Rogers 2009 Annual Report Download - page 72

76 ROGERS COMMUNICATIONS INC. 2009 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cable Operations services revenue and operating profit increased
primarily due to price increases, increased penetration of its digital
products and incremental programming packages, and the scaling
and rapid growth of our cable telephony service. Similarly, the
steady growth of Internet revenues has been the result of a greater
penetration of Internet subscribers as a percentage of homes
passed. RBS’ operating profit margin reflects the pricing pressures
on long-distance and higher carrier costs, with an increase in lower
margin long-distance revenue. Rogers Retail revenue has decreased
as a result of lower iPhone sales in 2009 due to the launch of the
product in the prior year.
Media’s results are primarily attributable to a general downturn in
demand for advertising due to the softness in the economy and the
decline in consumer discretionary retail sales.
Other fluctuations in net income from quarter-to-quarter can
also be attributed to losses on repayment of debt, foreign
exchange gains or losses, changes in the fair value of derivative
instruments, other income and expenses, writedowns of goodwill,
intangible assets and other long-term assets and changes in income
tax expense.
Summary of Fourth Quarter 2009 Results
During the three months ended December 31, 2009, consolidated
operating revenue increased 4% to $3,057 million in 2009 compared
to $2,941 million in the corresponding period in 2008, with 7%
growth Wireless network and Cable Operations growth, and flat
results at Media. Consolidated fourth quarter adjusted operating
profit grew 14% year-over-year to $1,101 million, with 16% growth
at Wireless, 4% growth at Cable, and 13% growth at Media.
Consolidated operating income for the three months ended
December 31, 2009, totalled $607 million, compared to $137 million
in the corresponding period of 2008.
We recorded net income of $310 million for the three months ended
December 31, 2009, or basic and diluted net income per share of
$0.51, compared to a net loss of $138 million or basic and diluted net
loss per share of $0.22 in the corresponding period of 2008.
SUMMARY OF SEASONALITY AND QUARTERLY RESULTS
Quarterly results and statistics for the previous eight quarters are
outlined following this section.
Our operating results are subject to seasonal fluctuations that
materially impact quarter-to-quarter operating results. As a result,
one quarter’s operating results are not necessarily indicative
of what a subsequent quarter’s operating results will be. Each
of Wireless, Cable and Media has unique seasonal aspects to
its business.
Wireless’ operating results are subject to seasonal fluctuations
that materially impact quarter-to-quarter operating results. In
particular, operating results may be influenced by the timing of
our marketing and promotional expenditures and higher levels of
subscriber additions and subsidies, resulting in higher subscriber
acquisition and activation-related expenses in certain periods.
The operating results of Cable Operations services are subject
to modest seasonal fluctuations in subscriber additions and
disconnections, which are largely attributable to movements
of university and college students and individuals temporarily
suspending service due to extended vacations, or seasonal
relocations, as well as our concentrated marketing efforts generally
conducted during the fourth quarter. Rogers Retail operations
may also experience modest fluctuations from quarter-to-quarter
due to the availability and timing of release of popular titles
throughout the year. RBS does not have any unique seasonal
aspects to its business.
The seasonality at Media is a result of fluctuations in advertising
and related retail cycles, since they relate to periods of increased
consumer activity as well as fluctuations associated with the Major
League Baseball season, where revenues are generally concentrated
in the spring, summer and fall months.
In addition to the seasonal trends, revenue and operating profit
can fluctuate from general economic conditions. The Canadian
economy, and Ontario in particular, experienced an economic
slowdown in 2009.
Wireless revenue and operating profit growth reflects the
increasing number of wireless voice and data subscribers and
increased handset subsidies as a result of a consumer shift towards
smartphones, offset by a decrease in blended ARPU. Wireless has
continued its strategy of targeting higher value postpaid subscribers
and selling prepaid handsets at higher price points, which has also
contributed over time to the significantly heavier mix of postpaid
versus prepaid subscribers. Meanwhile, the successful growth in
customer base and 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, as
well as strong growth in roaming revenues from visitors to Canada
utilizing our GSM network.