Rogers Communications Inc.
2015 Annual Report
Igniting growth
At a glance highlights for 2015
Rogers Communications Inc.
Wireless
Rogers Communications (TSX: RCI; NYSE: RCI)
is a diversified Canadian communications and
media company. We report our results of
operations in the four segments of Wireless,
Cable, Business Solutions and Media.
Operating revenue
(In billions of dollars)
Adjusted operating profit
(In billions of dollars)
2015
13.4
2015
2014
12.9
2013
12.7
2014
2013
5.0
5.0
5.0
Wireless is Canada’s largest provider of voice and data
communications services. We provide these services to
approximately 9.9 million customers under the Rogers,
Fido, chatr and Mobilicity brands. We provide customers
with the best and latest wireless devices, applications and
leading network speeds. Our far-reaching LTE network
covers approximately 93% of all Canadians. Our strategic
spectrum investments position us well to provide the
network connectivity, speed and reliability our customers
have come to enjoy and expect. Wireless also provides
seamless wireless roaming across the U.S. and more than
200 other countries and is the Canadian leader in the
deployment of machine-to-machine communications and
Internet of Things applications.
Free cash flow
(In billions of dollars)
Annualized dividend
rate at year end ($)
Operating revenue
(In billions of dollars)
Adjusted operating profit
(In billions of dollars)
2015
1.7
2015
$1.92
2014
1.4
2014
$1.83
2013
1.5
2013
$1.74
2015
2014
2013
7.7
2015
7.3
7.3
2014
2013
3.2
3.2
3.2
$13.4
Billion
2015 Operating revenue
$13.4 Billion
Wireless 56%
Cable 26%
Media 15%
Business Solutions 3%
$7.7
Billion
2015 Operating revenue
$7.7 Billion
Network 90%
Equipment 10%
Cable and Business Solutions
Media
Cable is a leading Canadian cable services provider whose
service territory covers approximately 4.2 million homes
in Ontario, New Brunswick and Newfoundland representing
approximately 31% of the total Canadian cable market.
Our advanced digital hybrid fibre-coax network provides
market-leading broadband Internet access speeds, a
compelling selection of digital television and online viewing
and telephony services to millions of residential and small
business customers. Together with Business Solutions,
Cable also provides scalable carrier-grade business telecom,
networking, hosting and managed data services and IP
connectivity and solutions to small, medium and large
enterprise, government and carrier customers.
Media is Canada’s premier destination for category-leading
sports entertainment, digital media, television and radio
broadcasting and publishing properties. Media owns the
Toronto Blue Jays Baseball Club, the Rogers Centre,
The Grand Slam of Curling and holds a 37.5% investment
in Maple Leaf Sports & Entertainment, owner of the Toronto
Maple Leafs, the Toronto Raptors and Toronto FC. Media
owns a suite of digital media properties, including Texture
by Next Issue and a 50% interest in shomi, a streaming
subscription video on demand (SVOD) service. Television
assets include seven regional and national Sportsnet
channels, seven City stations, which reach approximately
89% of Canadians, five OMNI Television multilingual channels
as well as specialty channels FX, FXX, OLN and G4. Media
also operates 51 Canadian radio stations, publishes more than
25 well known consumer and business magazines and owns
The Shopping Channel, Canada’s only nationally televised
and online shopping service.
Operating revenue
(In billions of dollars)
Adjusted operating profit
(In billions of dollars)
Operating revenue
(In billions of dollars)
Adjusted operating profit
(In billions of dollars)
2015
2014
2013
3.8
3.8
3.8
2015
2014
2013
1.8
1.8
1.8
2015
2014
2013
2.1
2015
0.17
1.8
1.7
2014
2013
0.13
0.16
■ BUSINESS SOLUTIONS ■ CABLE
■ BUSINESS SOLUTIONS ■ CABLE
$3.8
Billion
2015 Operating revenue
$3.8 Billion
Television 43%
Internet 35%
Phone 12%
Business Solutions 10%
$2.1
Billion
2015 Operating revenue
$2.1 Billion
Sports 52%
Broadcasting 26%
The Shopping Channel 13%
Publishing 9%
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC.
