Seamless Connections Rogers Communications Inc. 2010 Annual Report ROGERS COMMUNICATIONS INC. AT A GLANCE Rogers Communications Inc. is a diversified Canadian communications and media company engaged in three primary lines of business. Rogers Wireless is Canada’s largest wireless voice and data communications services provider and the country’s only national carrier operating on both the world standard GSM and HSPA+ technology platforms. Rogers Cable is the second largest Canadian cable services provider, offering cable television, high-speed Internet access, and telephony products for residential and business customers, and a retail distribution chain which offers Rogers branded wireless and home entertainment services. Rogers Media is Canada’s premier group of category-leading broadcast, specialty, print and on-line media assets with businesses in radio and television broadcasting, televised shopping, magazine and trade journal publication and sports entertainment. Delivering Results In 2010 Pre-tax Free Cash Dividend Share Top-line Flow Growth Increases Buybacks Growth What We Said: Deliver What We Said: Increase cash What We Said: Return What We Said: Leverage approximately 5% growth in returns to shareholders consistently additional cash to shareholders networks, channels and brands consolidated free cash flow. over time. by repurchasing Rogers shares to deliver continued revenue What We Did: Generated a What We Did: Increased annualized on open market. growth. 14% year-over-year increase in dividend per share 10% from $1.16 What We Did: Repurchased What We Did: Delivered 4% pre-tax free cash flow growth to $1.28 in 2010. 37.1 million Rogers Class B shares consolidated top-line growth in 2010. for $1.3 billion. with 6% growth in adjusted operating profit. Capture Operating Fast and Reliable Grow Wireless Data Gain Higher Value Leverage Networks Revenue Wireless Subscribers What We Said: Implement cost What We Said: Maintain Rogers’ What We Said: Strong double-digit What We Said: Continued rapid containment initiatives to capture leadership in network technology wireless data growth to support growth in smartphone subscriber efficiencies. and innovation. continued ARPU leadership. base to drive wireless data revenue What We Did: Delivered 80 basis What We Did: Completed What We Did: 34% wireless data and ARPU. points of consolidated adjusted deployment of HSPA+ 21 Mbps revenue growth with data as a What We Did: Activated nearly operating profit margin expansion wireless network nationally and percent of network revenue 1.9 million smartphones helping despite economic and competitive DOCSIS-3 50 Mbps Internet service expanding to 28% from 22% bring smartphone penetration to pressures. across entire cable territory. in 2009. 41% of postpaid subscriber base. Table of Contents 1 Letter to Shareholders 80 Management’s Responsibility for 83 Consolidated Statement of Financial Reporting Comprehensive Income 4 Seamless Connections 80 Independent Auditors’ Report of Registered 84 Consolidated Statements of Cash Flows 14 Why Invest in Rogers Public Accounting Firm 85 Notes to Consolidated Financial Statements 15 2010 Financial and Operating Highlights 81 Consolidated Statements of Income 120 Corporate Governance 16 2010 Financial Highlights 82 Consolidated Balance Sheets 122 Directors and Senior Corporate Officers 18 Management’s Discussion and Analysis 83 Consolidated Statements of 124 Corporate and Shareholder Information Shareholders’ Equity Rogers Communications Inc. at a glance ROGERS COMMUNICATIONS REVENUE ADJUSTED OPERATING PROFIT FY2010 REVENUE: ($ in billions) ($ in billions) $12.2 billion Rogers Communications (TSX: RCI; NYSE: RCI) is a diversified 11.311.3 11.711.7 12.212.2 4.14.1 4.44.4 4.74.7 Canadian communications and media company. As discussed in the following pages, Rogers Communications is engaged in three primary lines of business through its three operating segments Rogers Wireless, Rogers Cable and Rogers Media. Wireless 56% Rogers Communications Cable 32% Media 12% Wireless Cable Media 20082008 20092009 20102010 20082008 20092009 20102010 WIRELESS REVENUE ADJUSTED OPERATING PROFIT FY2010 REVENUE: ($ in billions) ($ in billions) $7.0 billion Rogers Wireless provides wireless voice and data communications 6.36.3 6.76.7 7.07.0 2.82.8 3.03.0 3.23.2 services across Canada to approximately 9 million customers under the Rogers Wireless, Fido and chatr brands. Rogers Wireless is Canada’s largest wireless provider and the only national carrier operating on both the global standard GSM and highly advanced 3G HSPA+ technology platforms. Rogers Wireless is Canada’s leader Postpaid Voice 65% in innovative wireless voice and data services, and provides customers Wireless Data 26% with the best and latest wireless devices and applications. In addition Prepaid Voice 3% to providing seamless wireless roaming across the U.S. and approximately 200 countries internationally, Rogers Wireless also Equipment Sales 6% provides wireless broadband services across Canada utilizing its 2.5 GHz fixed wireless spectrum. 