Rogers 2013 Annual Report Download - page 48

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MANAGEMENT’S DISCUSSION AND ANALYSIS
Higher Cable Telephony Revenue and Growing Subscriber Base
Phone revenue was 4%higher in 2013, compared to last year, the net
result of:
• higher phone subscriber base
• partially offset by higher promotional pricing activity.
Phone subscribers grew 7%in 2013, compared to last year and represent:
•54%of our television subscribers, compared to 49%last year
•29%of the homes passed by our cable network, compared to 28%
last year.
Lower Equipment Sales
Equipment sales include revenues generated from the sale of digital
cable set-top terminals and Internet modems.
Lower equipment revenue this year compared to 2012 reflects the
reduction of cable boxes sales versus rentals.
Discontinued Operations
In 2012, we closed our Video store operations, which offered DVD and
video game rentals of equipment and sales in many of our corporate-
owned retail locations. The results of the Video business were treated as
discontinued operations for accounting and reporting purposes. See
“Review of Consolidated Performance”.
Higher Operating Expenses
We assess Cable operating expenses in three categories:
• the cost of equipment sales (cable digital set-top box and Internet
modem equipment)
• the cost of programming
• all other expenses involved in day-to-day operations, to service
existing subscriber relationships and attract new subscribers.
Overall operating expenses increased slightly this year compared to last
year mainly due to:
• operating expenses generated by Mountain Cable which we acquired
earlier this year
• higher investments in customer care and network
• partially offset by savings from improvements in our cost structure
and productivity and lower subscriber additions.
Higher Adjusted Operating Profit
Adjusted operating profit was 7%higher this year mainly the net result
of higher service revenue, partially offset by higher operating expenses.
The increase in the adjusted operating profit margin reflects a
continued shift in product mix to the higher margin Internet and phone
products combined with efficiency gains. This increased our adjusted
operating profit margin to 49.4%, compared to 47.8%in 2012.
Excluding the results of Mountain Cable which we acquired in the
second quarter of 2013:
• revenue would have been 2%higher this year compared to last year,
instead of 3%higher as reported
• adjusted operating profit would have been 5%higher this year
compared to last year, instead of 7%higher as reported.
2013
2012
2011
1,153
1,074
1,052
29%
28%
28%
(IN THOUSANDS)
CABLE TELEPHONY SUBSCRIBERS AND CABLE TELEPHONY
PENETRATION OF HOMES PASSED % (IN MILLIONS OF DOLLARS)
CABLE ADJUSTED OPERATING PROFIT
AND CABLE ADJUSTED PROFIT MARGIN %
2013
2012
2011
$1,718
$1,605
$1,549
49.4%
47.8%
46.8%
44 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT