Rogers 2015 Annual Report Download - page 49

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MANAGEMENT’S DISCUSSION AND ANALYSIS
BUSINESS SOLUTIONS
LEADING-EDGE WIRELINE TELECOM AND DATA
COMMUNICATIONS SERVICES TO CANADIAN
BUSINESSES
As at December 31, 2015, Business Solutions:
• sells to small, medium, and large enterprises and
governments;
• sells to other carriers on a wholesale basis;
• has 8,500 on-net fibre connected buildings; and
• has fibre passing close to an additional 23,000 near-net
buildings.
BUSINESS SOLUTIONS FINANCIAL RESULTS
Years ended December 31
(In millions of dollars, except margins) 2015 12014 % Chg
Operating revenue
Next generation 288 271 6
Legacy 85 106 (20)
Service revenue 373 377 (1)
Equipment sales 45 (20)
Operating revenue 377 382 (1)
Operating expenses 261 260 –
Adjusted operating profit 116 122 (5)
Adjusted operating profit margin 30.8% 31.9% (1.1 pts)
Additions to property, plant and equipment 187 146 28
1The operating results of Internetworking Atlantic Inc. are included in the Business
Solutions results of operations from the date of acquisition on November 30, 2015.
Business Solutions generates revenue from the provision of wireline
communications services and the sale of related equipment to
Canadian businesses and governments at retail rates and to other
telecommunications providers on a wholesale basis.
Next generation revenue is generated by the provision of high-
speed, high-reliability data and voice communications, provided on
Rogers’ advanced IP, Ethernet, and cloud platforms, and mainly
through Rogers’ extensive communications network and data
centre infrastructure.
Legacy revenue is generated mainlybycircuit-switchedlocaland
long distance voice services and legacy data services, provided over
TDM and prior generation data platforms, with client access often
delivered using leased third-party network elements and tariffed
ILEC services.
(IN MILLIONS OF DOLLARS)
BUSINESS SOLUTIONS SERVICE REVENUE MIX
2015
2014
2013
85 288
106 271
149 213
Next GenerationLegacy
$0.4
BILLION
(%)
2015 BUSINESS SOLUTIONS SERVICE REVENUE MIX
NEXT GENERATION 77%
LEGACY 23%
Business Solutions continues to focus primarily on next generation
IP-based services, leveraging higher margin on-net and near-net
service revenue opportunities, and using existing network facilities
to expand offerings to the small, medium, and large sized
enterprise, public sector, and carrier wholesale markets. Business
Solutions also provides voice and data communications and
advanced services, including data centres, cloud computing, fibre
networking, and professional services.
OPERATING REVENUE
The 1% decrease in service revenue this year was a result of:
• the continued decline in the legacy and off-net voice business, a
trend we expect to continue as we focus the business on next
generation on-net and near-net opportunities and customers
move to more advanced and cost-effective IP-based services and
solutions; partially offset by
• the continuing execution of our plan to grow higher margin,
next generation on-net and near-net IP-based services revenue.
Next generation services, which include our data centre operations,
represented 77% (2014 – 72%) of total service revenue during the year.
OPERATING EXPENSES
The marginal increase in operating expenses this year was a result of:
• higher service costs; partially offset by
• ongoing initiatives to reduce costs and increase productivity.
ADJUSTED OPERATING PROFIT
The 5% decrease in adjusted operating profit this year was a result
of the revenue and expense changes discussed above.
OTHER DEVELOPMENTS
In November 2015, we acquired 100% of the common shares of
Internetworking Atlantic Inc. (IAI) for $6 million. IAI provided
enhanced technology solutions and services for business and
public sector clients in Atlantic Canada. The acquisition of IAI will
enable us to offer greater local expertise in the areas of cloud
computing, data centre services, fibre networking, and professional
services.
(IN MILLIONS OF DOLLARS)
BUSINESS SOLUTIONS ADJUSTED OPERATING PROFIT
2015
2014
2013
$116
$122
$106
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 47