RG Rogers Commun CL B

Consolidated Revenue Grows 14.4% to $2.4 Billion and Consolidated Operating Profit Increases 46.3% to $752 Million in the Quarter; TORONTO, Feb. 15 /PRNewswire-FirstCall/ -- Rogers Communications Inc. today announced its consolidated financial and operating results for the three and twelve months ended December 31, 2006. Financial highlights are as follows: ------------------------------------------------------------------------- (In millions Three months ended Twelve months ended of dollars, December 31, December 31, except per --------------------------------------------------------- share amounts) 2006 2005 % Chg 2006 2005 % Chg ------------------------------------------------------------------------- Operating revenue(1) $2,370 $2,071 14.4 $8,838 $7,334 20.5 Operating profit(2) 752 514 46.3 2,875 2,144 34.1 Net income (loss) 176 (67) n/m 622 (45) n/m Net income (loss) per share(3) : Basic $ 0.28 $(0.11) n/m $ 0.99 $(0.08) n/m Diluted 0.27 (0.11) n/m 0.97 (0.08) n/m ------------------------------------------------------------------------- (1) Certain current and prior year amounts related to equipment sales and cost of equipment sales have been reclassified. See the "Reclassification of Wireless Equipment Sales and Cost of Sales" section for further details. (2) Operating profit should not be considered as a substitute or alternative for operating income or net income, in each case determined in accordance with generally accepted accounting principles ("GAAP"). See the "Reconciliation of Operating Profit to Net Income (Loss) for the Period" section for a reconciliation of operating profit to operating income and net income under GAAP and the "Key Performance Indicators and Non-GAAP Measures" section. (3) Prior period per share amounts have been retroactively adjusted to reflect a two-for-one split of the Company's Class A Voting and Class B Non-Voting shares on December 29, 2006. Highlights of the fourth quarter of 2006 include the following: - Operating revenue increased 14.4% for the quarter, with all of our operating units contributing to the growth, while quarterly operating profit grew 46.3% year-over-year, driven by growth in all operating units. - Strong subscriber growth continued at Wireless, with quarterly net postpaid additions of 189,300 and net prepaid additions of 55,200. - Wireless postpaid subscriber monthly churn was 1.24%, the lowest in Wireless' history, versus 1.57% in the fourth quarter of 2005. Postpaid monthly ARPU (average revenue per user) increased 6.1% from the fourth quarter of 2005 to $69.04, helped by a 41.6% increase in wireless data revenue. - Successfully launched our High-Speed Downlink Packet Access ("HSDPA") network in the Golden Horseshoe markets of Ontario. This next generation broadband wireless technology, which Wireless continues to deploy across other major markets, is the fastest mobile wireless data service available in Canada. - Added 95,100 cable telephony residential subscriber lines (of which 13,100 were migrations from the circuit-switched platform) to end the quarter with 365,900 residential voice-over-cable telephony subscriber lines. The combined number of local telephony lines on both the cable telephony and circuit-switched platforms of Rogers Home Phone and Rogers Business Solutions reached 920,500. - Drove basic cable subscriber gains of 10,700 versus an increase of approximately 8,000 in the fourth quarter of 2005. Digital cable households increased by 69,600 in the quarter to reach a total of 1,134,000, while residential high-speed Internet subscribers grew by 44,800 in the quarter to a total of 1,291,000. - Concluded the final phase of a multi-staged transaction to acquire certain of the CLEC assets of Group Telecom/360Networks from Bell Canada, including approximately 3,400 route kilometres of multi- stranded local and regional fibre; voice and data switching infrastructure; and co-location, point-of-presence and hub sites in Ontario, Quebec, Nova Scotia, New Brunswick and Newfoundland. - Gained CRTC approval for Media to acquire five Alberta Radio stations. The acquisition closed January 1, 2007 and brought the total number of radio stations owned by Rogers to 51. - Announced and implemented a two-for-one split of our Class A Voting and Class B Non-Voting shares during the quarter, with the additional shares having been distributed to shareholders beginning January 5, 2007. - Cable made significant investments during the quarter on network enhancements, customer premise equipment, and scaleable infrastructure related to network capacity increases in order to accommodate future demand for cable, Internet and telephony products. - Announced a 113% increase in our annual dividend from C$0.075 to C$0.16 per share (on a post split basis) during the quarter, and also modified our dividend distribution policy from a semi-annual to a quarterly basis. The first quarterly dividend at the increased rate was paid on January 2, 2007 to shareholders of record on December 20, 2006. "I am pleased with the solid financial and operating results Rogers generated in 2006 and thankful to our many dedicated employees for their hard work during the year," said Ted Rogers, President and CEO of Rogers Communications Inc. "We are fortunate to see continued healthy demand in the markets we serve and excellent responses from customers for our innovative wireless, cable, high-speed Internet and telephony products. As 2007 unfolds, our focus remains steadfastly on delivering profitable growth through innovation and disciplined execution." This earnings release should be read in conjunction with our 2005 Annual MD&A and our 2005 Annual Audited Consolidated Financial Statements and Notes thereto, as well as our 2006 quarterly interim financial and other recent securities filings available on SEDAR at http://www.sedar.com/. As this earnings release includes forward-looking statements and assumptions, readers should carefully review the sections of this release entitled 'Caution Regarding Forward-Looking Statements, Risks and Assumptions'. In this release, the terms "we", "us", "our", and "the Company" refer to Rogers Communications Inc. and our subsidiaries, which are reported in the following three segments: - "Wireless", which refers to our wholly owned subsidiary Rogers Wireless Communications Inc. and its subsidiaries, including Rogers Wireless Inc. ("RWI") and its subsidiaries; - "Cable and Telecom", which refers to our wholly owned subsidiary Rogers Cable Inc. and its subsidiaries; and - "Media", which refers to our wholly owned subsidiary Rogers Media Inc. and its subsidiaries including Rogers Broadcasting, which owns Rogers Sportsnet, 51 radio stations, OMNI television and The Shopping Channel, Rogers Publishing and Rogers Sports Entertainment, which owns the Toronto Blue Jays and the Rogers Centre. In addition, Media holds ownership interests in entities involved in specialty TV content, TV production and broadcast sales. "RCI" refers to the legal entity Rogers Communications Inc. excluding our subsidiaries. Throughout this release, all amounts appear in Canadian dollars unless otherwise indicated, and percentage changes are calculated using numbers rounded to the decimal to which they appear. Prior period share and per share amounts have been retroactively adjusted to reflect a two-for-one split of our common stock in December 2006. SUMMARY CONSOLIDATED FINANCIAL RESULTS (Unaudited) ------------------------------------------------------------------------- (In millions Three months ended Twelve months ended of dollars, December 31, December 31, except per --------------------------------------------------------- share amounts) 2006 2005 % Chg 2006 2005 % Chg ------------------------------------------------------------------------- Operating revenue Wireless(1) $1,257 $1,050 19.7 $4,580 $3,860 18.7 Cable and Telecom Cable and Internet 505 453 11.5 1,944 1,735 12.0 Rogers Home Phone 99 75 32.0 355 150 136.7 Rogers Business Solutions 155 143 8.4 596 284 109.9 Rogers Retail 84 91 (7.7) 310 327 (5.2) Corporate items and eliminations (1) (1) - (4) (4) - --------------------------------------------------------- 842 761 10.6 3,201 2,492 28.5 Media 317 300 5.7 1,210 1,097 10.3 Corporate items and eliminations (46) (40) 15.0 (153) (115) 33.0 --------------------------------------------------------- Total 2,370 2,071 14.4 8,838 7,334 20.5 Operating expenses, including integration and Rogers Retail store closure expenses Wireless(1) 740 758 (2.4) 2,611 2,523 3.5 Cable and Telecom Cable and Internet 287 256 12.1 1,111 1,012 9.8 Rogers Home Phone 96 70 37.1 345 141 144.7 Rogers Business Solutions 143 128 11.7 547 264 107.2 Rogers Retail 83 88 (5.7) 303 309 (1.9) Integration costs 3 3 - 9 5 80.0 Corporate items and eliminations (1) (1) - (4) (4) - --------------------------------------------------------- 611 544 12.3 2,311 1,727 33.8 Media 270 261 3.4 1,059 969 9.3 Corporate items and eliminations (3) (6) (50.0) (18) (29) (37.9) --------------------------------------------------------- Total 1,618 1,557 3.9 5,963 5,190 14.9 Operating profit, after integration and Rogers Retail store closure expenses(2) Wireless(3) 517 292 77.1 1,969 1,337 47.3 Cable and Telecom Cable and Internet 218 197 10.7 833 723 15.2 Rogers Home Phone 3 5 (40.0) 10 9 11.1 Rogers Business Solutions 12 15 (20.0) 49 20 145.0 Rogers Retail 1 3 (66.7) 7 18 (61.1) Integration costs (3) (3) - (9) (5) 80.0 --------------------------------------------------------- 231 217 6.5 890 765 16.3 Media 47 39 20.5 151 128 18.0 Corporate items and eliminations (43) (34) 26.5 (135) (86) 57.0 --------------------------------------------------------- Total 752 514 46.3 2,875 2,144 34.1 --------------------------------------------------------- Other income and expense, net(4) 576 581 (0.9) 2,253 2,189 2.9 --------------------------------------------------------- Net income (loss) $ 176 $ (67) n/m $ 622 $ (45) n/m --------------------------------------------------------- Net income (loss) per share(5): Basic $ 0.28 $(0.11) n/m $ 0.99 $(0.08) n/m Diluted 0.27 (0.11) n/m 0.97 (0.08) n/m Additions to PP&E(2) Wireless $ 201 $ 205 (2.0) $ 684 $ 585 16.9 Cable and Telecom Cable and Internet 188 160 17.5 492 515 (4.5) Rogers Home Phone 71 33 115.2 193 121 59.5 Rogers Business Solutions 48 14 n/m 98 63 55.6 Rogers Retail 6 4 50.0 11 15 (26.7) --------------------------------------------------------- 313 211 48.3 794 714 11.2 Media 16 12 33.3 48 40 20.0 Corporate(6) 24 3 n/m 186 16 n/m --------------------------------------------------------- Total $ 554 $ 431 28.5 $1,712 $1,355 26.3 --------------------------------------------------------- ------------------------------------------------------------------------- (1) Certain current and prior year amounts related to Wireless equipment sales and cost of equipment sales have been reclassified. See the "Reclassification of Wireless Equipment Sales and Cost of Sales" section for further details. (2) As defined. See the "Key Performance Indicators and Non-GAAP Measures" section. Operating profit includes integration costs and Rogers Retail store closure expenses of $4 million and $18 million for the three and twelve months ended December 31, 2006, respectively, and $32 million and $66 million for the three and twelve months ended December 31, 2005, respectively. (3) During the three months ended December 31, 2006, certain accrued liabilities in Wireless were updated for new information, resulting in an increase to operating profit of approximately $19 million. In the three months ended December 31, 2005, Wireless incurred costs of approximately $16 million that were not incurred in the same period of 2006. (4) See the "Reconciliation of Operating Profit to Net Income (Loss) for the Period" section for details of these amounts. (5) Prior period per share amounts have been retroactively adjusted to reflect a two-for-one split of the Company's Class A Voting and Class B Non-voting shares in December 2006. (6) Corporate additions to PP&E for the twelve months ended December 31, 2006 include $105 million for RCI's purchase of real estate in Brampton, Ontario. In addition, during the three and twelve months ended December 31, 2006, RCI's PP&E improvements related to the Brampton real estate totalled $12 million and $28 million, respectively. For discussions of the results of operations of each of these segments, refer to the respective segment sections of this release. Reconciliation of Operating Profit to Net Income (Loss) for the Period The items listed below represent the consolidated income and expense amounts that are required to reconcile operating profit to the net income (loss) for the period as defined under Canadian GAAP. For details of these amounts on a segment-by-segment basis and for an understanding of intersegment eliminations on consolidation, the following section should be read in conjunction with tables in the Supplemental Information section entitled "Segmented Information". ------------------------------------------------------------------------- Three months ended Twelve months ended December 31, December 31, (In millions --------------------------------------------------------- of dollars) 2006 2005 % Chg 2006 2005 % Chg ------------------------------------------------------------------------- Operating profit(1) $ 752 $ 514 46.3 $2,875 $2,144 34.1 Depreciation and amortization (395) (404) (2.2) (1,584) (1,489) 6.4 --------------------------------------------------------- Operating income 357 110 n/m 1,291 655 97.1 Interest expense on long-term debt (151) (163) (7.4) (620) (699) (11.3) Foreign exchange gain (loss) (39) (4) n/m 2 35 (94.3) Change in the fair value of derivative instruments 24 2 n/m (4) (25) (84.0) Other income (expense), net (2) (20) (90.0) 9 (9) n/m Income tax reduction (expense) (13) 8 n/m (56) (2) n/m --------------------------------------------------------- Net income (loss) $ 176 $ (67) n/m $ 622 $ (45) n/m --------------------------------------------------------- ------------------------------------------------------------------------- (1) As defined. See the "Key Performance Indicators and Non-GAAP Measures" section. Operating Income The growth in our consolidated operating income for the three months ended December 31, 2006 as compared to the corresponding period in 2005 resulted from the higher operating profit across all of our operating units. See the section entitled "Operating Unit Review" for a detailed discussion of operating unit results. Interest on Long-Term Debt The reduction in interest expense for the three months ended December 31, 2006 compared to the corresponding period in 2005 is primarily due to the decrease in debt as at December 31, 2006, compared to December 31, 2005, of more than $750 million, including the impact of cross-currency interest rate exchange agreements. This decrease in debt was largely the result of the repayment at maturity in February 2006 of RCI's $75 million 10.50% Senior Notes, the repayment in June 2006 of $160 million of the 10.5% Wireless Senior Secured Notes, Wireless' July 2006 repayment of a mortgage in the amount of $22 million and aggregate net repayments under our various bank credit facilities. Foreign Exchange Gain (Loss) During the three months ended December 31, 2006, the Canadian dollar weakened by 5 cents versus the U.S. dollar. This resulted in a foreign exchange loss of $39 million during the three months ended December 31, 2006 primarily related to U.S. dollar-denominated long-term debt not hedged for accounting purposes. The corresponding period in 2005 reflected a foreign exchange loss of $4 million related to long-term debt not hedged for accounting purposes given a 0.48 cent weakening of the Canadian dollar in that period. Change in Fair Value of Derivative Instruments The change in fair value of derivative instruments in the three months ended December 31, 2006 and 2005 was primarily the result of the changes in the Canadian dollar relative to that of the U.S. dollar, as described above, and the resulting change in fair value of our cross-currency interest rate exchange agreements not accounted for as hedges. Other Income (Expense) Other expenses for the three months ended December 31, 2006 and 2005 were primarily associated with losses from investments, net of gains on the sale of investments, write-downs required to reflect other than temporary declines in the values of certain investments, and a loss on repayment of long-term debt. Income Taxes Current income tax expense has historically consisted primarily of the Canadian Federal Large Corporations Tax ("LCT"). Due to the elimination of LCT in 2006, no amount has been expensed in respect of LCT for the three month period ended December 31, 2006. We recorded a current income tax recovery of $7 million in the fourth quarter of 2006 related primarily to the reduction of certain amounts previously accrued for income taxes. We recorded net future income tax expense for the three month period ended December 31, 2006 of $20 million. Net Income (Loss) and Net Income (Loss) Per Share We recorded net income of $176 million for the three months ended December 31, 2006 or basic earnings per share of $0.28 (diluted - $0.27), compared to a net loss of $67 million or basic and diluted loss per share of $0.11 in the corresponding period in 2005. 2006 PERFORMANCE AGAINST TARGETS AND 2007 GUIDANCE 2006 Performance Against Targets The following table sets forth the guidance ranges for selected full year financial and operating metrics that we provided for 2006, as revised during the year, versus the actual results we achieved for the year. As indicated in the table, we either met or exceeded our operating and financial targets in all categories. -------------------------------------------- ------------------- -------- (In millions of dollars, except Original 2006 Range Updated from 2006 subscribers) (At February 9, 2006) Original Guidance Actual -------------------------------------------- ------------------- -------- Revenue Wireless (network revenue) $4,125 to $4,175 $4,125 to $4,300 $4,313 Cable and Telecom 3,110 to 3,185 3,110 to 3,217 3,201 Media 1,165 to 1,205 1,165 to 1,205 1,210 Operating profit(1) Wireless(2) $1,730 to $1,780 $1,730 to $1,905 $1,997 Cable and Telecom(3) 825 to 860 825 to 877 899 Media 115 to 120 115 to 130 151 PP&E expenditures(4) Wireless $ 600 to $ 650 $ 600 to $ 650 $ 624 Cable and Telecom 640 to 695 640 to 751 751 Net subscriber additions (000's) Retail wireless postpaid and prepaid 525 to 575 525 to 575 610 Basic cable 0 to 10 0 to 10 13 Digital households 175 to 225 175 to 225 221 High-speed Internet 125 to 175 125 to 175 155 Residential cable telephony 200 to 250 200 to 300 318 Rogers Telecom integration $ 50 to $ 65 $ 50 to $ 65 $ 52 -------------------------------------------- ------------------- -------- (1) Before Rogers Communications Inc. ("RCI") corporate expenses and management fees paid to RCI. (2) Excludes operating losses related to the Inukshuk fixed wireless initiative and costs associated with the integration of Fido Solutions Inc. ("Fido"). (3) Excludes costs associated with the integration of Call-Net Enterprises Inc. ("Call-Net"). (4) Does not include Corporate, Inukshuk or Media PP&E expenditures or the PP&E expenditures related to the Call-Net integration. Full Year 2007 Financial and Operating Guidance The following table outlines our financial and operational guidance for the full year 2007. This information is forward-looking and should be read in conjunction with the sections below entitled 'Caution Regarding Forward- Looking Statements, Risks and Assumptions'. 