1
Financial Highlights 2015
FOR A DETAILED DISCUSSION OF OUR FINANCIAL AND OPERATING METRICS AND RESULTS,
PLEASE SEE THE ACCOMPANYING MANAGEMENT’S DISCUSSION AND ANALYSIS LATER IN THIS REPORT.
2015 Consolidated Revenue and Adjusted Operating Profit Profile
Operating revenue
Adjusted operating profit
$13.4
Billion
Wireless 56%
Cable 26%
Media 15%
Business Solutions 3%
$5.0
Billion
Wireless 63%
Cable 32%
Media 3%
Business Solutions 2%
(In millions of dollars, except margins, per share
amounts, subscriber and employee data)
Operating revenue
Adjusted operating profit 1
Adjusted operating profit margin 1
Free cash flow 1
Annualized dividend rate at year-end
Adjusted net income 1
Adjusted basic earnings per share 1
Total assets
Return on assets
Long-term debt (includes current portion)
Shareholders’ equity
Wireless subscribers (000s)
Internet subscribers (000s)
Television subscribers (000s)
Phone subscribers (000s)
Number of employees (approximate)
2015
13,414
5,032
38%
1,676
$1.92
1,490
$2.89
29,175
4.7%
16,870
5,745
9,877
2,048
1,896
1,090
26,000
2014
12,850
5,019
39%
1,437
$1.83
1,532
$2.97
26,522
5.1%
14,787
5,481
9,450
2,011
2,024
1,150
27,000
2013
2012
2011
12,706
4,993
39%
1,548
$1.74
1,769
$3.43
23,601
7.1%
13,343
4,669
9,503
1,961
2,127
1,153
28,000
12,486
4,834
39%
1,649
$1.58
1,781
$3.43
19,618
8.6%
10,789
3,768
9,437
1,864
2,214
1,074
27,000
12,346
4,739
38%
1,874
$1.42
1,736
$3.20
18,362
8.5%
10,034
3,572
9,335
1,793
2,297
1,052
29,000
1 For a definition of these measures (which are “Non-GAAP”) see “Non-GAAP Measures” in Management’s Discussion and Analysis.
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ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
Delivering on Rogers 3.0 in 2015
The plan is to re-accelerate revenue growth in a sustainable
way and continue the company’s track record of translating
revenue into strong margins and free cash flow, a solid return
on assets and ultimately increasing returns to shareholders.
Be a Strong Canadian Growth Company
• Grew revenue by 4% and free cash flow by 17%
• In our largest segment, Wireless, we grew network revenue
by 2%, the subscriber base by 5% and ARPA by 4%
• In Internet, the growth engine of our Cable segment,
we grew revenue by 8% and the subscriber base by 2%
Focus on Innovation and Network Leadership
• Grew our LTE geographic coverage 4 times and now reach
93% of the Canadian population on our own network
• Launched IGNITE Gigabit Internet, which is expected to
cover our entire footprint by the end of 2016, well ahead
of the competition
• Named Canada’s Fastest ISP and Fastest Mobile Network
by Ookla, a global leader in broadband speed testing
Deliver Compelling Content Everywhere
• Delivered on our commitment to make Sportsnet the
number one sports media brand in Canada
• Launched Share Everything+ plans in Wireless, allowing
customers to choose from three content experiences:
Texture by Next Issue, shomi or Spotify Premium
Overhaul the Customer Experience
• Showed the biggest improvement amongst our primary
competitors in reducing customer complaints to the
Commissioner for Complaints for Telecommunications
Services (CCTS), with complaints down 26%
• Reduced the number of times our customers needed to
contact us by 13%
Invest in and Develop Our People
• Established a national onboarding program for
new employees
• Created a Retail Academy for front-line leaders and
a manager leadership development program
• Recognized as one of Canada’s Top 100 Employers
Drive Growth in the Business Market
• Consolidated a strong portfolio of assets into a single
enterprise business
• Introduced the first in a series of “leapfrog” technologies
with the launch of managed Wi-Fi services and cloud-
managed cybersecurity services
Go to Market as One Rogers
• Launched Rogers 4K TV and made North America’s largest
commitment to broadcasting in 4K, leveraging our robust
fibre-coax network and sports content portfolio
2015 Achievements Against Guidance 1
(In millions of dollars)
Consolidated
Adjusted operating profit 2
Additions to property, plant and equipment
Free cash flow 2
2015
GUIDANCE
5,020
2,350
1,525
to
to
to
5,175
2,450
1,675
2015
ACTUALS
5,032
2,440
1,676
ACHIEVEMENT
✔
✔
✔ ✔
1 Should be read in conjunction with the accompanying Management’s Discussion and Analysis later in this report.
2 For a definition of these measures (which are “Non-GAAP”) see “Non-GAAP Measures” in Management’s Discussion and Analysis.
