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24 ROGERS COMMUNICATIONS INC. 2009 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(1) Excludes stock-based compensation expense (recovery), integration and restructuring expenses, contract termination fees, adjustment for CRTC Part II fees decision,
and settlement of pension obligations.
(2) In addition to Wireless, Cable Operations and Rogers Media PP&E expenditures, consolidated additions to PP&E includes expenditures related to billing system development
and corporately owned real estate.
(3) Pre-tax free cash flow is defined as adjusted operating profit less PP&E expenditures and interest expense and is not a term defined under Canadian GAAP.
(4) Management currently expects that its 2011 cash income tax payments will not exceed the 2010 guidance and that it will not be fully cash taxable until 2012.
2. SEGMENT REVIEW
WIRELESS
WIRELESS BUSINESS
Wireless is the largest Canadian wireless communications service
provider, serving approximately 8.5 million retail voice and data
subscribers at December 31, 2009, representing approximately 37%
of Canadian wireless subscribers. Wireless operates a GSM/General
Packet Radio Service (“GSM/GPRS”) network, with Enhanced Data
for GSM Evolution (“EDGE”) technology which provides coverage
to approximately 95% of Canada’s population.
Wireless has also deployed a next generation wireless data
technology called UMTS/HSPA (“Universal Mobile Telephone
System/High-Speed Packet Access”) in markets across Canada
representing approximately 85% of the population.
Wireless’ customers are able to access to their services across the U.S.
and in most other parts of the world through roaming agreements
with various other GSM and HSPA wireless operators.
Wireless is the only national carrier in Canada operating on both
the GSM and HSPA wireless technology standards.
Wireless Products and Services
Wireless offers wireless voice, data and messaging services
including related handsets and devices, across Canada. Wireless
voice services are available in either postpaid or 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 and application downloading,
video calling and two-way short messaging service (“SMS”).
Wireless Distribution
Wireless markets its products and services under both the Rogers
Wireless and Fido brands through an extensive nationwide
distribution network of over 3,600 dealer and retail locations across
Canada (excluding approximately 448 Rogers Retail locations,
which is a segment of Cable), selling subscriptions to service plans,
handsets and prepaid air time and thousands of additional locations
selling prepaid cards. Wireless’ nationwide distribution network
includes: an independent dealer network; Rogers Wireless and Fido
stores which are managed by Rogers Retail; major retail chains;
and convenience stores. Wireless also offers many of its products
and services through telemarketing and on the Rogers.com and
Fido.ca e-business websites. As competition intensifies in the
Canadian wireless industry, distribution challenges could arise
as more carriers attempt to market their products and services
through existing channels.
Wireless Networks
Wireless is a facilities-based carrier operating its wireless
networks over a broad, national coverage area, much of which is
interconnected by its own fibre-optic and microwave transmission
infrastructure. The seamless, integrated nature of its networks
enables subscribers to make and receive calls and to activate
network features anywhere in Wireless’ coverage area and in
the coverage area of roaming partners as easily as if they were in
their home area.
Wireless operates a digital wireless GSM network in the 1900
megahertz (“MHz”) and 850 MHz frequency bands across its
national footprint. The GSM network, which operates seamlessly
between the two frequencies, provides integrated voice and high-
speed packet data transmission service capabilities and utilizes
Full Year 2010 Guidance
(millions of dollars) 2009
Actual 2010
Guidance
Consolidated
Adjusted operating profit(1) $ 4,388 Up 2% to 7%
Additions to PP&E(2) $ 1,855 Flat to up 5%
Pre-tax free cash flow(3) $ 1,886 Up 3% to 8%
Cash Income Taxes
Assumptions for the timing and amount of cash income tax payments(4) $ 8 ~$150
WIRELESS REVENUE MIX
(%)
Data 20%
Equipment 6%
Postpaid Voice 70%
Prepaid Voice 4%