2007 Full Year Guidance Ranges ------------------------------------------- -------------------- -------- 2006 (Millions of dollars, except subscribers) 2007 Range Actual ------------------------------------------- -------------------- -------- Consolidated Revenue $9,700 to $10,000 $8,838 Operating profit(1) 3,250 to 3,400 2,887 PP&E expenditures(1) 1,625 to 1,750 1,669 Free cash flow(2) 800 to 1,000 543 Revenue Wireless (network revenue) $4,900 to $5,000 $4,313 Cable and Telecom(A) 3,615 to 3,700 3,201 Media(B) 1,275 to 1,325 1,210 Operating profit(3) Wireless(4) $2,250 to $2,350 $1,997 Cable and Telecom(A)(1) 935 to 975 899 Media(B) 150 to 160 151 PP&E expenditures Wireless(C)(5) $675 to $725 $624 Cable and Telecom(A)(1)(6) 815 to 880 751 Media(7) 85 to 95 48 Net subscriber additions (000's) Retail wireless postpaid and prepaid(8) 500 to 600 610 Residential cable revenue generating units (RGU's)(9) 625 to 725 666 ------------------------------------------- -------------------- -------- (A) Supplementary Cable and Telecom detail: ------------------------------------------- -------------------- -------- 2006 Millions of dollars 2007 Range Actual ------------------------------------------- -------------------- -------- Revenue Cable, Internet and Home Phone $2,570 to $2,600 $2,299 Rogers Business Solutions 560 to 600 596 Rogers Retail 485 to 500 310 Operating profit(1) Cable, Internet and Home Phone $925 to $950 $843 Rogers Business Solutions 5 to 15 49 Rogers Retail 5 to 10 7 PP&E expenditures(1) Cable, Internet and Home Phone $665 to $700 $657 Rogers Business Solutions(6) 125 to 150 83 Rogers Retail 25 to 30 11 ------------------------------------------- -------------------- -------- (B) Supplementary Media detail: ------------------------------------------- -------------------- -------- 2006 Millions of dollars 2007 Range Actual ------------------------------------------- -------------------- -------- Revenue Core Media $1,095 to $1,135 $1,034 Sports Entertainment 180 to 190 176 Operating profit Core Media $175 to $190 $167 Sports Entertainment (25) to (30) (16) ------------------------------------------- -------------------- -------- (C) Supplementary Wireless PP&E expenditures detail: ------------------------------------------- -------------------- -------- 2006 Millions of dollars 2007 Range Actual ------------------------------------------- -------------------- -------- Wireless (excluding HSDPA)(5) $425 to $450 $360 HSDPA 250 to 275 264 ------------------------------------------- -------------------- -------- (1) Excludes integration related expenditures. (2) Free cash flow is defined as operating profit less PP&E expenditures and interest expense and is not a term defined under Canadian GAAP. (3) Before management fees paid to RCI in 2006. (4) Excludes operating losses related to the Inukshuk fixed wireless initiative estimated to be $35 million in 2007. (5) Excludes PP&E expenditures related to Inukshuk of approximately $25 million in 2007. (6) Rogers Business Solutions PP&E excludes integration costs estimated to be $25 million to $30 million in 2007. (7) The increase in Media PP&E primarily reflects the relocation and construction of new studio facilities for Rogers SportsNet. (8) Wireless subscriber net additions exclude any potential subscriber adjustments associated with the planned TDMA/analog network turndown. (9) Residential cable RGU's are comprised of basic cable subscribers, digital cable households, residential high-speed Internet subscribers and residential cable and circuit switched telephony subscribers. Includes approximately 75,000 migrations from the circuit-switched telephony platform to the cable telephony platform. The 2007 guidance for Wireless, Cable and Telecom, and Media reflect the impact of the following intercompany changes and transactions, which have no impact on consolidated results: Effective January 2007, the Rogers Video segment of Cable and Telecom acquired the approximately 170 Wireless-owned retail locations. This segment, now known as Rogers Retail, will provide our customers with a single direct retail channel featuring all of our wireless and cable products and services. The combined entity will continue to be a segment of Cable and Telecom. In 2007, this will have the impact of increasing revenue and expenses of Rogers Retail by approximately $175 million. In late December 2006, Wireless transferred the Rogers Campus (land and buildings) at fair market value to RCI. The Rogers Campus is comprised of the properties at 333 Bloor Street East and One Mount Pleasant Road in Toronto, Ontario. In early January 2007, Wireless, Cable and Telecom, and Media transferred certain land and buildings at fair market value to RCI. As a result of these transfers, it is expected that net rent expense for each of Wireless, Cable and Telecom, and Media will increase in 2007 by approximately $16 million, $6 million, and $3 million, respectively. Effective December 31, 2006, we terminated the management fee arrangements which had previously been in place between RCI and each of Wireless, Cable and Telecom, and Media. Management fees will no longer be paid by Wireless, Cable and Telecom, or Media to RCI. Such fees paid by the three segments to RCI totaled approximately $93 million in 2006. BASIS OF PRO FORMA INFORMATION Certain financial and operating data information in this release has been prepared on a pro forma basis as if the acquisition of Call-Net Enterprises Inc. ("Call-Net"), as described in our 2005 Annual MD&A, had occurred on January 1, 2004. Such information is based on our historical financial statements, the historical financial statements of Call-Net and the accounting for this business combination. Although we believe this presentation provides certain relevant contextual and comparative information for existing operations, the unaudited pro forma consolidated financial and operating data presented in this document is for illustrative purposes only and does not purport to represent what the results of operations actually would have been if the acquisition of Call-Net had occurred on January 1, 2004, nor does it purport to project the results of operations for any future period. This pro forma information reflects, among other things, adjustments to Call-Net's historically reported financial information to conform to our accounting policies and the impacts of purchase accounting. The pro forma adjustments are based upon certain estimates and assumptions that we believe are reasonable. Accounting policies used in the preparation of these statements are those disclosed in our 2005 Annual Audited Consolidated Financial Statements and Notes thereto. Certain tables in the "Cable and Telecom" section present selected unaudited pro forma information. OPERATING UNIT REVIEW WIRELESS -------- Reclassification of Wireless Equipment Sales and Cost of Sales During 2006, the Company determined that certain transactions related to the sale of wireless equipment were historically recorded as cost of equipment sales rather than as a reduction of equipment revenue. The Company determined these should be reflected as a reduction of equipment revenue and has reclassified current and prior year figures to reflect this accounting, resulting in a $61 million and $206 million reduction in both equipment revenue and cost of equipment sales in the three and twelve months ended December 31, 2006, respectively. This also resulted in a $48 million and $147 million reduction in both equipment revenue and cost of equipment sales in the three and twelve months ended December 31, 2005, respectively. As a result of this reclassification, there was no change to previously reported net income (loss) or operating income. Also, there is no impact on reported cash flow, the balance sheet, or any Wireless key performance indicators, including network revenue, ARPU, cost of acquisition, average monthly operating expense per user or operating profit margin as a percentage of network revenue. Included in the supplemental information section is a schedule which presents reclassified Wireless results for each quarter of 2005 and 2006 conformed to the current presentation. See "Wireless 2006 and 2005 Quarterly Summary." Wireless Financial Results ------------------------------------------------------------------------- Three months ended Twelve months ended (In millions December 31, December 31, of dollars, --------------------------------------------------------- except margin) 2006 2005 % Chg 2006 2005 % Chg ------------------------------------------------------------------------- Operating revenue Postpaid $1,095 $ 917 19.4 $4,084 $3,384 20.7 Prepaid 61 53 15.1 214 210 1.9 One-way messaging 4 5 (20.0) 15 20 (25.0) --------------------------------------------------------- Network revenue 1,160 975 19.0 4,313 3,614 19.3 Equipment sales(1) 97 75 29.3 267 246 8.5 --------------------------------------------------------- Total operating revenue 1,257 1,050 19.7 4,580 3,860 18.7 --------------------------------------------------------- Operating expenses Cost of equipment sales(1) $ 189 $ 195 (3.1) $ 628 $ 625 0.5 Sales and marketing expenses 186 194 (4.1) 604 604 - Operating, general and administrative expenses 365 344 6.1 1,376 1,240 11.0 Integration expenses(2) - 25 n/m 3 54 (94.4) --------------------------------------------------------- Total operating expenses 740 758 (2.4) 2,611 2,523 3.5 --------------------------------------------------------- Operating profit(3)(4)(5) $ 517 $ 292 77.1 $1,969 $1,337 47.3 --------------------------------------------------------- Operating profit margin as % of network revenue(5) 44.6% 30.0% 45.7% 37.0% Additions to property, plant and equipment ("PP&E")(5) $ 201 $ 205 (2.0) $ 684 $ 585 16.9 ------------------------------------------------------------------------- (1) Certain current and prior year amounts related to equipment sales and cost of equipment sales have been reclassified. See the "Reclassification of Wireless Equipment Sales and Cost of Sales" section. (2) Expenses incurred relate to the integration of the operations of Fido. (3) During the three months ended December 31, 2006, certain accrued liabilities in Wireless were updated for new information, resulting in an increase to operating profit of approximately $19 million. In the three months ended December 31, 2005, Wireless incurred costs of approximately $16 million that were not incurred in the same period of 2006. (4) Operating profit includes a loss of $10 million and $25 million for the three and twelve months ended December 31, 2006, respectively and $1 million and $5 million for the three and twelve months ended December 31, 2005, respectively, related to the Inukshuk fixed wireless initiative. (5) As defined. See the "Key Performance Indicators and Non-GAAP Measures" section. ------------------------------------------------------------------------- (Subscriber statistics in thousands, Three Months Ended December 31, except ARPU, churn and usage) 2006 2005 Chg % Chg ------------------------------------------------------------------------- Postpaid Gross additions 384.5 422.3 (37.8) (8.9) Net additions 189.3 202.6 (13.3) (6.6) Total postpaid retail subscribers Average monthly revenue per user ("ARPU")(1) $ 69.04 $ 65.05 $ 3.99 6.1 Average monthly usage (minutes) 556 536 20 3.7 Monthly churn 1.24% 1.57% (0.33%) (21.0) Prepaid Gross additions 181.1 160.3 20.8 13.0 Net additions(2) 55.2 13.7 41.5 n/m Total prepaid retail subscribers ARPU(1) $ 15.15 $ 13.30 $ 1.85 13.9 Monthly churn(2) 3.14% 3.68% (0.54%) (14.7) ------------------------------------------------------------------------- ------------------------------------------------------------------------- (Subscriber statistics in thousands, Twelve Months Ended December 31, except ARPU, churn and usage) 2006 2005 Chg % Chg ------------------------------------------------------------------------- Postpaid Gross additions 1,375.2 1,453.5 (78.3) (5.4) Net additions 580.1 603.1 (23.0) (3.8) Total postpaid retail subscribers 5,398.3 4,818.2 580.1 12.0 Average monthly revenue per user ("ARPU")(1) $ 67.27 $ 63.56 $ 3.71 5.8 Average monthly usage (minutes) 545 503 42 8.3 Monthly churn 1.32% 1.61% (0.29%) (18.0) Prepaid Gross additions 615.4 576.5 38.9 6.7 Net additions(2) 30.2 15.7 14.5 92.4 Total prepaid retail subscribers 1,380.0 1,349.8 30.2 2.2 ARPU(1) $ 13.49 $ 13.20 $ 0.29 2.2 Monthly churn(2) 3.70% 3.54% 0.16% 4.5 ------------------------------------------------------------------------- (1) As defined. See the "Key Performance Indicators and Non-GAAP Measures" section. (2) Effective November 9, 2004, the deactivation of prepaid subscribers acquired from Fido is recognized after 180 days of no usage to conform to the Wireless prepaid churn definition. This had the impact of decreasing prepaid subscriber net losses by approximately 12,000 in the twelve months ended December 31, 2005 and reducing prepaid churn by 0.10% for the twelve months ended December 31, 2005. There was no impact in the three months ended December 31, 2005 or any period in 2006. Wireless Network Revenue The increase in network revenue for the three months ended December 31, 2006 compared to the prior year period was driven by the continued growth of Wireless' postpaid subscriber base and improvements in postpaid average monthly revenue per user ("ARPU"). The year-over-year increase in postpaid ARPU in the fourth quarter of 2006 reflects the combination of higher data revenues, as well as continued growth in optional voice services, long distance and roaming revenue. Our success in the continued reduction in postpaid churn largely reflects proactive and targeted customer retention activities, including a continued trend towards having a greater portion of our subscriber base on longer term contracts, as well as the increased network density and coverage quality resulting from the completion of the integration of the Fido GSM network in mid-2005. We continue to have an opportunity for improvement in the area of prepaid churn. The decrease in prepaid churn in the fourth quarter of 2006 was largely due to increased retention efforts. During the three months ended December 31, 2006, wireless data revenue increased by 41.6% over the corresponding period in 2005 and totalled $130 million. This increase in data revenue reflects the continued rapid growth of text and multimedia messaging services, wireless Internet access, BlackBerry devices, downloadable ring tones, music and games, and other wireless data services and applications. For the fourth quarter of 2006, data revenue represented 11.2% of total network revenue compared to 9.4% in the corresponding period last year. Wireless Equipment Sales The year-over-year increase in revenue from equipment sales, including activation fees and net of equipment subsidies, reflects the increased volume of handset upgrades associated with subscriber retention programs combined with the generally higher prices of handsets and devices. Wireless Operating Expenses ------------------------------------------------------------------------- (In millions of dollars, Three months ended Twelve months ended except per December 31, December 31, subscriber --------------------------------------------------------- statistics) 2006 2005 % Chg 2006 2005 % Chg ------------------------------------------------------------------------- Operating expenses Cost of equipment sales(1) $ 189 $ 195 (3.1) $ 628 $ 625 0.5 Sales and marketing expenses 186 194 (4.1) 604 604 - Operating, general and administrative expenses 365 344 6.1 1,376 1,240 11.0 Integration expenses (2) - 25 n/m 3 54 (94.4) --------------------------------------------------------- Total operating expenses $ 740 $ 758 (2.4) $2,611 $2,523 3.5 --------------------------------------------------------- Average monthly operating expense per subscriber before sales and marketing expenses(3) $19.70 $23.26 (15.3) $19.69 $20.78 (5.2) Sales and marketing costs per gross subscriber addition(3) $ 427 $ 425 0.5 $ 399 $ 388 2.8 ------------------------------------------------------------------------- (1) Certain current and prior year amounts related to equipment sales and cost of equipment sales have been reclassified. See the "Reclassification of Wireless Equipment Sales and Cost of Sales" section. (2) Expenses incurred related to the integration of the operations of Fido. (3) As defined. See the "Key Performance Indicator and Non-GAAP Measures" section. As calculated in the "Supplementary Information" section. Cost of equipment sales remained relatively unchanged for the three months ended December 31, 2006 compared to the corresponding period of the prior year. Sales and marketing expenses in the three months ended December 31, 2006 were slightly lower than the corresponding period in 2005 as Wireless' gross subscriber additions declined. Sales and marketing costs per gross subscriber addition were relatively unchanged in the three months ended December 31, 2006 at $427 compared to $425 in 2005. The increased operating, general and administrative expenses were primarily due to the increases in retention spending and costs to support data and roaming services, partially offset by savings related to operating and scale efficiencies across various functions. Retention spending has increased due to higher volumes of handset upgrades compared to the fourth quarter of 2005. Retention spending, on both an absolute and a per subscriber basis, is expected to grow as wireless market penetration in Canada deepens and wireless number portability ("WNP") becomes available in March 2007. (See the section entitled "Caution Regarding Forward- Looking Statements, Risks and Assumptions" below.) The decrease in average monthly operating expense per subscriber, excluding sales and marketing expenses, is primarily due to operating and scale efficiencies across various functions. Wireless Operating Profit The strong year-over-year growth in operating profit was largely the result of the growth in network revenue and the impact of certain changes in estimates related to accrued liabilities made in the fourth quarter of 2006 as well as costs incurred in the fourth quarter of 2005 that were not incurred in the same period of 2006, as previously noted. As a result, Wireless' operating profit margins, as a percentage of network revenue, increased to 44.6% for the three months ended December 31, 2006, compared to 30.0% in the corresponding period of the prior year. The operating loss related to the fixed wireless initiative, which includes the Inukshuk joint venture and Wireless' internal spending on the initiative, is included in Wireless' operating profit. During the three months ended December 31, 2006, the fixed wireless initiative recorded an operating loss of $10 million, compared to an operating loss of $1 million for the three months ended December 31, 2005. Wireless Additions to Property, Plant and Equipment Wireless additions to property, plant and equipment ("PP&E") are classified into the following categories: ------------------------------------------------------------------------- Three months ended Twelve months ended December 31, December 31, (In millions --------------------------------------------------------- of dollars) 2006 2005 % Chg 2006 2005 % Chg ------------------------------------------------------------------------- Additions to PP&E Network - capacity $ 14 $ 82 (82.9) $ 159 $ 286 (44.4) Network - other 42 54 (22.2) 89 117 (23.9) HSDPA 82 - n/m 264 - n/m Inukshuk 13 - n/m 60 - n/m Information technology and other 50 38 31.6 112 90 24.4 Integration of Fido - 31 n/m - 92 n/m --------------------------------------------------------- Total additions to PP&E $ 201 $ 205 (2.0) $ 684 $ 585 16.9 --------------------------------------------------------- ------------------------------------------------------------------------- The $201 million of additions to PP&E for the three months ended December 31, 2006 reflects spending on non-capacity network and technology enhancements, as well as spending on the deployment of our next generation HSDPA network. Recent Wireless Development In January 2007, we announced that Wireless will turn down its TDMA and analog networks effective May 31, 2007. We are offering to migrate the remaining customers on these older networks to our more advanced GSM network to enable these customers to take advantage of the superior coverage and signal quality. CABLE AND TELECOM ----------------- Cable and Telecom Financial and Operating Results ----------------------------------------- ------------------------------- Three Months Ended Twelve Months Ended December 31, December 31, 2005 % Chg 2005 Actual Actual Actual 2005 % Chg (In millions of Reclas- Reclas- Reclas- Pro Pro dollars, except 2006 sified sified 2006 sified Forma Forma margin) Actual (4) (4) Actual (4) (5) (5) ----------------------------------------- ------------------------------- Operating revenue Cable $ 367 $ 336 9.2 $1,421 $1,299 $1,299 9.4 Internet 138 117 17.9 523 436 441 18.6 Rogers Home Phone 99 75 32.0 355 150 300 18.3 Rogers Business Solutions 155 143 8.4 596 284 562 6.0 Rogers Retail 84 91 (7.7) 310 327 327 (5.2) Intercompany eliminations (1) (1) - (4) (4) (4) - ----------------------- ------------------------------- Total operating revenue 842 761 10.6 3,201 2,492 2,925 9.4 ----------------------- ------------------------------- Operating expenses Cable and Internet 287 256 12.1 1,111 1,012 1,015 9.5 Rogers Home Phone 96 70 37.1 345 141 263 31.2 Rogers Business Solutions 143 128 11.7 547 264 508 7.7 Rogers Retail(1) 83 88 (5.7) 303 309 309 (1.9) Integration costs(2) 3 3 - 9 5 19 (52.6) Intercompany eliminations (1) (1) - (4) (4) (4) - ----------------------- ------------------------------- Total operating expense 611 544 12.3 2,311 1,727 2,110 9.5 Operating profit (loss)(3) Cable and Internet 218 197 10.7 833 723 725 14.9 Rogers Home Phone 3 5 (40.0) 10 9 37 (73.0) Rogers Business Solutions 12 15 (20.0) 49 20 54 (9.3) Rogers Retail(1) 1 3 (66.7) 7 18 18 (61.1) Integration costs(2) (3) (3) - (9) (5) (19) (52.6) ----------------------- ------------------------------- Total operating profit $ 231 $ 217 6.5 $ 890 $ 765 $ 815 9.2 ----------------------- ------------------------------- Operating profit margin(3) Cable and Internet 43.2% 43.5% 42.8% 41.7% 41.7% Rogers Home Phone 3.0% 6.7% 2.8% 6.0% 12.3% Rogers Business Solutions 7.7% 10.5% 8.2% 7.0% 9.6% Rogers Retail 1.2% 3.3% 2.3% 5.5% 5.5% Additions to PP&E(3) Cable and Internet $ 188 $ 160 17.5 $ 492 $ 515 $ 515 (4.5) Rogers Home Phone 71 33 115.2 193 121 127 52.0 Rogers Business Solutions 48 14 n/m 98 63 85 15.3 Rogers Retail 6 4 50.0 11 15 15 (26.7) ----------------------- ------------------------------- Total additions to PP&E $ 313 $ 211 48.3 $ 794 $ 714 $ 742 7.0 ----------------------- ------------------------------- ----------------------------------------- ------------------------------- (1) Rogers Retail operating expenses for the three and twelve months ended December 31, 2006 include a charge of $1 million and $6 million, respectively, related to the closure of 21 stores in the first quarter of 2006. (2) Integration costs incurred relate to the integration of the operations of Call-Net. (3) As defined. See the "Key Performance Indicators and Non-GAAP Measures" and "Supplementary Information" sections. (4) Certain prior year amounts have been reclassified to conform to the current year presentation. (5) See the "Basis of Pro Forma Information" section for a discussion of considerations in the preparation of this pro forma information. Total operating revenue for the three months ended December 31, 2006 increased $81 million or 10.6%, from the corresponding period in 2005, and total operating profit for the three months ended December 31, 2006 increased $14 million, or 6.5% from the corresponding period of the prior year, to $231 million. See the following business unit discussions for a detailed discussion of operating results. CABLE AND INTERNET Cable and Internet Financial and Operating Results -------------------------------------------- ---------------------------- Three months ended Twelve months ended December 31, December 31, ---------------------------- ---------------------------- 2005 % Chg 2005 % Chg (In millions Actual Actual Actual Actual of dollars, 2006 Reclas- Reclas- 2006 Reclas- Reclas- except margin) Actual sified(2) sified(2) Actual sified(2) sified(2) -------------------------------------------- ---------------------------- Operating revenue Cable $ 367 $ 336 9.2 $1,421 $1,299 9.4 Internet 138 117 17.9 523 436 20.0 ---------------------------- ---------------------------- Total 505 453 11.5 1,944 1,735 12.0 Operating expenses Sales and marketing expenses 27 27 - 123 123 - Operating, general and administrative expenses 260 229 13.5 988 889 11.1 ---------------------------- ---------------------------- Total 287 256 12.1 1,111 1,012 9.8 ---------------------------- ---------------------------- Operating profit(1) $ 218 $ 197 10.7 $ 833 $ 723 15.2 ---------------------------- ---------------------------- Operating profit margin(1) 43.2% 43.5% 42.8% 41.7% ---------------------------- ---------------------------- -------------------------------------------- ---------------------------- (1) As defined. See the "Key Performance Indicators and Non-GAAP Measures" and "Supplementary Information" sections. (2) Certain prior year amounts have been reclassified to conform with the current year presentation. -------------------------------------------- ---------------------------- Three months ended Twelve months ended (Subscriber December 31, December 31, statistics in ---------------------------- ---------------------------- thousands, 2006 2005 2006 2005 except ARPU) Actual Actual Change Actual Actual Change -------------------------------------------- ---------------------------- Cable homes passed 3,480.8 3,387.5 93.3 Basic cable, net gain(1) 10.7 8.0 2.7 13.3 9.2 4.1 Basic cable subscribers 2,277.1 2,263.8 13.3 Core cable ARPU(2) $53.83 $49.54 $ 4.29 $52.37 $48.09 $ 4.28 Residential high-speed Internet, net additions(1) 44.8 59.9 (15.1) 154.8 205.0 (50.2) Residential high-speed Internet subscribers(3) 1,291.0 1,136.2 154.8 Internet ARPU(1)(2) $35.82 $34.48 $ 1.34 $36.02 $35.04 $ 0.98 Digital households, net additions(1) 69.6 73.2 (3.6) 220.7 237.8 (17.1) Digital households 1,134.0 913.3 220.7 -------------------------------------------- ---------------------------- (1) Effective August 2005, voluntarily deactivating cable and Internet subscribers are required to continue service for 30 days from the date termination is requested. This continued service period, which is consistent with the subscriber agreement terms and conditions, had the impact of decreasing basic cable, Internet and digital household subscriber net additions by approximately 7,200, 2,700 and 1,800, respectively, in the three months ended December 31, 2005 and increasing basic cable, Internet and digital household subscriber net additions by approximately 9,500, 5,200 and 3,800, respectively, in the twelve months ended December 31, 2005. (2) As defined. See the "Key Performance Indicators and Non-GAAP Measures" and "Supplementary Information" sections. (3) Residential high-speed Internet subscribers do not include residential ADSL and fixed wireless subscribers. The prior year high-speed Internet subscriber base was reduced by approximately 8,900 to reclassify non-residential customers into the Rogers Business Solutions segment. Cable Revenue The increase in Cable revenue for the three months ended December 31, 2006 reflects price increases implemented in early 2006, the growth in basic subscribers and the growing penetration of our digital products. The price increases on service offerings effective March 2006 contributed to the cable revenue growth by approximately $15 million for the three months ended December 31, 2006. The remaining increase in revenue of $16 million for the three months ended December 31, 2006 is related mainly to the impact of the growth in basic and digital subscribers. The basic subscriber base of nearly 2.3 million increased by 10,700 in the three months ended December 31, 2006. The digital subscriber base grew by 24.2% between December 31, 2005 and December 31, 2006 to over 1.1 million households. This represents a 49.8% penetration of basic cable customers. The demand for our high-definition and personal video recorder digital equipment were contributors to the growth in our digital subscriber base of 69,600 households in the three months ended December 31, 2006. Internet (Residential) Revenue The increases in Internet revenue for the three months ended December 31, 2006 from the corresponding period in 2005 reflects primarily the 13.6% year- over-year increase in the number of Internet subscribers and certain price increases for our Internet offerings. The price increases on Internet offerings, effective March 2006, contributed to the Internet revenue growth by approximately $6 