Rogers 2009 Annual Report Download - page 57

ROGERS COMMUNICATIONS INC. 2009 ANNUAL REPORT 61
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
new and advanced services. Alternatively, we may fail to anticipate
or satisfy demand for certain products and services, or may not be
able to offer or market these new products and services successfully
to subscribers. The failure to attract subscribers to new products
and services, or failure to keep pace with changing consumer
preferences for products and services, would slow revenue growth
and could have a materially adverse effect on our business, results
of operations and financial condition.
We Are Highly Dependent Upon our Information Technology
Systems and the Inability to Enhance our Systems or Prevent
a Security Breach (Data or System) or Disaster Could Have an
Adverse Impact on our Financial Results and Operations.
The day-to-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,
manage subscriber churn, produce accurate and timely subscriber
invoices, generate revenue growth and manage operating
expenses, all of which could adversely impact our financial results
and position.
In addition, we use industry standard network and information
technology security, survivability and disaster recovery practices.
Our ongoing success is in part dependent on the protection of
our corporate business sensitive data including our Customers’
as well as employees’ personal information. This information
is considered company intellectual property and it needs to be
protected from unauthorized access and compromise for which
we rely on policies and procedures as well as IT systems. Failure
to secure our data and the privacy of our customer information
may result in noncompliance with regulatory standards, may lead
to negative publicity, litigation, reputation damage any of which
may result in customer losses, financial losses and an erosion
of public confidence.
A portion of our employees and critical elements of the network
infrastructure and information technology systems are located at
our corporate offices in Toronto, Ontario, and Brampton, Ontario,
as well as an operations facility in Markham, Ontario. In the event
that we cannot access these facilities, as a result of a natural or
manmade disaster or otherwise, operations may be significantly
affected and may result in a condition that is beyond the scope of
our ability to recover without significant service interruption and
commensurate revenue and customer loss.
We Are Reliant on Third Party Service Providers Through
Outsourcing Arrangements.
Through outsourcing arrangements, third parties provide
certain essential components of our business operations to our
employees and customers, including payroll, call centre support,
installation and service technicians and invoice printing. In
addition, we have recently completed an outsourcing arrangement
for certain information technology functions. Interruptions in
these services can adversely affect our ability to provide services
to our customers.
We Are Heavily Involved in Operational Convergence.
In an effort to more efficiently serve our customer base, there is
an ongoing emphasis on convergence of our wireless and
cable operations, including organization structure and network
platforms. We have also commenced an enterprise-wide billing
and business support system initiative. In the event that
implementation of our convergence plans lead to operational
problems or unforeseen delays are incurred, operational efficiencies
may not be achieved and service impairment may result in loss of
revenue and customers.
We Are Subject to General Economic Conditions.
Our businesses are affected by general economic conditions,
consumer confidence and spending. Recessions or declines in
economic activity or economic uncertainty, such as that which has
occurred since late 2008, generally cause an erosion of consumer
and business confidence and may materially reduce discretionary
consumer spending. Any reduction in discretionary spending
by consumers and businesses or weak economic conditions may
materially negatively affect us through decreased demand for
our products and services including decreased advertising,
decreased revenue and profitability, higher churn and higher
bad debt expense.
Poor economic conditions may also have an impact on our pension
plans as there is no assurance that the plans will be able to earn
the assumed rate of return. As well, market driven changes may
result in changes in the discount rates and other variables which
would result in Rogers being required to make contributions in the
future that differ significantly from the current contributions and
assumptions incorporated into the actuarial valuation process.
Network Failures Could Reduce Revenue and
Impact Customer Service.
The failure of our networks or key network components could, in
some circumstances, result in an indefinite loss of service for our
customers and could adversely impact our financial results and
position. In addition, we rely on business partners to carry certain
of our customers’ traffic. The failure of one of these carriers might
also cause an interruption in service for our customers that would
last until we could reroute the traffic to an alternative carrier.
We Are and Will Continue to Be Involved in Litigation.
In August 2008, a proceeding was commenced in Ontario pursuant
to that province’s Class Proceedings Act, 1992 against Cable
and other providers of communications services in Canada. The
proceedings involve allegations of, among other things, false,
misleading and deceptive advertising relating to charges for
long-distance telephone usage. The plaintiffs are seeking
$20 million in general damages and punitive damages of $5 million.
The plaintiffs intend to seek an order certifying the proceedings as
a class action. Any potential liability is not yet determinable.
In June 2008, a proceeding was commenced in Saskatchewan
under that province’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 9-1-1 fee
charged by us and the other wireless communication providers
in Canada. The plaintiffs are seeking unquantified damages
and restitution. The plaintiffs intend to seek an order certifying
the proceeding as a national class action in Saskatchewan. Any
potential liability is not yet determinable.