✔ Achieved ✔ ✔ Exceeded
Contents
4 A message from the President and
89 Consolidated Financial Statements
95 Consolidated Statements of Changes
CEO of Rogers Communications Inc.
89 Management’s Responsibility for
in Shareholders’ Equity
12 Good Corporate Citizenship
Financial Reporting
96 Consolidated Statements of Cash Flows
14 Corporate Governance
16 Senior Executive Officers
90 Report of Independent Registered
97 Notes to Consolidated Financial Statements
Public Accounting Firm
140 Glossary of Selected Industry Terms
of Rogers Communications Inc.
92 Consolidated Statements of Income
and Helpful Links
17 Directors of Rogers Communications Inc.
18 We Aspire
20 Management’s Discussion and Analysis
93 Consolidated Statements of
Comprehensive Income
94 Consolidated Statements of Financial
Position
142 Corporate and Shareholder Information
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC.
3
Overall, 2015 was a busy and productive year.
We introduced a number of innovative propositions that
saw us attract and retain more high value customers.
We also made meaningful progress on the customer
experience front and expanded our enterprise business.
A message from
the President and CEO
of Rogers Communications Inc.
Dear Fellow Shareholders,
Just over a year ago, I introduced Rogers 3.0, a multi-year plan to deliver
sustainable revenue growth and to convert revenue into solid margins
and strong cash flow whilst delivering an attractive return on assets.
Ultimately, it’s about delivering increasing returns to shareholders
over time. We’ve just completed our first full year of the plan, and I’m
pleased to report we made solid progress on our priorities.
Overall it was a busy and productive year. We re-established growth in
revenue and free cash flow and substantially strengthened the two major
growth engines of our business, Wireless and Internet. We introduced a
number of innovative propositions that saw us attract and retain more high
value customers. We also made meaningful progress on the customer
experience front and expanded our enterprise business.
Whilst there is more work to do, we delivered steady improvements in our
fundamentals, despite a fiercely competitive environment. Following is a
more detailed progress report on each of the seven priorities that make up
our Rogers 3.0 plan.
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ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
Be a Strong
Canadian Growth
Company
Overhaul
the Customer
Experience
Go to
Market as
One Rogers
3.0
Drive Growth
in the Business
Market
Focus on
Innovation
and Network
Leadership
Invest In
and Develop
Our People
Deliver Compelling
Content Everywhere
Our Rogers 3.0 plan is a multi-year plan intended
to re-accelerate revenue growth in a sustainable
way and continue the company’s track record of
translating revenue into strong margins, robust
free cash flow, and a solid return on assets,
ultimately increasing returns to shareholders.
Be a Strong Canadian Growth Company
It’s our goal to re-accelerate our growth relative to our peers.
In 2015, we delivered solid growth in both revenue and free
cash flow. We also attracted and retained more high value
customers in our largest business segment, Wireless, which
contributed to our industry-leading margins in this segment.
We reported record revenue and adjusted operating profit,
which grew to $13.4 billion and $5.0 billion respectively. This
growth resulted in free cash flow of $1.7 billion and adjusted
basic earnings per share of $2.89.
We met our 2015 financial guidance. Healthy cash flow allowed
us to make the right investments in order to maintain our best
in class networks and return substantial cash to shareholders.
Overhaul the Customer Experience
When we introduced Rogers 3.0, we committed to overhaul
the customer experience. In 2015, we introduced over 10 new
programs and invested $100 million to start this journey. We
are focused on fixing the basics, creating a more consistent
experience and improving customer self-service.
For example, we introduced Centre Ice, a program that gives
frontline agents the opportunity to uncover common customer
issues to senior management in real-time. The program has
already identified and resolved over 500 customer issues.
We also solved one of our customers’ biggest irritants, roaming,
by introducing Roam Like Home last year and expanding it
further this year. It’s a unique offering that allows our customers
to use their wireless plans like they do at home whilst travelling
abroad. The program is now available in over 100 destinations
around the world, reaching virtually everywhere our customers
travel. Over 2.3 million customers are now enrolled in the
program as part of our Share Everything plans.
Billing is the number one reason our customers call us, so we
vastly improved our mobile billing, making it interactive, more
concise and easier to understand. Over 3 million customers are
now using the new bill and it’s one of our many efforts to make
it easier for our customers to do business with us when and how
they want.
We were also the first communications provider in the world to
introduce customer care on Facebook Messenger. In our first
month alone, we responded to inquiries over 70,000 times using
this platform.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC.
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Overall in 2015, the improvements we made in self-service
Invest In and Develop Our People
reduced the number of times our customers needed to contact
us by 13%. We also saw the biggest reduction amongst our
Creating a high performing culture is critical to delivering
primary competitors in customer complaints to the CCTS,
on our Rogers 3.0 plan. In 2015 we made a number of
down 26%, and down 50% over the past two years.
investments in tools, training and our physical workspace to
create the right workplace.
Importantly, in the second half of the year, we made steady
progress in reducing customer churn, the number of customers
In total, we introduced over 20 programs to help our employees
who leave us every month, year over year. This is a good indicator
better serve our customers. For example, we introduced a best-
of success, although this is a journey, and it will take time. In 2016,
in-class training program, Retail Academy, to strengthen 400+
we will reinvest another $100 million to continue to strengthen
front-line retail leaders so they can better serve our customers.
the customer experience.
Drive Growth in the Business Market
We believe Canadian businesses are underserved and this
represents an important growth opportunity that we will pursue.
In 2015, we established a solid foundation with a plan to capture
market share. We built a leadership team comprised of global
experts, consolidated a strong portfolio of assets into a single
focused unit, expanded our range of products and services and
developed a go-to-market strategy. In the last half of the year,
we opened our doors for business, announcing two “leapfrog”
technologies, Managed Wi-Fi and Cyber Security as a service.
In 2016, we will continue to introduce new “leapfrog” technologies
that better serve the changing needs of Canadian businesses. Our
Enterprise business is now open for business and we are excited
about the potential of this longer-term growth opportunity.
We also established a robust national onboarding program
with 500 participants in 2015, so that new employees get up
and running in their jobs more quickly. We put 800 managers
through a new leadership development program and provided
‘Go to Market’ training for 18,000 employees. And we rolled out
our new open, collaborative work space to employees in Calgary,
Brampton and Toronto.
Our efforts were recognized externally. In 2015, we were
recognized as one of Canada’s Top 100 employers, a top
employer for young people, one of Canada’s best diversity
employers and one of Canada’s greenest employers. We
delivered our employee survey and achieved an employee
engagement score of 76%, up 4% from the prior year, and 4%
shy of best in class. Employee engagement is assessed by using
answers to survey questions focused on sense of employee
pride, satisfaction, advocacy and intention to stay with Rogers.
It was a big year for sports at Rogers.
100%
9:45 AM
ROGERS
In 2015, Sportsnet became the number one sports
media brand in the country. The Toronto Blue Jays
made the postseason for the first time in 22 years
and we delivered our first full year of the NHL.
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ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC.
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R
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Last year we introduced Roam Like Home; this
year we expanded it. This is a unique offering that
allows our customers to use their wireless plans
like they do at home while travelling abroad. The
program is now available in over 100 destinations
around the world, reaching virtually everywhere
our customers travel.
Deliver Compelling Content Everywhere
Focus on Innovation and Network Leadership
It was a big year for sports at Rogers, as we continued to
Innovation and network leadership are at the core of Rogers’
deliver solid results in this fast growing area of our media
DNA and this was a big area of focus in 2015.
portfolio. In 2015, Sportsnet became the number one sports
media brand in the country. The Toronto Blue Jays made the
postseason for the first time in 22 years and we delivered
our first full year of the NHL, generating a 10% profit. Sports
now represents over 50% of revenue and profit in our Media
division and it’s a core part of our media and residential
content strategy going forward.