million for the three months ended December 31, 2006. The remaining increase in revenue of $15 million for the three months ended December 31, 2006 is related mainly to the impact of the growth in subscribers. With the residential high-speed Internet subscriber base now at approximately 1.3 million, Cable has a 37.1% penetration of high-speed Internet service as a percentage of homes passed by its cable networks. Cable and Internet Operating Expenses and Operating Profit The fourth quarter marketing expenses were at a level consistent with the corresponding period of the prior year. The increases in operating, general and administrative costs for the three months ended December 31, 2006 compared to the corresponding period of the prior year was driven by the substantial increase in digital cable and Internet penetration resulting in higher costs associated with programming content, engineering and network operations, customer care, technical service and administration associated with the support of the larger subscriber bases. The Cable and Internet operating profit for the three months ended December 31, 2006 increased from the corresponding period in 2005 reflecting the growth in revenue and relatively consistent operating profit margin percentages. ROGERS HOME PHONE Rogers Home Phone Financial and Operating Results -------------------------------------------- ---------------------------- Three months ended Twelve months ended December 31, December 31, ---------------------------- ---------------------------- 2005 % Chg (In millions Actual Actual 2005 % Chg of dollars, 2006 Reclas- Reclas- 2006 Pro Pro except margin) Actual sified(3) sified(3) Actual Forma(2) Forma(2) -------------------------------------------- ---------------------------- Operating revenue $ 99 $ 75 32.0 $ 355 $ 300 18.3 Operating expenses Sales and marketing expenses 30 13 130.8 96 45 113.3 Operating, general and administrative expenses 66 57 15.8 249 218 14.2 ---------------------------- ---------------------------- Total operating expenses 96 70 37.1 345 263 31.2 ---------------------------- ---------------------------- Operating profit(1) $ 3 $ 5 (40.0) $ 10 $ 37 (73.0) ---------------------------- ---------------------------- Operating profit margin(1) 3.0% 6.7% - 2.8% 12.3% - ---------------------------- ---------------------------- -------------------------------------------- ---------------------------- (1) As defined. See the "Key Performance Indicators and Non-GAAP Measures" and "Supplementary Information" sections. (2) See the "Basis of Pro Forma Information" section for a discussion of considerations in the preparation of this pro forma information. (3) Certain prior year amounts have been reclassified to conform to the current year presentation. -------------------------------------------- ---------------------------- Three months ended Twelve months ended December 31, December 31, ---------------------------- ---------------------------- (Subscriber 2005 Chg statistics in 2006 2005 Chg 2006 Pro Pro thousands) Actual Actual Actual Actual Forma(2) Forma(2) -------------------------------------------- ---------------------------- Cable telephony subscriber lines Net additions(1) 95.1 29.8 65.3 318.0 47.9 270.1 Total cable telephony subscriber lines 365.9 47.9 318.0 Circuit-switched subscriber lines Net additions (losses and migrations)(1) (8.4) 26.0 (34.4) (41.2) 79.8 (121.0) Total circuit -switched subscriber lines 349.6 390.8 (41.2) Total residential telephony subscriber lines 715.5 438.7 276.8 -------------------------------------------- ---------------------------- (1) Includes approximately 13,100 and 36,700 migrations from circuit- switched to cable telephony for the three and twelve months ended December 31, 2006, respectively. (2) See the "Basis of Pro Forma Information" section for a discussion of considerations in the preparation of this pro forma information. Rogers Home Phone Revenue The growth in Rogers Home Phone revenue for the three months ended December 31, 2006 compared to the corresponding period in 2005 is mainly a result of incremental revenues from voice-over-cable telephony service of approximately $27 million. This service, which was launched in July 2005, added 95,100 net new subscriber lines in the three month period ended December 31, 2006. Partially offsetting this increase was a decline in the number of circuit-switched local lines of 8,400 for the three months ended December 31, 2006, as a result of the migration of 13,100 lines from the circuit-switched to the cable telephony platform within our cable territory in the period. Circuit-switched revenue decreased by $1 million in the three months ended December 31, 2006 compared to the corresponding period of the prior year due to a lower number of lines in the current quarter compared to last year. Partially offsetting the growth of the Rogers Home Phone local service revenue was a decline of approximately $2 million in long distance revenue for the three months ended December 31, 2006, reflecting ongoing declines in long distance only customers, pricing and usage. Rogers Home Phone Operating Expenses and Operating Profit The significant growth and expansion of both operations and sales and marketing associated with the launch of the cable telephony service and overall increase in subscribers drove the increases in operating expenses of $26 million for the three months ended December 31, 2006. The year-over-year decreases in both the Rogers Home Phone operating profit and operating profit margins for the three months ended December 31, 2006 primarily reflect the additional costs associated with the scaling and rapid growth of our cable telephony service. Investment is being made in the awareness of the product, customer acquisition and increased capacity to install. ROGERS BUSINESS SOLUTIONS Rogers Business Solutions Financial and Operating Results -------------------------------------------- ---------------------------- Three months ended Twelve months ended December 31, December 31, ---------------------------- ---------------------------- 2005 % Chg (In millions Actual Actual 2005 % Chg of dollars, 2006 Reclas- Reclas- 2006 Pro Pro except margin) Actual sified(3) sified(3) Actual Forma(2) Forma(2) -------------------------------------------- ---------------------------- Operating revenue $ 155 $ 143 8.4 $ 596 $ 562 6.0 Operating expenses Sales and marketing expenses 19 19 - 70 71 (1.4) Operating, general and administrative expenses 124 109 13.8 477 437 9.2 ---------------------------- ---------------------------- Total operating expenses 143 128 11.7 547 508 7.7 ---------------------------- ---------------------------- Operating profit(1) $ 12 $ 15 (20.0) $ 49 $ 54 (9.3) ---------------------------- ---------------------------- Operating profit margin(1) 7.7% 10.5% 8.2% 9.6% ---------------------------- ---------------------------- -------------------------------------------- ---------------------------- (1) As defined. See the "Key Performance Indicators and Non-GAAP Measures" and "Supplementary Information" sections. (2) See "Basis of Pro Forma Information" section for discussion of considerations in the preparation of this pro forma information. (3) Certain prior year amounts have been reclassified to conform to the current year presentation. -------------------------------------------- ---------------------------- Three months ended Twelve months ended December 31, December 31, ---------------------------- ---------------------------- (Subscriber 2005 Chg statistics in 2006 2005 Chg 2006 Pro Pro thousands) Actual Actual Actual Actual Forma(1) Forma(1) -------------------------------------------- ---------------------------- Local line equivalents(1) Net additions 10.6 3.3 7.3 33.4 17.5 15.9 Total local line equivalents 205.0 171.6 33.4 Broadband data circuits(2) Net additions 2.3 3.0 (0.7) 9.5 6.2 3.3 Total broadband data circuits 31.0 21.5 9.5 -------------------------------------------- ---------------------------- (1) Local line equivalents include individual voice lines plus Primary Rate Interfaces ("PRIs") at a factor of 23 voice lines each and includes both wholesale and retail customers. (2) Broadband data circuits are those customer locations accessed by data networking technologies including DOCSIS, DSL, E10/100/1000, OC 3/12 and DS 1/3. The subscriber statistics for prior periods have been restated to include wholesale customers. Rogers Business Solutions Revenue The increase in Rogers Business Solutions revenue reflects growth in each of the data, local and long distance components of revenue. During the three months ended December 31, 2006, data revenues grew by $4 million or 8%, local services grew by $3 million or 13% and long distance grew by $5 million or 8% compared to the corresponding period of 2005. Rogers Business Solutions ended the quarter with 205,000 local line equivalents and 31,000 broadband data circuits in service at December 31, 2006, representing year-over-year growth rates of 19.5% and 44.2%, respectively. The increase in long distance revenue resulted from an increase in minute volumes of 10% for the three months ended December 31, 2006, all as a result of the intercompany sale of long distance to Wireless. The volume increases were partially offset by the ongoing declines in average revenue per minute, which decreased 2% for the three months ended December 31, 2006. The increase in local and data revenues was due to the net increase in local line equivalents and broadband data circuits, respectively. Rogers Business Solutions continues to focus on selling local and data products, especially IP-enabled solutions, thereby decreasing its reliance on long distance revenues. The combination of local and data