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ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT 45
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cable Operations’ base of cir-
cuit-switched local telephony
customers as discussed above,
which was acquired in July 2005
through the acquisition of Call-
Net, is generally less capital
intensive than its on-net cable
telephony business but also
generates lower margins. As a
result, the inclusion of the cir-
cuit-switched local telephony
business, which includes approx-
imately 215,000 customers which
have not been migrated to our
cable network telephony plat-
form with Cable Operations’
telephony business, has a dilu-
tive impact on operating profit
margins.
Cable Operations Operating Expenses
The increase in Cable’s operating expenses 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 collec-
tions. Additionally, equipment costs increased over 2007, which is
primarily the result of an HD digital box sale (versus rental) cam-
paign. Partially offsetting these increases was a reduction in certain
costs associated with Cable’s Internet product resulting from a
renegotiated agreement with Yahoo! which became effective
January 1, 2008, a year-over-year reduction in selling expenditures
resulting from lower volumes of RGU net additions than in the cor-
responding periods of the prior year and scale efficiencies across
various functions.
Cable Operations Adjusted Operating Profit
The year-over-year growth in adjusted operating profit was pri-
marily the result of the revenue growth described above, partially
offset by the changes in Cable’s operating expenses. As a result,
Cable Operations adjusted operating profit margins increased to
40.7% for 2008, compared to 38.7% in 2007.
ROGERS BUSINESS SOLUTIONS
Summarized Financial Results
Years ended December 31,
(In millions of dollars, except margin) 2008 2007 % Chg
RBS operating revenue $ 526 $ 571 (8)
Operating expenses before the undernoted
Sales and marketing expenses 26 75 (65)
Operating, general and administrative expenses 441 484 (9)
467 559 (16)
Adjusted operating profit (1) 59 12 n/m
Stock option plan amendment (2) – (2) n/m
Stock-based compensation recovery (2) 1 – n/m
Integration and restructuring expenses (3) (6) (29) (79)
Operating profit (loss) (1) $ 54 $ (19) n/m
Adjusted operating profit margin (1) 11.2% 2.1%
(1) As defined. See the sections entitled “Key Performance Indicators and Non-GAAP Measures” and “Supplementary Information: Non-GAAP Calculations”.
(2) See the section entitled “Stock-based Compensation”.
(3) Costs incurred relate to severances resulting from the restructuring of our employee base to improve our cost structure in light of the declining economic conditions, the integration of Call-Net and the
restructuring of RBS.
20082007
$1,171$1,008$854
CABLE OPERATIONS ADJUSTED
OPERATING PROFIT AND
MARGIN (In millions of dollars)
2007
2008
2006
37.1%
38.7%
40.7%