2008 ROGERS COMMUNICATIONS INC. Management’s Discussion and Analysis and Audited Annual Consolidated Financial Statements and Notes MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2008 This Management’s Discussion and Analysis (“MD&A”) should be Canadian dollars, unless otherwise stated. Please refer to Note 25 read in conjunction with our 2008 Audited Consolidated Financial to the 2008 Audited Consolidated Financial Statements for a summary Statements and Notes thereto. The financial information presented of differences between Canadian and United States (“U.S.”) GAAP. herein has been prepared on the basis of Canadian generally This MD&A, which is current as of February 18, 2009, is organized into accepted accounting principles (“GAAP”) and is expressed in six sections. CONSOLIDATED LIQUIDITY CORPORATE OVERVIEW SEGMENT REVIEW 1 2 3 AND FINANCING 2 Our Business 10 Wireless 29 Liquidity and Capital Resources 3 Our Strategy 16 Cable 32 Interest Rate and Foreign 3 Acquisitions 27 Media Exchange Management 3 Consolidated Financial and 33 Outstanding Common Share Data Operating Results 33 Dividends and Other Payments 10 2009 Financial and on RCI Equity Securities Operating Guidance 34 Commitments and Other Contractual Obligations 34 Off-Balance Sheet Arrangements ACCOUNTING POLICIES AND ADDITIONAL FINANCIAL OPERATING ENVIRONMENT 4 5 NON-GAAP MEASURES 6 INFORMATION 35 Government Regulation and 45 Key Performance Indicators and 52 Related Party Transactions Regulatory Developments Non-GAAP Measures 53 Five-Year Summary of 38 Competition in our Businesses 47 Critical Accounting Policies Consolidated Financial Results 40 Risks and Uncertainties Affecting 48 Critical Accounting Estimates 54 Summary of Seasonality and our Businesses 50 New Accounting Standards Quarterly Results 50 Recent Canadian Accounting 56 Controls and Procedures Pronouncements 57 Supplementary Information: 52 U.S. GAAP Differences Non-GAAP Calculations In this MD&A, the terms “we”, “us”, “our”, “Rogers” and “the channels including The Biography Channel Canada, G4TechTV Company” refer to Rogers Communications Inc. and our subsidiaries, and Outdoor Life Network; Rogers Publishing, which publishes which were reported in the following segments for the year ended approximately 70 magazines and trade journals; and Rogers December 31, 2008: Sports Entertainment, which owns the Toronto Blue Jays Baseball Club (“Blue Jays”) and Rogers Centre. Media also holds owner- • “Wireless”, which refers to our wireless communications opera- ship interests in entities involved in specialty television content, tions, including Rogers Wireless Partnership (“RWP”) and Fido television production and broadcast sales. Solutions Inc. (“Fido”); Substantially all of our operations are in Canada. • “Cable”, which refers to our wholly-owned cable television sub- sidiaries, including Rogers Cable Communications Inc. (“RCCI”) “RCI” refers to the legal entity Rogers Communications Inc. exclud- and its subsidiary, Rogers Cable Partnership; and ing our subsidiaries. • “Media”, which refers to our wholly-owned subsidiary Rogers Throughout this MD&A, all percentage changes are calculated Media Inc. and its subsidiaries, including Rogers Broadcasting, using numbers rounded to the decimal to which they appear. Please which owns a group of 52 radio stations, the Citytv television note that the charts, graphs and diagrams that follow have been network, the Rogers Sportsnet television network, The Shopping included for ease of reference and illustrative purposes only and do Channel, the OMNI television stations, and Canadian specialty not form part of management’s discussion and analysis. ROGERS COMMUNICATIONS INC. 2008 ANNUAL MD&A 1 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Caution Regarding Forward-LooKing Statements, RisKS Before making any investment decisions and for a detailed discus- and Assumptions sion of the risks, uncertainties and environment associated with This MD&A includes forward-looking statements and assumptions our business, fully review the sections of this MD&A entitled “Risks concerning our business, its operations and its financial perfor- and Uncertainties Affecting our Businesses” and “Government mance and condition approved by management on the date of Regulation and Regulatory Developments”. this MD&A. These forward-looking statements and assumptions include, but are not limited to, statements with respect to our objec- Additional Information tives and strategies to achieve those objectives, statements with Additional information relating to us, including our Annual respect to our beliefs, plans, expectations, anticipations, estimates Information Form and discussions of our 2008 quarterly