In Wireless we grew our LTE geographic coverage four times
and now reach 93% of the Canadian population on our own
network. We acquired Mobilicity’s customers and spectrum
whilst divesting non-core spectrum to WIND. In the same
transaction, we acquired Shaw’s AWS-1 spectrum and
deployed it in just 31 days. Without this spectrum, we would
have needed four years to physically build out the equivalent
We continued to strengthen our content portfolio, focusing
network infrastructure. These transactions significantly
on the needs of the growing millennial audience, which
strengthened our spectrum position and will help ensure
represents roughly 35% of the Canadian population. For
our customers experience even better coverage and super-
instance, we announced a partnership with Spotify, the world’s
fast speeds. We also launched LTE Extended Coverage so
top music streaming service. We also advanced our relationship
that Rogers offers unsurpassed LTE coverage nationally.
with VICE, opening a VICE studio in Canada and launching
We were first to introduce Voice over LTE and LTE-A and we
VICELAND TV in early 2016. In mid-2015, we made shomi,
also introduced Wi-Fi calling to improve the quality of cellular
our streaming subscription service in partnership with Shaw,
calls. All in all, we made a number of smart, strategic and cost
available to all Canadians.
effective investments that will benefit our customers for many
years to come.
Like many media companies, we’ve seen a softening in the
advertising market and we have put in place a plan to align our
cost structure as a result of the declines in revenue. In 2016,
we will continue to capitalize on our sports leadership, target a
growing base of millennials, whilst increasing the revenue we
generate from digital platforms.
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ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
On our cable network, we introduced Rogers IGNITE, giving
customers unlimited Internet usage options and speeds of
up to 250 Mbps across our entire footprint. Roughly 40% of
our customers were on Rogers IGNITE at the end of 2015 and
the majority had signed up for speeds of 100 Mbps or faster.
We have also started to future-proof our customers’ growing
demand for streaming by introducing a gigabit Internet
service. These new speeds are now available to 130,000
homes and we expect to offer them to our entire cable
footprint; that’s 4.2 million homes by the end of 2016.
We can offer these speeds in 2016 with very little incremental
investment, thereby providing attractive financial payback
versus our competitors. Using our DOCSIS technology, the
incremental in-year capital cost to offer a 1-gigabit service is
less than $50 per home passed. We believe this is a significant
capital efficiency advantage compared to what an immediate
fibre-to-the-home strategy means for our competitors.
In 2015, Ookla, a global leader in broadband speed testing,
named Rogers as both Canada’s Fastest ISP and Canada’s
Fastest Mobile Network. We believe this confirms how our
network investments deliver higher quality customer
experiences.
We also made substantial investments to reposition our TV
business. For example, we introduced a new Navigatr user
interface which has been well received by our customers. We
also started to deliver Rogers 4K TV, the new global standard
Go to Market as One Rogers
Rogers has an unmatched portfolio of assets, including our
networks, content and brands and a core priority for us is to
bring together these assets to strengthen the company overall.
In 2015, we clarified and significantly strengthened our Rogers,
Fido and chatr wireless brands. This really came to life in our
product development, advertising and in our retail stores.
We also delivered on our commitment to make Sportsnet the
number one sports media brand in the country. And working
as One Rogers, we successfully delivered our first full season
in TV viewing. We were the first to introduce 4K set-top boxes
of the NHL.
and we plan to deliver the most 4K content in North America
this year, including every Toronto Blue Jays home game and
We successfully leveraged our unique content offerings –
20 NHL games. In total, we will broadcast 500 hours of 4K
NHL GameCentre Live, Texture by Next Issue, Spotify,
content in 2016. 4K is a good example of how we’re using
VICE and shomi, to attract and retain more customers.
our asset mix to strengthen Cable and to innovate for our
This will continue to be a core part of our strategy in 2016.
customers. We will also start to bring IPTV to our customers
towards the end of 2016.
We introduced , giving customers
unlimited Internet usage options and speeds of
up to 250 Mbps across our entire footprint and
introduced a gigabit Internet service. We expect
to offer this service to our entire cable footprint;
that’s 4.2 million homes by the end of 2016.
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2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC.
9
Full Year 2016 Guidance 1
(In millions of dollars, except percentages).