revenue represented 56.1% of total revenue for the three months ended December 31, 2006. Rogers Business Solutions Operating Expenses and Operating Profit Carrier charges, which are included in operating, general and administrative expenses, increased by $14 million to $93 million for the three months ended December 31, 2006 and represented 60.0% of revenue in the three months ended December 31, 2006, compared to 55.2% of revenue in the corresponding period of 2005. The net increase in the quarter is the result of product mix changes and market pricing pressures. Other operating, general and administrative expenses for the three months ended December 31, 2006 remained consistent with the corresponding period of 2005. Primarily due to the higher carrier charges, Rogers Business Solutions margins decreased to 7.7% for the three months ended December 31, 2006, compared to 10.5% for the corresponding period in 2005. ROGERS RETAIL (Previously Rogers Video) Rogers Retail Financial Results -------------------------------------------- ---------------------------- Three months ended Twelve months ended December 31, December 31, ---------------------------- ---------------------------- (In millions of dollars, 2006 2005 2006 2005 except margin) Actual Actual % Chg Actual Actual % Chg -------------------------------------------- ---------------------------- Operating revenue $ 84 $ 91 (7.7) $ 310 $ 327 (5.2) Operating expenses(1) 83 88 (5.7) 303 309 (1.9) ---------------------------- ---------------------------- Operating profit(2) $ 1 $ 3 (66.7) $ 7 $ 18 (61.1) ---------------------------- ---------------------------- Operating profit margin(2) 1.2% 3.3% 2.3% 5.5% ---------------------------- ---------------------------- -------------------------------------------- ---------------------------- (1) Operating expenses for the three and twelve months ended December 31, 2006 include a charge of $1 and $6 million, respectively, related to the closure of 21 stores in the first quarter of 2006. (2) As defined. See the "Key Performance Indicators and Non-GAAP Measures" and "Supplementary Information" sections. (3) During January 2007, the Video store segment of Cable and Telecom acquired the approximately 170 Wireless-owned retail locations. This segment is now referred to as Rogers Retail and will remain a segment of Cable and Telecom. Rogers Retail Revenue The decline in revenue at Rogers Retail was primarily due to lower video rental and sales revenue. Initiatives were introduced to increase customers' spending, which resulted in dollars per transaction increasing 8.4% in the three months ended December 31, 2006 compared to the same period last year; however, same store customer transactions decreased 6.6% compared to the corresponding period in 2005 due to a decrease in total visits. As a result, same store revenue increased 1.2% for the three months ended December 31, 2006 compared to the corresponding period of the prior year. Rogers Retail has recently taken additional steps with respect to its pricing and late-fee structures aimed at reversing the trend of lower same store customer transactions and revenue. Rogers Retail Operating Expenses and Operating Profit The decline in Rogers Retail operating profit relates primarily to the decline in revenue and charges of approximately $1 million in the three months ended December 31, 2006 associated with the closing of 21 stores in the first quarter of 2006. CABLE AND TELECOM ADDITIONS TO PP&E The nature of the cable television business is such that the construction, rebuild and expansion of a cable system are highly capital- intensive. The Cable and Internet segment categorizes its additions to property, plant and equipment ("PP&E") according to a standardized set of reporting categories that were developed and agreed to by the U.S. cable television industry and which facilitate comparisons of additions to PP&E between different cable companies. Under these industry definitions, our Cable and Internet additions to PP&E are classified into the following five categories: - Customer premises equipment ("CPE"), which includes the equipment for digital set-top terminals, Internet modems and the associated installation costs; - Scaleable infrastructure, which includes non-CPE costs to meet business growth and to provide service enhancements, including many of the costs to-date of the cable telephony initiative; - Line extensions, which includes network costs to enter new service areas; - Upgrade and rebuild, which includes the costs to modify or replace existing coaxial cable, fibre-optic network electronics; and - Support capital, which includes the costs associated with the purchase, replacement or enhancement of non-network assets. -------------------------------------------- ---------------------------- Three months ended Twelve months ended December 31, December 31, ---------------------------- ---------------------------- 2005 % Chg Actual Actual 2005 % Chg (In millions 2006 Reclas- Reclas- 2006 Pro Pro of dollars) Actual sified(1) sified Actual Forma(2) Forma(2) -------------------------------------------- ---------------------------- Cable and Internet PP&E additions(3) Customer premise equipment $ 79 $ 72 9.7 $ 230 $ 249 (7.6) Scaleable infrastructure 47 28 67.9 106 119 (10.9) Line extensions 21 19 10.5 64 56 14.3 Upgrade and rebuild 5 2 150.0 10 3 n/m Support capital 36 39 (7.7) 82 88 (6.8) ---------------------------- ---------------------------- 188 160 17.5 492 515 (4.5) Rogers Home Phone PP&E additions 71 33 115.2 193 127 52.0 Rogers Business Solutions PP&E additions(4) 48 14 n/m 98 85 15.3 Rogers Retail PP&E additions 6 4 50.0 11 15 (26.7) ---------------------------- ---------------------------- $ 313 $ 211 48.3 $ 794 $ 742 7.0 ---------------------------- ---------------------------- ------------------------------------------------------------------------- (1) Certain prior year amounts have been reclassified to conform with the current year presentation. (2) See "Basis of Pro Forma Information" section for a discussion of considerations in the preparation of this pro forma information. (3) Included in Cable and Internet PP&E additions is integration expenses related to the integration of Call-Net of $6 million and $28 million for the three and twelve months ended December 31, 2006, respectively. (4) Included in Rogers Business Solutions PP&E additions is integration expenses related to the integration of Call-Net of $4 million and $15 million for the three and twelve months ended December 31, 2006, respectively. The increase in Cable and Internet PP&E additions for the three months ended December 31, 2006 compared to the corresponding period in 2005 is primarily attributable to higher spending on scaleable infrastructure related to IP and other network capacity increases due to deferral from prior quarters, as well as higher spending on customer premise equipment related to digital boxes. The increase in additions to Rogers Home Phone PP&E compared to the corresponding period in 2005 are primarily due to capacity on the cable network associated with the year-over-year increase in subscriber additions as well as additional spending on customer premises equipment. The increase in additions to Rogers Business Solutions PP&E for the three months ended December 31, 2006 compared to the corresponding period of the prior year is primarily due to the completion of the final phase of the purchase of the Group Telecom/360Networks assets from Bell Canada, network enhancements, as well as the timing of capital spend. A total of $12 million of assets were purchased from Group Telecom/360Networks in the fourth quarter of 2006, of which $6 million was treated as PP&E, and $6 million was treated as other assets. SEGMENTED REPORTING OF CABLE AND TELECOM RESULTS The growing Rogers Home Phone customer base served by the cable telephony platform, coupled with the continued migration of Rogers Home Phone customers from the circuit-switched platform onto our cable telephony platform, results in our Rogers Home Phone service sharing much of the same physical infrastructure, sales, marketing and support resources as other Cable and Internet offerings. This leads to allocations of network and other operating costs between the Cable and Internet and the Rogers Home Phone segments of Cable and Telecom. As such, beginning in 2007, management and reporting of the Cable and Internet and the Rogers Home Phone segments of Cable and Telecom will be combined. We will continue to provide separate statistical information for our Rogers Home Phone subscribers, as we do for our digital cable and Internet subscribers. MEDIA ----- Media Operating and Financial Results -------------------------------------------- ---------------------------- Three months ended Twelve months ended December 31, December 31, (In millions ---------------------------- ---------------------------- of dollars) 2006 2005 % Chg 2006 2005 % Chg -------------------------------------------- ---------------------------- Operating revenue $ 317 $ 300 5.7 $1,210 $1,097 10.3 Operating expenses 270 261 3.4 1,059 969 9.3 ---------------------------- ---------------------------- Operating profit(1) $ 47 $ 39 20.5 $ 151 $ 128 18.0 ---------------------------- ---------------------------- Operating profit margin(1) 14.8% 13.0% 12.5% 11.7% Additions to property, plant and equipment(1) $ 16 $ 12 33.3 $ 48 $ 40 20.0 -------------------------------------------- ---------------------------- (1) As defined. See the "Key Performance Indicators and Non-GAAP Measures" section. Media Revenue The increases in Media revenues for the three months ended December 31, 2006 over the corresponding period in 2005 primarily reflect growth in the Publishing, Radio, OMNI