Rogers 2012 Annual Report Download - page 27

MANAGEMENT’S DISCUSSION AND ANALYSIS
ADDITIONAL INFORMATION
Additional information relating to Rogers, including our Information
Circular, Annual Information Form, and discussions of our 2012
quarterly results, may be found online at rogers.com/investors,
sedar.com or sec.gov. Information contained in or connected to these
websites are not a part of and not incorporated into this MD&A.
Additional information on Rogers’ corporate social responsibility
reporting and corporate governance, along with a glossary of
communications and media industry terms, can also be found at
rogers.com/investors.
1. EXECUTIVE SUMMARY
We are one of Canada’s leading diversified communications and
media companies. Through our four operating segments – Wireless,
Cable, RBS and Media – we provide a broad range of services: wireless
and wired voice and data communications, cable television, high-
speed Internet, telephony, wired telecom and data networking
services to businesses. We are also active in television and radio
broadcasting, televised shopping, sports entertainment, digital media,
and consumer, trade and professional publications. Almost all of our
operations and sales are in Canada, supported by a highly skilled and
diversified workforce approximately 24,500 employees strong.
The Canadian telecommunications and media industries are both
subject to various regulatory controls and competitive dynamics as
discussed later in this MD&A. Over the past few years, the industry has
seen a shift toward vertical integration, a migration to next
generation wireless technologies and innovations to deliver
telecommunications services and premium media content across both
traditional and newly developed platforms. We continue to evolve
our corporate strategy to thrive in this operating environment by
focusing on growing areas of our business, including wireless data
revenue and smartphone penetration, and offering products and
services aligned with transforming consumer demands.
We continue to focus on innovation to meet the changing needs and
desires of our customers as technology evolves. We are committed to
providing customers with ground-breaking solutions and state-of-the-
art products at home and for businesses. We put the newest and
fastest Wireless technology available in the hands of our customers
with the expansion of our LTE network, created advanced conversion
of television and Internet experiences with Nextbox 2.0 and Rogers
Anyplace TV, made significant investments to our Cable network to
deliver the fastest Internet speeds available, offered more next-
generation IP based solutions to our enterprise customers. In addition,
we completed the joint acquisition of 37.5% of Maple Leaf Sports &
Entertainment to further enhancing our sports content offerings.
Our strategy requires continued capital investments and innovative
service offerings to maintain our industry leadership and continue to
be the first in Canada to deliver seamless, easy-to-use and reliable
end-to-end supported experiences to our customers.
At Wireless, in 2012, strong data service growth and ongoing
increases to our subscriber base, resulted in revenue growth of 2%
year over year. Wireless activated nearly 2.9 million smartphones,
bringing smartphone penetration to 69% of the postpaid subscriber
base.
To drive future growth opportunities aligned with consumer demand
for advanced mobile data applications, together with the Canadian
Imperial Bank of Commerce (“CIBC”), we launched Canada’s first
mobile payment solution. It allows consumers to pay for purchases
with their CIBC credit card using a compatible Rogers NFC-enabled
smartphone. This is one of the first solutions of its kind anywhere in
the world.
At Cable, in 2012, revenue was positively impacted by growth to our
Internet subscriber base, which was partially offset by market
declines. The increase in Cable revenue reflects our mix of
promotional programs designed to encourage movement of cable
and Internet subscribers to term contracts and higher-end tiers.
Cable demonstrated its commitment to bringing leading Internet
experiences to Canadians by increasing speeds across approximately
90% of its footprint, including doubling the speed of our Ultimate
tier to 150 Mbps and unveiling NextBox 2.0 and Rogers anyplace TV
Home edition application for tablets providing a seamless converged
TV and Internet experience.
At RBS, in 2012, 27% growth of next-generation revenue was offset
by a 32% planned decline in legacy revenue for an overall decline in
RBS revenue of 13%. The shift to higher margin next-generation IP
services enabled RBS to generate 3% growth in adjusted operating
profit. Focusing on the higher margin IP services, RBS launched a new
SIP Trunking voice solution for its enterprise customers.
At Media, in 2012, revenue increased modestly from 2011, primarily
driven by growth in our sports properties. Media experienced a
continued weakness in the advertising sales market that stemmed
from economic softness and shifting trends in advertiser spending.
Media made further investments in first-class content offerings,
purchasing theScore television network and completing several off-
season all-star calibre player acquisitions at the Blue Jays, to be
positioned to monetize on future changes in the economic
environment.
We have a healthy balance sheet from both a leverage and a liquidity
perspective. With an investment grade rating for the year ended
December 31, 2012, our debt-to-adjusted-operating-profit ratio is 2.3
times and we have available liquidity of $3.1 billion, with $213 million
in cash, $900 million available through our new accounts receivable
securitization program, and all of our $2.0 billion fully committed
multi-year bank credit facility available at December 31, 2012.
(%)
2012 CONSOLIDATED REVENUE BY SEGMENT
WIRELESS 58%
MEDIA 13%
CABLE 26%
$12.5
RBS 3%
BILLION
(%)
2012 CONSOLIDATED ADJUSTED OPERATING PROFIT BY SEGMENT
WIRELESS 62%
MEDIA 4%
CABLE 32%
RBS 2%
$4.8
BILLION
2012 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 23