Consolidated Guidance
Operating revenue
Adjusted operating profit 2
Additions to property, plant and equipment
Free cash flow 2
2015 Actual
2016 Guidance Ranges 3
13,414
5,032
2,440
1,676
Increase of 1%
Increase of 1%
2,300
Increase of 1%
3%
to
to
3%
to 2,400
3%
to
1 Should be read in conjunction with the accompanying Management’s Discussion and Analysis later in this report.
2 For a definition of these measures (which are “Non-GAAP”) see “Non-GAAP Measures” in Management’s Discussion and Analysis.
3 Guidance ranges presented as percentages reflect percentage increases over 2015 actual results.
The year ahead
As we enter the second year of our multi-year plan, I remain confident
Rogers 3.0 is the right plan to re-accelerate revenue growth and
increase cash flow and shareholder returns.
We will continue to maintain our leadership in Wireless and Internet,
whilst capitalizing on the growing Enterprise opportunity. We will
evolve and enhance the performance of both our TV and traditional
media businesses. And we will continue our journey to overhaul
the customer experience.
Our 2016 guidance reflects an outlook of continued growth. We look
forward to growing revenue and adjusted operating profit, lowering
capital expenditures and delivering more growth in free cash flow.
Whilst we will continue to operate in a competitive environment,
I have full confidence in our team and our plan. I’d like to thank
the Board of Directors, the management team and our employees
for their support.
Thank you for your continued investment.
Guy Laurence
President and Chief Executive Officer
Rogers Communications Inc.
10 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
1 Should be read in conjunction with the accompanying Management’s Discussion and Analysis later in this report.
2 For a definition of these measures (which are “Non-GAAP”) see “Non-GAAP Measures” in Management’s Discussion and Analysis.
3 Guidance ranges presented as percentages reflect percentage increases over 2015 actual results.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 11
Corporate Social Responsibility at Rogers
Good Corporate
Citizenship
From investing in our communities to environmental
We have also set clear targets of 10% energy reduction and
stewardship, we are constantly striving to improve our
25% greenhouse gas reduction by 2025, based on 2011 levels.
sustainability performance and 2015 was no different.
We’ve been moving towards those targets through a variety of
Across the company, we donated over $65 million in cash
and in-kind donations to various charitable organizations and
causes. This is approximately 4% of net earnings before taxes,
well exceeding our goal of over 1% of net earnings before taxes,
which is the best-practice standard set by Imagine Canada.
Through Rogers Youth Fund, we supported education programs
for at-risk youth. Rogers Youth Fund’s signature program, Rogers
Raising the Grade, provides homework help and technology
centres at over 40 Boys and Girls Clubs across Canada, with
the goal of increasing graduation rates and entrance into
post-secondary education for at-risk youth. Since the program’s
inception in 2012, over 50,000 youth have benefited from
access to the technology centres in their communities.
Our Connected for Success program offers affordable
broadband to low-income Canadians living in Toronto
Community Housing. As of the end of 2015, over 8,500
households are enrolled in the program. We expect that
number to grow in 2016, as we will be expanding the program
in partnership with other community housing and non-profit
organizations, in communities in our cable footprint within
Ontario, Newfoundland and New Brunswick.
We’ve made steady progress in our environmental goals.
Our waste diversion rates improved through our Get Up and
Get Green Program, which saw the removal of individual garbage
bins at employees’ desks and the installation of centralized
sorting bins. We’ve also been transforming our office space,
which has resulted in the collection of 1,125 metric tonnes of
material from office supplies to furniture, 96% of which has
been diverted from landfill by being donated to non-profit
organizations or recycled.
programs, including lighting retrofits and standardizing lighting
schedules, as well as improvements to heating and cooling. In
2015, we were recognized for our environmental achievements.
We were named one of Canada’s Greenest Employers and we
received two awards from Civic Action’s Race to Reduce program:
a Building Performance Award for Lowest Energy Use for our
One Mount Pleasant location and a Building Performance Award
for Greatest Energy Reduction for our Brampton location.
Our Supplier Code of Conduct provides the policy and guidance
that we expect from our suppliers. In 2015, 100% of our suppliers
have signed up and adhered to both our Business Conduct
Guidelines and Supplier Code of Conduct. In addition, we
assessed our top 200 suppliers regarding their sustainability
and ethical practices and compliance to ensure that our partners
live up to our values.