results, may or intentions, including guidance and forecasts relating to revenue, be found on SEDAR at www.sedar.com or on EDGAR at www.sec.gov. adjusted operating profit, property, plant and equipment (“PP&E”) expenditures, free cash flow, expected growth in subscribers and For a glossary of communications and media industry terms, please the services to which they subscribe, the cost of acquiring subscrib- refer to the Investor Relations section of rogers.com. ers and the deployment of new services and all other statements that are not historical facts. Such forward-looking statements are based on current objectives, strategies, expectations and assump- 1. CORPORATE OVERVIEW tions that we believe to be reasonable at the time including, but not limited to, general economic and industry growth rates, currency exchange rates, product pricing levels and competitive intensity, OUR BUSINESS subscriber growth and usage rates, changes in government regula- We are a diversified Canadian communications and media com- tion, technology deployment, device availability, the timing of new pany. We are engaged in wireless voice and data communications product launches, content and equipment costs, the integration of services through Rogers Wireless, Canada’s largest wireless provider acquisitions, and industry structure and stability. and the operator of the country’s only national Global System for Mobile Communications/High-Speed Packet Access (“GSM/HSPA”) Except as otherwise indicated, this MD&A and our forward-looking based network. Through Rogers Cable we are one of Canada’s statements do not reflect the potential impact of any non-recurring largest providers of cable television services as well as high-speed or other special items or of any dispositions, monetizations, mergers, Internet access, telephony services and video retailing. Through acquisitions, other business combinations or other transactions that Rogers Media, we are engaged in radio and television broadcast- may be considered or announced or may occur after the date of the ing, televised shopping, magazines and trade publications, and financial information contained herein. sports entertainment. We are publicly traded on the Toronto Stock Exchange (TSX: RCI.a and RCI.b) and on the New York Stock We caution that all forward-looking information, including any Exchange (NYSE: RCI). statement regarding our current intentions, is inherently subject to change and uncertainty and that actual results may differ materi- For more detailed descriptions of our Wireless, Cable and Media ally from the assumptions, estimates or expectations reflected in businesses, see the respective segment discussions that follow. the forward-looking information. A number of factors could cause actual results to differ materially from those in the forward-look- REVENUE ADJUSTED OPERATING (In millions of dollars) PROFIT ing statements or could cause our current objectives and strategies (In millions of dollars) to change, including but not limited to economic conditions, tech- $4,580 $5,503 $6,335 $1,987 $2,589 $2,806 nological change, the integration of acquisitions, unanticipated 3,201 3,558 3,809 916 1,016 1,233 changes in content or equipment costs, changing conditions in the 1,210 1,317 1,496 156 176 142 entertainment, information and communications industries, regu- latory changes, litigation and tax matters, the level of competitive intensity and the emergence of new opportunities, many of which are beyond our control and current expectation or knowledge. Therefore, should one or more of these risks materialize, should our objectives or strategies change, or should any other factors underlying the forward-looking statements prove incorrect, actual results and our plans may vary significantly from what we currently foresee. Accordingly, we warn investors to exercise caution when considering any such forward-looking information herein and that it would be unreasonable to rely on such statements as creating 2006 2007 2008 2006 2007 2008 any legal rights regarding our future results or plans. We are under no obligation (and we expressly disclaim any such obligation) to Wireless Cable Media Wireless Cable Media update or alter any forward-looking statements or assumptions whether as a result of new information, future events or otherwise, except as required by law. 2 ROGERS COMMUNICATIONS INC. 2008 ANNUAL MD&A MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OUR STRATEGY Acquisition of Aurora Cable TV Limited Our business objective is to maximize subscribers, revenue, operat- On June 12, 2008, we acquired 100% of the outstanding shares of ing profit and return on invested capital by enhancing our position Aurora