial Reporting and Disclosure Controls and Procedures There have been no changes in our internal controls over financial reporting during 2008 that have materially affected,...

  • Page 83
    ... Years ended December 31, (In millions of dollars, number of shares outstanding in millions) 2008 2007 Operating profit Add (deduct): Stock option plan amendment Stock-based compensation (recovery) expense Adjustment for CRTC Part II fees decision Integration and restructuring expenses Contract...

  • Page 84
    ...Prepaid (voice and data) revenue Divided by: average prepaid subscribers Divided by: 12 months $ $ $ $ Cost of acquisition per gross addition Total sales and marketing expenses Equipment margin loss (acquisition related) $ $ Divided by: total gross wireless additions (postpaid, prepaid and one-way...

  • Page 85
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS C ABLE NON - GA AP C ALCUL ATIONS (1) Years ended December 31, (In millions of dollars, subscribers in thousands, except ARPU figures and operating profit margin) 2008 2007 Core Cable ARPU Core Cable ...

  • Page 86
    ...FOR FINANCIAL REPORTING DECEMBER 31, 2008 The accompanying consolidated financial statements of Rogers Communications Inc. and its subsidiaries and all the information in Management's Discussion and Analysis are the responsibility of management and have been approved by the Board of Directors. The...

  • Page 87
    CONSOLIDATED STATEMENTS OF INCOME (IN MILLIONS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS) Years ended December 31, 2008 and 2007 2008 2007 Operating revenue (note 3(b)) Operating expenses: Cost of sales Sales and marketing Operating, general and administrative Stock option plan amendment (...

  • Page 88
    ... statements. 17,093 $ 15,325 $ 19 2,412 1 45 239 2,716 8,506 616 184 344 12,366 4,727 17,093 $ 61 2,260 1 195 225 2,742 6,032 1,609 214 104 10,701 4,624 $ 15,325 On behalf of the Board: Alan D. Horn, CA Director Ronald D. Besse Director 84 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 89
    ...) Class B Non-Voting shares Number of shares (000s) Contributed surplus Years ended December 31, 2008 and 2007 Amount Amount Accumulated other Retained comprehensive Total earnings income shareholders' (deficit) (loss) equity Balances, December 31, 2006 Change in accounting policy related to...

  • Page 90
    ...$ 1,002 $ 637 (146) - (146) 1,122 (1,274) 110 (42) 140 (2) 138 (635) 742 119 226 364 (100) 264 $ 901 Related income taxes (188) 43 (145) Comprehensive income for the year See accompanying notes to consolidated financial statements. $ 857 86 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 91
    ... rate exchange agreements and forward contracts Repurchase of Class B Non-Voting shares Issuance of capital stock on exercise of stock options Dividends paid 4,474 (3,335) - - (375) (969) 970 (137) 3 (559) 72 Increase (decrease) in cash and cash equivalents Cash deficiency, beginning of year...

  • Page 92
    ... its operations and sales in Canada. RCI is engaged in wireless voice and data communications services through its Wireless segment ("Wireless"); cable television, high-speed Internet access, telephony, data networking and retailing of wireless, cable and video products and services ("Rogers Retail...

  • Page 93
    ... relates to cable installation costs, the Company expenses the costs related to the acquisition or retention of subscribers. (D) STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS: On May 28, 2007, the Company's employee stock option plans were amended to attach cash settled share appreciation...

  • Page 94
    ... cross-currency interest rate exchange agreements ("Cross-Currency Swaps") is determined using an estimated credit-adjusted mark-tomarket valuation which involves increasing the treasury-related discount rates used to calculate the risk-free estimated 90 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 95
    ...the development and pre-operating phases of new products and businesses, related incremental costs are deferred and amortized on a straight-line basis over periods of up to five years. (M) PENSION BENEFITS: The Company accrues its pension plan obligations as employees render the services necessary...

  • Page 96
    ... its fair value. Intangible assets with finite useful lives are amortized on a straight-line basis over their estimated useful lives as follows: Brand name - Rogers Brand name - Fido Brand name - Citytv Subscriber bases Roaming agreements Dealer networks Marketing agreement 20 years 5 years 5 years...

  • Page 97
    ... and annual consolidated financial statements commencing on January 1, 2011 with earlier adoption permitted as of the beginning of a fiscal year. The Company is assessing the impact of the new standards on its consolidated financial statements. ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT 93

  • Page 98
    ... totals Wireless Cable Media Wireless Cable Operating revenue Cost of sales Sales and marketing Operating, general and administrative* Stock option plan amendment Integration and restructuring Stock-based compensation expense (recovery)* Adjustment for CRTC Part II fees decision* Contract...