We strive to ensure our products and services are inclusive and
accessible. We have a team of customer service representatives
who are specialised in our accessibility offerings. In 2015, we
became the first and only service provider to introduce a wireless
accessibility data and text plan for people who are deaf or
hard-of-hearing or have speech impediments. It offers a flexible
data plan that adjusts based on the customer’s monthly usage
as well as unlimited messaging.
Within our business, we have also improved our employee
experience by investing in training and development programs
and focusing on inclusion and diversity as a way to strengthen
our talent strategy. In 2015, we were recognized as one of
Canada’s Top 100 Employers, one of Canada’s Best Diversity
Employers, one of Canada’s Top Employer for Young People
and one of Greater Toronto’s Top Employers.
For more information on Corporate Social Responsibility at Rogers,
please see our website www.rogers.com/csr and look out for our
2015 CSR Report, which will be released in spring 2016.
12 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
over
65$
Million
in cash and in-kind donations to
various charitable organizations
and causes in 2015
Committed
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 13
Corporate Governance
Board of Directors and its Committees
Audit
and Risk
Corporate
Governance
Nominating
Human
Resources
Executive
Finance
Pension
As of February 11, 2016
Chair Member
Alan D. Horn, cpa, ca
Charles Sirois
C. William D. Birchall
Bonnie R. Brooks
Stephen A. Burch
John H. Clappison, fcpa, fca
Guy Laurence
Philip B. Lind, cm
John A. MacDonald
Isabelle Marcoux
The Hon. David R. Peterson, pc, qc
Edward S. Rogers
Loretta A. Rogers
Martha L. Rogers
Melinda M. Rogers
Rogers Communications Inc.’s Board of Directors (the Board)
is strongly committed to sound corporate governance and
continually reviews its governance practices and benchmarks
them against acknowledged leaders and evolving legislation.
We are a family-founded and controlled company and take
pride in our proactive and disciplined approach towards
ensuring that Rogers’ governance structures and practices are
deserving of the confidence of the public capital markets.
With the December 2008 passing of Company founder and
CEO Ted Rogers, his voting control of Rogers Communications
Inc. passed to a trust, of which members of the Rogers family
are beneficiaries. This trust holds voting control of Rogers
Communications Inc. for the benefit of successive generations
of the Rogers family.
As substantial stakeholders, the Rogers family is represented
on our Board and brings a long-term commitment to oversight
and value creation. At the same time, we benefit from having
outside directors who are experienced North American
business leaders.
The Board believes that the Company’s governance and risk
management systems are effective and that the appropriate
structures and procedures are in place.
The composition of our Board and structure of its various
committees are outlined in the table above and on the
following page. As well, we make available detailed information
on our governance structures and practices – including our
complete statement of Corporate Governance practices, our
codes of conduct and ethics, full committee charters and
Board member biographies – in the Corporate Governance
section at rogers.com/governance. At this link, you will find
a summary of the differences between the NYSE corporate
governance rules applicable to U.S.-based companies and our
governance practices as a non-U.S.-based issuer that is listed
on the NYSE.
The Audit and Risk Committee reviews the Company’s
accounting policies and practices, the integrity of the
Company’s financial reporting processes and procedures
and the financial statements and other relevant disclosures
for release to shareholders and the public. The Committee
also assists the Board in its oversight of the Company’s
compliance with legal and regulatory requirements relating
to financial reporting and assesses the accounting systems,
financial control systems and evaluates the qualifications,
independence and work of both external and internal
auditors. It also reviews risk management policies and
associated processes to identify major risk exposures.
The Corporate Governance Committee assists and makes
recommendations to ensure the Board has developed
appropriate systems and procedures to enable it to exercise
and discharge its responsibilities. To carry this out, the
Corporate Governance Committee assists the Board in
developing, recommending and establishing corporate
governance policies and practices, and leads the Board
in its periodic review of the performance of the Board and
its committees.
14 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
“ Over the years, the Canadian economy has benefited greatly from family-
founded and controlled companies that are able to take a longer-term view
of investment horizons and general business management. At Rogers, we
have successfully overlaid disciplined corporate governance processes that
strike a healthy balance of being supportive of the company’s continued
success, making business sense and benefiting all shareholders.”