and The Shopping Channel divisions, partially offset by Sports Entertainment due to the timing of the receipt of Major League Baseball revenue sharing. The increases include higher advertising revenue in Publishing and Radio, and the launch of Hello! and Chocolat magazines. The launch of OMNI Manitoba, and consolidation of the Biography Channel and G4TechTV as a result of increased ownership contributed to the increase in revenue at OMNI. Strong consumer demand contributed to increased revenue at The Shopping Channel. Media Operating Expenses The increases in Media operating expenses for the three months ended December 31, 2006 compared to the corresponding period in 2005 are primarily due to increased costs at Publishing related to the new Chocolat magazine and the Canadian edition of Hello! magazine, increased programming costs at OMNI from the consolidation of the Biography Channel and G4TechTV and the launch of OMNI Manitoba. Higher sales volume attracted higher cost of goods sold on The Shopping Channel. Media Operating Profit The changes discussed above drove the year-over-year increases in Media's operating profit for the three months ended December 31, 2006 from the corresponding period in 2005, as well as the corresponding increase in operating margins. Media Additions to PP&E The majority of Media's PP&E additions in both 2006 and 2005 reflect renovations and enhancements to the Rogers Centre sports and entertainment venue in Toronto. Recent Media Development On January 1, 2007, Media closed the acquisition of five Alberta Radio stations announced earlier in 2006 and brought the total number of radio stations owned by Media to 51. OVERVIEW OF RECENT FINANCING AND SHARE CAPITAL ACTIVITIES Operations For the three months ended December 31, 2006, cash generated from operations before changes in non-cash operating items, which is calculated by removing the effect of all non-cash items from net income, increased to $631 million from $380 million in the corresponding period of 2005. The $251 million increase is primarily the result of the increase in operating profit of $238 million in addition to a $12 million decrease in interest expense. Taking into account the changes in non-cash working capital items for the three months ended December 31, 2006, cash generated from operations was $714 million, compared to $293 million in the corresponding period of 2005. The cash flow generated from operations of $714 million, together with receipt of $11 million from the issuance of Class B Non-Voting shares from the exercise of employee stock options, resulted in total net funds of approximately $725 million raised in the three months ended December 31, 2006. Net funds used during the three months ended December 31, 2006 totalled approximately $715 million, the details of which include funding: - additions to PP&E of $403 million, net of $151 million of related changes in non-cash working capital; - an aggregate net repayment of $280 million of outstanding advances under our bank credit facilities; - the payment of $10 million on termination of cross-currency interest rate exchange agreements; and - other net investments of $22 million including the final phase of an acquisition of certain CLEC assets and additions to program rights of $4 million. Taking into account the cash deficiency of $29 million at the beginning of the period and the fund uses described above, the cash deficiency at December 31, 2006 was $19 million. Financing Our long-term debt instruments are described in Note 11 to the 2005 Annual Audited Consolidated Financial Statements. As mentioned above, during the three months ended December 31, 2006, a total of $280 million net repayments of outstanding advances under our bank credit facilities was made. In addition, Wireless paid a net cash settlement of $10 million upon the maturity of cross-currency interest rate agreements in the aggregate notional principal amount of US$275 million and we received $11 million from the issuance of Class B Non-Voting shares under the exercise of employee stock options. In addition, Cable and Telecom concluded the final phase of a multi-staged transaction to acquire certain of the CLEC assets of Group Telecom/360 Networks from Bell Canada at a cost of approximately $12 million, including applicable taxes. Effective January 1, 2007, the payment of management fees by subsidiary companies ceased. In addition, Cable and Telecom will no longer distribute $6 million per month to RCI. Interest Rate and Foreign Exchange Management Economic Hedge Analysis For the purposes of our discussion on the hedged portion of long-term debt, we have used non-GAAP measures in that we include all cross-currency interest rate exchange agreements (whether or not they qualify as hedges for accounting purposes) since all such agreements are used for risk-management purposes only and are designated as a hedge of specific debt instruments for economic purposes. As a result, the Canadian dollar equivalent of U.S. dollar- denominated long-term debt reflects the contracted foreign exchange rate for all of our cross-currency interest rate exchange agreements regardless of qualifications for accounting purposes as a hedge. During the three months ended December 31, 2006, there was no change in our U.S. dollar-denominated debt and the only change in our hedging status during the same period was on an economic basis and was due to the maturity on December 15, 2006 of cross-currency interest rate exchange agreements in the aggregate notional principal amount of US$275 million. As a result of the above, on December 31, 2006 the amount of our U.S. dollar-denominated debt hedged on an economic basis was 91.4% and on an accounting basis was 85.6%. ------------------------------------------------------------------------- (In millions of dollars, December 31, December 31, except percentages) 2006 2005 ------------------------------------------------------------------------- U.S. dollar-denominated long-term debt US $ 4,895 US $ 4,917 Hedged with cross-currency interest rate exchange agreements US $ 4,475 US $ 4,802 Hedged exchange rate 1.3229 1.3148 Percent hedged 91.4%(1) 97.7% ------------------------------------------------------------------------- Amount of long-term debt(2) at fixed rates: Total long-term debt Cdn $ 7,658 Cdn $ 8,410 Total long-term debt at fixed rates Cdn $ 6,851 Cdn $ 7,077 Percent of long-term debt fixed 89.5% 84.1% ------------------------------------------------------------------------- Weighted average interest rate on long-term debt 7.98% 7.76% ------------------------------------------------------------------------- (1) Pursuant to the requirements for hedge accounting under AcG-13, on December 31, 2006, RCI accounted for 93.6% of its cross-currency interest rate exchange agreements as hedges against designated U.S. dollar-denominated debt. As a result, 85.6% of consolidated U.S. dollar-denominated debt is hedged for accounting purposes versus 91.4% on an economic basis. (2) Long-term debt includes the effect of the cross-currency interest rate exchange agreements. Outstanding Share Data On December 15, 2006, shareholders approved a two-for-one split of our Class A Voting and Class B Non-Voting shares. As a result, beginning January 5, 2007, shareholders of record as of the close of business on December 29, 2006 received one additional share of the relevant class for each share held. In addition, at the December 15, 2006 special shareholder meeting, shareholders approved amending our Class B Non-Voting shares to 'no par value' shares from the previous par value of $1.62478 (pre-split). Set out below is our outstanding share data, on a post-split basis, as at December 31, 2006. ------------------------------------------------------------------------- Common Shares(1) Class A Voting 112,467,648 Class B Non-Voting 523,231,804 Options to Purchase Class B Non-Voting Shares Outstanding 19,694,860 Exercisable 14,160,866 ------------------------------------------------------------------------- (1) Holders of our Class B Non-Voting shares are entitled to receive notice of and to attend meetings of our shareholders, but, except as required by law or as stipulated by stock exchanges, are not entitled to vote at such meetings. If an offer is made to purchase outstanding Class A Voting shares, there is no requirement under applicable law or RCI's constating documents that an offer be made for the outstanding Class B Non-Voting shares and there is no other protection available to shareholders under RCI's constating documents. If an offer is made to purchase both Class A Voting shares and Class B Non-Voting shares, the offer for the Class A Voting shares may be made on different terms than the offer to the holders of Class B Non-Voting shares. Dividends and Other Payments on Equity Securities On October 31, 2006, we declared a quarterly dividend of C$0.04 per share (on a post-split basis), which was paid on January 2, 2007 to shareholders of record on December 20, 2006, reflecting the increased C$0.16 per share annual dividend level and the new quarterly distribution schedule. Unless indicated otherwise, all dividends paid by Rogers are Eligible Dividends as defined by the Canada Revenue Agency. DATASOURCE: Rogers Communications Inc. CONTACT: Investment Community Contacts: Bruce M. Mann, (416) 935-3532, ; Dan Coombes, (416) 935-3550, ; Media Contacts: Corporate and Media - Jan Innes, (416) 935-3525, ; Wireless, Cable and Telecom - Taanta Gupta, (416) 935-4727, Archived images on this organization are searchable through CNW Photo Archive website at http://photos.newswire.ca/. Images are free to accredited members of the media.

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