  • Page 99
    ...: 2008 2007 Wireless: Postpaid Prepaid One-way messaging Network revenue Equipment sales Cable: Cable Operations Rogers Business Solutions ("RBS") Rogers Retail Intercompany eliminations Media: Advertising Circulation and subscription Retail Blue Jays/Sports Entertainment Other Corporate items...

  • Page 100
    ... paid during the first quarter of 2008. In addition, the Company contributed $10 million to simultaneously pay down certain credit facilities of Aurora Cable. Aurora Cable provides cable television, Internet and telephony services in the Town of Aurora and the community of Oak Ridges, in Richmond...

  • Page 101
    ... time, Cable entered into a marketing agreement with the former controlling shareholder of Futureway that entitles the Company to preferred marketing arrangements in certain new residential housing developments in the Greater Toronto Area. The acquisition was accounted for using the purchase method...

  • Page 102
    ...million (2007 - $12 million) related to the severances, which will be paid in 2009. During 2008, the Company incurred $4 million (2007 - nil) related to the closure of 18 underperforming store locations, primarily located in the province of Ontario. 98 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 103
    ... and intangible assets not deductible for tax Benefits relating to changes to prior year tax filing positions and other items Income tax expense $ 32.7% 466 (2) 19 - (33) 5 (65) 51 (17) $ 424 $ $ 35.2% 312 (12) (20) (25) 47 (17) - - (36) 249 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT 99

  • Page 104
    ... outstanding - diluted Net income per share: Basic Diluted Employee stock options are not considered dilutive after the May 28, 2007 amendment to stock option plans (note 19(a)(i)). $ 1,002 638 - 638 $ 637 638 4 642 $ 1.57 1.57 $ 1.00 0.99 100 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 105
    ... discounted future cash ï¬,ows for three to seven years, depending on the reporting unit, and a terminal value. The future cash ï¬,ows are based on the Company's estimates and include consideration for expected future operating results, economic conditions and ROGERS COMMUNICATIONS INC. 2008 ANNUAL...

  • Page 106
    ... value Accumulated amortization Details of intangible assets are as follows: 2007 Net book value Cost Indefinite life: Spectrum licences Broadcast licences Definite life: Brand names Subscriber bases Roaming agreements Dealer networks Wholesale agreement Marketing agreement Advertising bookings...

  • Page 107
    ...increase in advertising bookings. Amortization of brand names, subscriber bases, baseball player contracts, roaming agreements, dealer networks, wholesale agreements and marketing agreement amounted to $280 million for the year ended December 31, 2008 (2007 - $282 million). During 2007, the Company...

  • Page 108
    ... in accounts payable and accrued liabilities and other long-term liabilities, is $83 million at December 31, 2008 (2007 - $87 million). Deferred charges related to these commitments are being amortized over periods ranging from six to seven years. 104 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 109
    ... the consolidated results previously reported by the Company. In addition, the operating subsidiaries of Rogers Cable Inc. and Rogers Wireless Inc. were not part of and were not impacted by the amalgamation. As a result of the amalgamation, on July 1, 2007, Rogers Communications Inc. assumed all of...

  • Page 110
    ... rate charged on the Cable bank credit facility ranged from nil to 2.0% per annum over the bank The fair value increment on long-term debt is a purchase accounting adjustment required by GAAP as a result of the acquisition of the minority interest of Wireless during 2004. Under GAAP, the purchase...

  • Page 111
    ...7.53%). (H) PRINCIPAL REPAYMENTS: As at December 31, 2008, principal repayments due within each of the next five years and thereafter on all long-term debt are as follows: 2009 2010 2011 2012 2013 Thereafter $ 1 - 1,235 1,494 1,014 4,751 8,495 $ ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT 107

  • Page 112
    ... to the Company's reputation. At December 31, 2008, the undrawn portion of the Company's bank credit facility was approximately $1.8 billion. Utilizations include advances borrowed under the bank credit facility and issuances of letters of credit. 108 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 113
    ...the Company's outstanding stock options are classified as liabilities and are carried at their intrinsic value, as adjusted for vesting, measured as the difference between the current share price and the option exercise price. The intrinsic value of the ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT...

  • Page 114
    ... in a liability position (B) Net liability position (A) + (B) Mark-to-market value - risk-free analysis Mark-to-market value - credit-adjusted estimate (carrying value) Difference $ $ 572 507 $ (716) $ (661) 55 $ (144) (154) (10) (65) $ 110 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 115
    ... recorded in the consolidated statements of income related to Cross-Currency Swaps not accounted for as hedges and $3 million related to CrossCurrency Swaps accounted for as hedges was recorded in other comprehensive income. At December 31, 2008, 87.4% of the Company's U.S. dollardenominated long...

  • Page 116
    ... or reassessments of previous tax filings of the corporation that carries on the business. (b) Sales of services: As part of transactions involving sales of services, the Company may be required to pay counterparties for costs and losses incurred as a result of breaches of representations and...

