Rogers 2009 Annual Report Download - page 5

2 ROGERS COMMUNICATIONS INC. 2009 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 2009 ANNUAL REPORT 3
Delivering Results
2009 was a significant year of change for the company. We
delivered on our key financial metrics, and established a solid
foundation for the future.
We refined and institutionalized our strategy. We defined success
and the critical pillars needed to get us there. We took costs out
of the business to maintain double-digit growth in cash flow as
top-line growth moderated. We organized the company around
a more streamlined, efficient and customer-focused organization
structure. We reduced our capital expenditures as a percentage
of revenue. We further strengthened our already healthy balance
sheet and increased cash returns to shareholders. And we
demonstrated that we have the team, the assets, the brands and
the fortitude to deliver on our commitments to shareholders in
even the most challenging of times.
In 2009, we continued to grow subscribers at a healthy rate,
increased revenue by three percent to nearly $12 billion, and
grew adjusted operating profit by 8 percent. At the same time,
we reduced capital expenditures by 8 percent. As a result, we were
able to increase free cash flow, defined as adjusted operating
profit less capital expenditures and interest, by 29 percent to
$1.89 billion for the year. We established a target leverage range
of net debt to adjusted operating profit of 2.0 to 2.5 times. We
issued investment-grade bonds in Canada, raising $2 billion at
favourable rates to remain within our target leverage range.
And we executed the largest share buy back in the history of the
company, which, together with our dividend payments, enabled
us to return $2.1 billion of cash to shareholders. Overall, we
continue to have a solid investment grade balance sheet with
$2.8 billion of available liquidity and no near-term debt maturities.
In February 2010 we increased our annual dividend by 10 percent
and we announced another share buy back program for 2010 of
up to $1.5 billion. These two announcements reflect our continued
success in delivering free cash flow and signal our continued
confidence in the strength of the company. For 2010, our plan
strikes a healthy balance between continued subscriber and
financial growth, the return of increasing amounts of free cash
flow to shareholders, and prudent investments in our networks,
systems and service delivery platforms that will help ensure that
such growth continues in the future.
Defining Next
We’re truly fortunate to participate in an industry where
demand for our products and services is insatiable. As consumer
utilization of technology and consumption of content evolve,
so will we.
It’s our goal to define what’s next, to lead the changing
intersection of content and distribution, to lead our customers
through this incredible transformation.
Rogers moves into this new era from a position of tremendous
strength.
We have the best asset mix of any communications company in
North America. Our competitive advantage includes network
and operating scale and scope, some of the most advanced
networks in the world, extensive distribution and service
channels, powerful brands, and complementary communications
products. Importantly, we have a rich history of entrepreneurship
and an innate desire to continually define and lead what’s next.
Ted Rogers, our late founder, knew that you couldn’t succeed in
the future by relying on what you did in the past. He was a keen
observer of changing trends and constantly looking for ways to
build a business around them. Great companies look to the future
and this is where our sights are firmly set.
I’d like to extend my thanks to the Rogers employees across
Canada for their hard work and continuing dedication.
Thank you for your investment, confidence and support.
Nadir Mohamed
President and Chief Executive Officer
Rogers Communications Inc.
Embracing and Leading Industry Change
The transformation underway in our industry is about the
blurring of lines between wireline and wireless; between the
TV screen, the computer screen and the smartphone screen;
between the excitement of real-time and the convenience of
time-shifting. It’s about richer content, greater mobility, and
faster speeds on our customers’ platform of choice. It’s about
digital content available across multiple IP-based platforms.
At the same time, competition is increasing both from
traditional players, from new wireless entrants and from
disruptive new technologies that challenge the status quo
and offer customers new alternatives.
As our industry transforms, it will be defined by the
marriage of broadband and wireless in an all IP world –
setting the stage for new ways of interacting, engaging and
consuming information, communications and entertainment –
facilitating the intersection of content and distribution.
The future will increasingly be driven by consumers looking to
access media and communicate anywhere, anytime, anyplace.
The challenge for Rogers and the industry is clear: Embrace
and facilitate this change, or watch others lead the charge.
At Rogers we’re ready for this challenge. We’re ready to set
the pace, to embrace, and to lead this transformation. Three
key building blocks will drive our efforts – a significantly
improved customer experience, industry-leading networks,
and a competitive cost structure.
Customer Experience. Enhancing our customers experience is
critical for our ongoing success. Looking forward, more revenue
growth will come from existing customers rather than from new
customers. We need to make it easier for our customers to do
business with us. And we need to develop newer, better, and
faster ways to deliver what customers want, while delivering
attractive returns for shareholders.
In 2009 we introduced a number of visible efforts to enhance
the customer experience. We created a dedicated team who
engage with customers looking for help in online forums and
micro blogs; we established a simple four-step process for our
customers to escalate their concerns; we introduced an Office
of the Ombudsman to provide our customers with a fair
and impartial mediator; and we created the Rogers Customer
Commitment to help our customers understand what they can
expect when they choose to do business with us. These examples
reflect early, visible signs of progress. We know we need to do
more, and we are committed to better meeting our customers’
expectations long-term.
Industry-Leading Networks. Our networks are among the best
in the world and Canadians have come to rely on Rogers for a
fast, reliable and proven network experience. The quality of
our advanced networks and our commitment to driving broad-
band and wireless data growth position us to win as consumer
behaviour evolves. More than ever we will focus our investment
on defining the future of leading-edge networks to ensure
Canadians continue to view Rogers as the leader in Canada.
In 2009 we launched the next generation HSPA+ network, the
first in North America, offering customers wireless speeds up to
21.1 Mbps, nearly triple those previously available. On the cable
side Rogers launched a 50 Mbps high-speed Internet service on
our new DOCSIS 3.0 platform, representing the fastest landline
residential Internet speed available in our market.
Competitive Cost Structure. As our business matures and
revenue growth moderates, our focus shifts from subscriber
growth towards cash flow. Managing costs and operating
efficiently becomes imperative. In 2009, we took significant
steps toward resetting our cost structure. Key initiatives included
outsourcing the majority of our physical IT infrastructure to IBM
to drive meaningful capital expenditure efficiencies. And we
significantly streamlined our organization structure to enhance
our operating efficiency and to position Rogers effectively for
the changing industry landscape. We are on a path to continually
drive efficiencies, maintain strong profit margins, and continue to
grow cash flow.
Underscoring all of this is innovation and Rogers’ thirst to
embrace new technologies; to be first to market, to ensure if it’s
new, Rogers will have it. It’s this innate drive; this competitive
spirit; which will continue to fuel our growth and drive our
differentiation in an increasingly crowded marketplace.
LETTER TO SHAREHOLDERS
“We have the best asset mix of any communications company in North America.
Our competitive advantage includes network and operating scale and scope,
some of the most advanced networks in the world, unmatched distribution and
service channels, powerful brands, and complementary communications products.
Importantly, we have a rich history of entrepreneurship and an innate desire to
continually define and lead what’s next.”