Rogers 2010 Annual Report Download - page 54

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
58 ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT
private Rogers family holding companies controlled by the Rogers
ControlTrusttogetherownedapproximately90.9%oftheoutstanding
RCI Class A Voting Shares, which class is the only class of issued shares
carryingtherighttovoteinallcircumstances,andapproximately9.0%
of the RCI Class B Non-Voting Shares. Accordingly, the Rogers Control
Trust is able to elect all of our Board of Directors and to control the vote
on matters submitted to a vote of our shareholders. See the section
entitled “Outstanding Shares and Main Shareholder” in RCI’s
Information Circular.
The Rogers Control Trust holds voting control of the Rogers group of
companies for the benefit of successive generations of the Rogers
family and deals with RCI on the company’s long-term strategy and
direction.
The Rogers Control Trust satisfies the Canadian ownership and control
requirements that apply to RCI and its regulated subsidiaries, and RCI
made all necessary filings relating to the Trust with the relevant
Canadian regulatory authorities in March 2010.
Our Holding Company Structure May Limit Our Ability to Meet Our
Financial Obligations.
As a holding company, our ability to meet our financial obligations is
dependent primarily upon the receipt of interest and principal
payments on intercompany advances, rental payments, cash dividends
and other payments from our subsidiaries together with proceeds
raised by us through the issuance of equity and debt and from the sale
of assets.
Substantially all of our business activities are operated by our
subsidiaries. All of our subsidiaries are distinct legal entities and have
no obligation, contingent or otherwise, to make funds available to us
whether by dividends, interest payments, loans, advances or other
payments, subject to payment arrangements on intercompany
advances. In addition, the payment of dividends and the making of
loans, advances and other payments to us by these subsidiaries are
subject to statutory or contractual restrictions, are contingent upon the
earnings of those subsidiaries and are subject to various businesses and
other considerations.
Changes in Government Regulations Could Adversely Affect Our
Results of Operations in Wireless, Cable and Media.
As described in the section of this MD&A entitled “Government
Regulation and Regulatory Developments”, substantially all of our
business activities are regulated by Industry Canada and/or the CRTC,
and accordingly our results of operations on a consolidated basis could
be adversely affected by changes in regulations and by the decisions of
these regulators. This regulation relates to, among other things,
licencing, competition, the cable television programming services that
we must distribute, wireless and wireline interconnection agreements,
the rates we may charge to provide access to our network by third
parties, resale of our networks and roaming on to our networks, our
operation and ownership of communications systems and our ability to
acquire an interest in other communications systems. In addition, the
costs of providing services may be increased from time to time as a
result of compliance with industry or legislative initiatives to address
consumer protection concerns or such Internet-related issues as
copyright infringement, unsolicited commercial e-mail, cyber-crime
and lawful access. Our cable, wireless and broadcasting licences may
not generally be transferred without regulatory approval.
Generally, our licences are granted for a specified term and are subject
to conditions on the maintenance of these licences. These licencing
conditions may be modified at any time by the regulators. The
regulators may decide not to renew a licence when it expires and any
failure by us to comply with the conditions on the maintenance of a
licence could result in a revocation or forfeiture of any of our licences or
the imposition of fines.
The licences include conditions requiring us to comply with Canadian
ownership restrictions of the applicable legislation. We are currently in
compliance with all of these Canadian ownership and control
requirements. However, if these requirements are violated, we would
be subject to various penalties, possibly including, in the extreme case,
the loss of a licence.
We May Engage in Unsuccessful Acquisitions or Divestitures.
Acquisitions of complementary businesses and technologies,
development of strategic alliances and divestitures of portions of our
business are a part of our overall business strategy. Services,
technologies, key personnel or businesses of acquired companies may
not be effectively assimilated into our business or service offerings and
our alliances may not be successful. We may not be able to successfully
complete any divestitures on satisfactory terms, if at all. Divestitures
may result in a reduction in our total revenues and net income.
We Have Substantial Debt and Interest Payment Requirements that
May Restrict our Future Operations and Impair our Ability to Meet
our Financial Obligations.
Our substantial debt may have important consequences. For instance,
it could:
• Makeitmoredifcultforustosatisfyournancialobligations;
• Requireustodedicateasubstantialportionofanycashowfrom
operations to the payment of interest and principal due under
our debt, which would reduce funds available for other business
purposes;
• Increaseourvulnerabilitytogeneraladverseeconomicandindustry
conditions;
• Limitourexibilityinplanningfor,orreactingto,changesinour
business and the industry in which we operate;
• Placeusatacompetitivedisadvantagecomparedtosomeofour
competitors that have less financial leverage; and
• Limit our abilitytoobtainadditionalnancingrequiredto fund
working capital and capital expenditures and for other general
corporate purposes.
Our ability to satisfy our obligations depends on our future operating
performance and on economic, financial, competitive and other
factors, many of which are beyond our control. Our business may not
generate sufficient cash flow and future financings may not be
available to provide sufficient net proceeds to meet these obligations
or to successfully execute our business strategy.
We Are Subject to Various Risks from Competing Technologies.
There are several technologies that may impact the way in which our
services are delivered. These technologies include broadband, IP-based
voice, data and video delivery services, the mass market deployment of
optical fibre technologies to the residential and business markets, the
deployment of broadband wireless access, and wireless services using
radio frequency spectrum to which we may have limited access. These
technologies may result in significantly different cost structures for the
users of the technologies, and may consequently affect the long-term
viability of certain of our currently deployed technologies. Some of
these new technologies may allow competitors to enter our markets
with similar products or services that may have lower cost structures.
Some of these competitors may be larger with more access to financial
resources than we have.
We May Fail to Achieve Expected Revenue Growth from New and
Advanced Services.
We expect that a substantial portion of our future revenue growth will
be achieved from new and advanced services. Accordingly, we have
invested and continue to invest significant capital resources in the
development of our networks in order to offer these services. However,