  • Page 117
    ... on contribution of spectrum licences, net of accumulated amortization of $6 million (2007 - $2 million) (note 5) Restricted share units Liabilities related to stock options Other $ 63 33 29 26 18 9 2 4 $ 66 36 26 15 22 16 22 11 $ 184 $ 214 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT 113

  • Page 118
    ..., beginning of year Service cost Interest cost Benefits paid Contributions by employees Actuarial loss (gain) Plan amendments Accrued benefit obligations, end of year $ 689 $ 28 40 (26) 21 (130) - 622 $ 612 29 34 (24) 18 10 10 689 $ 114 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 119
    ...FINANCIAL STATEMENTS Net pension expense is outlined below: 2008 2007 Plan cost: Service cost Interest cost Actual loss (return) on plan assets Actuarial loss (gain) on benefit obligations Plan amendments Costs Differences between costs arising during the year and costs recognized during the year...

  • Page 120
    ... funded and unfunded plans for fiscal year ending: 2009 2010 2011 2012 2013 Next five years $ Certain subsidiaries have defined contribution plans with total pension expense of $2 million in 2008 (2007 - $2 million). $ 31 32 34 35 36 168 200 368 116 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 121
    ... made under issuer bid exemption orders issued by the Ontario Securities Commission and will be included in calculating the number of Class B NonVoting shares that the Company may purchase pursuant to the NCIB. In addition, in August and September of 2008, the Company repurchased for cancellation an...

  • Page 122
    ... Committee on the date of grant. The exercise price for options is equal to the fair market value of the Class B Non-Voting shares determined as the five-day average before the grant date as quoted on the Toronto Stock Exchange (the "TSX"). 118 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 123
    ... per share. For in-the-money stock options measured at the Company's December 31 share price, unrecognized stock-based compensation expense related to stock-option plans was $3 million (2007 - $20 million), and will be recorded in the consolidated statements of income over the next four years. (iii...

  • Page 124
    ...amount to purchase additional shares of the Company on behalf of the employee, as outlined above. Compensation expense related to the employee share accumulation plan amounted to $14 million (2007 - $9 million) for the year ended December 31, 2008. The deferred share unit plan enables directors and...

  • Page 125
    ...' return and to sustain future development of the business. The Company is not subject to externally imposed capital requirements and its overall strategy with respect to capital risk management remains unchanged from the year ended December 31, 2007. ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT...

  • Page 126
    ... to pay certain telecom contribution fees. These fees are based on a formula including certain types of revenue, including the majority of wireless revenue. The Company estimates that these fees for 2009 will amount to approximately $50 million. 122 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 127
    ...'s Class Actions Act against providers of wireless communications services in Canada. The proceeding involves allegations of, among other things, breach of contract, misrepresentation and false advertising in relation to the 911 fee charged by the Company and the other wireless communication...

  • Page 128
    ... would be adjusted as follows: 2008 2007 Net income for the year based on Canadian GAAP Gain on sale of cable systems (B) Pre-operating costs capitalized (C) Capitalized interest, net of related depreciation (D) Financial instruments (E) Stock-based compensation (F) Income taxes (H) Installation...

  • Page 129
    ... did not own 100% of Wireless, the acquisition of the outstanding shares in Wireless and the acquisition of a cable company in Atlantic Canada. (B) GAIN ON SALE OF C ABLE SYSTEMS: Under United States GAAP, interest costs are capitalized as part of the historical cost of acquiring certain qualifying...

  • Page 130
    ... and certain other items at fair value. As the Company did not elect to fair value any of its financial instruments under the provisions of FASB No. 159, the adoption of this statement did not have an impact on the Company's financial statements. 126 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 131
    ... FINANCIAL STATEMENTS (F ) STOCK-BASED COMPENSATION: As a result of the amendment to the stock option plans on May 28, 2007, all of the Company's outstanding stock options can now be settled in cash at the discretion of the employee or director (note 19(a)(i)). Under United States GAAP, the cost...

  • Page 132
    ... for the Company beginning January 1, 2009. The Company is currently assessing the impact of this new standard on its consolidated financial statements, but it does not expect a material impact on its financial position or results of operations. 128 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT

  • Page 133
    ... by the Company considering market conditions, share prices, its cash position, and other factors. (B) In February 2009, the Company's Board of Directors adopted a dividend policy which increases the annual dividend rate from $1.00 to $1.16 per Class A Voting and Class B Non-Voting share effective...

  • Page 134
    ...annual report with the Securities and Exchange Commission of the U.S. on Form 40-F. A copy is available on EDGAR at sec.gov and at the Investor Relations section of the rogers.com website. ON -LINE INFORMATION Rogers is committed to open and full financial disclosure and best practices in corporate...

  • Page 135
    "The best is yet to come." Ted Rogers 1933-2008

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