20082008 20092009 20102010 20082008 20092009 20102010 CABLE REVENUE ADJUSTED OPERATING PROFIT FY2010 REVENUE: ($ in billions) ($ in billions) $4.1 billion Rogers Cable is a leading Canadian cable services provider, 3.83.8 3.93.9 4.14.1 1.21.2 1.31.3 1.41.4 whose territory covers approximately 3.5 million homes in Ontario, New Brunswick and Newfoundland and Labrador with 62% basic penetration of its homes passed. Its advanced digital two-way hybrid fibre-coax network provides the leading selection of on-demand and high-definition television programming including Television 45% an extensive line-up of sports and multicultural programming. High-Speed Internet 21% Rogers Cable pioneered high-speed Internet access and now 73% Home Phone 12% of its television customers subscribe to its high-speed Internet Business Solutions 14% service, while Rogers Cable boasts approximately 1.2 million Retail 8% residential and business telephony lines. Rogers Cable also includes a retail distribution chain which offers Rogers branded wireless, cable and home entertainment products and services. 20082008 20092009 20102010 20082008 20092009 20102010 MEDIA REVENUE ADJUSTED OPERATING PROFIT FY2010 REVENUE: ($ in billions) ($ in billions) $1.5 billion Rogers Media is Canada’s premier combination of category-leading 1.501.50 1.401.40 1.501.50 0.140.14 0.120.12 0.150.15 radio and television broadcasting, publishing, sports entertainment and on-line properties. Its Radio group operates 55 radio stations across Canada, while its Television properties include the five- station Citytv network; its five multicultural OMNI television Core Media 88% stations; Rogers Sportsnet and Sportsnet ONE specialty sports Sports Entertainment television services licenced to provide sports programming across 12% Canada; and The Shopping Channel, Canada’s only nationally televised shopping service. Media’s Publishing group produces 55 well-known consumer magazines and trade and professional publications in Canada. Media’s Sports Entertainment assets include the Toronto Blue Jays Baseball Club and Rogers Centre, Canada’s largest sports and entertainment facility. 20082008 20092009 20102010 20082008 20092009 20102010 For a detailed discussion of our financial and operating metrics and results, please see the accompanying MD&A later in this report. Seamless Connections Fellow Shareholders, I’m pleased to report that despite an intensely competitive environment that moderated our growth, we met or exceeded our key financial commitments in 2010 and delivered against our strategic priorities. We grew revenue and adjusted operating profit at a healthy rate and we held operating and capital expenditures in solid check. This operating discipline allowed us to deliver double digit growth in free cash flow per share and return significant amounts of cash to shareholders through a combination of dividends and share buybacks. In fact I believe we returned more cash as a percentage of equity market capitalization to shareholders than any other telecom or cable company in North America. At the same time, we maintained a solid investment grade balance sheet with approximately $2.4 billion of available liquidity. And we continued to invest in customer retention, network enhancement and product development initiatives. ROGERS COMMUNICATIONS INC. 2010 ANNUAL REPORT 1 LOetter T SHAREHolDERS We delivered respectable results in a year marked by a new 2010 FIFA World Cup to bring a unique cross-platform experience to ” I’m pleased to report that despite competitive reality and a sluggish recovery from the economic Canadians by enabling them to enjoy the matches on-demand across recession. In particular, we maintained our relentless focus on their TV, Internet and wireless devices. an intensely competitive environment driving wireless data growth and smartphone penetration where Industry-leading Networks -- Our advanced wireless and broadband that moderated our growth, we we have proven success in attracting and retaining higher value networks are some of the best in the world and we deliver fast, customers who generate greater average revenue and churn less. reliable and proven network experiences. In 2010 we continued met or exceeded our key financial At the same time, the competitive environment reflects multiple to push the envelope by increasing the speed of our national 3.5G new wireless entrants who have now launched service, our two commitments in 2010 and delivered HSPA wireless