Alan D. Horn, cpa, ca
Chairman of the Board
Rogers Communications Inc.
“ Rogers has long benefited from strong, independent voices and Directors
in the boardroom and sound governance structures, which ensure that
their influence is real. The structure of our Board is very much intended to
ensure that the Directors and management act in the interests of all Rogers
shareholders – an approach that has helped ensure the continuance of
strong, family-founded Canadian companies.”
Charles Sirois
Lead Director
Rogers Communications Inc.
The Nominating Committee identifies prospective Director
nominees for election by the shareholders and for appointment
by the Board and also recommends nominees for each
committee of the Board, including each committee’s Chair.
The Human Resources Committee assists the Board in
monitoring, reviewing and approving compensation and
benefit policies and practices. The Committee is responsible
for recommending senior management compensation and
for monitoring succession planning with respect to senior
executives.
The Executive Committee assists the Board in discharging
its responsibilities in the intervals between meetings of the
Board, including to act in such areas as specifically designated
and authorized at a preceding meeting of the Board and to
consider matters concerning the Company that may arise from
time to time.
Rogers’ good governance practices
Separation of CEO
and Chairman Roles
Independent
Lead Director
Formal Corporate
Governance
Policy and Charters
Code of Business
Conduct and
Whistleblower
Hotline
Director Share
Ownership
Guidelines
Board and
Committee
In Camera
Discussions
Annual Reviews
of Board and
Committee
Performance
Audit and
Risk Committee
Meetings with
Internal and External
Auditors
Orientation
Program for
New Directors
The Finance Committee reviews and reports to the Board on
matters relating to the Company’s investment strategies and
general debt and equity structure.
Board
Education
Sessions
Committee
Authority to
Retain Independent
Advisors
Director Material
Relationship
Standards
The Pension Committee supervises the administration of
the Company’s pension plans and reviews the provisions and
investment performance of the Company’s pension plans.
For a complete description of Rogers’ corporate governance
structure and practices and copies of our annual information
circular and proxy, go to rogers.com/investors
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 15
Senior Executive Officers
of Rogers Communications Inc.
As of February 11, 2016
Senior Executive Officers
1
2
3
4
Guy Laurence
President and
Chief Executive Officer
Bob Berner
Chief Technology Officer
Frank Boulben
Chief Strategy Officer
Rick Brace
President,
Media Business Unit
5
Jacob Glick
Chief Corporate Affairs Officer
6
7
8
9
Dale Hooper
Chief Brand Officer
Nitin Kawale
President,
Enterprise Business Unit
Deepak Khandelwal
Chief Customer Officer
David Miller
Chief Legal Officer and Secretary
11 Anthony Staffieri, fcpa, fca
Chief Financial Officer
12 Jamie Williams
Chief Information Officer
13 Dirk Woessner
President,
Consumer Business Unit
10 Jim Reid
Chief Human Resources Officer
For detailed biographical information
of Rogers’ Executive Officers,
go to rogers.com/investors
16 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
23546101197121318 Directors
of Rogers Communications Inc.
As of February 11, 2016
1
6
2
7
3
8
4
9
5
10
11
12
13
14
Directors
1
2
3
4
5
Alan D. Horn, cpa, ca
Chairman of RCI, President and
Chief Executive Officer,
Rogers Telecommunications Limited.
Charles Sirois
Lead Director of RCI, Chairman,
Telesystem Ltd.
C. William D. Birchall
Company Director
Bonnie R. Brooks
Vice Chairman,
Hudson’s Bay Company
Stephen A. Burch
Chairman,
University of Maryland
Medical Systems
6
*
7
8
9
John H. Clappison, fcpa, fca
Company Director
11 Edward S. Rogers
Deputy Chairman
Guy Laurence
President and Chief Executive Officer,
Rogers Communications Inc.
* Pictured on previous page.
Philip B. Lind, cm
Vice Chairman
John A. MacDonald
Company Director
Isabelle Marcoux
Chair, Transcontinental Inc.
12 Loretta A. Rogers
Company Director
13 Martha L. Rogers
Company Director
14 Melinda M. Rogers
Company Director
For detailed biographical
information of Rogers’ Directors,
go to rogers.com/investors
10 The Hon. David R. Peterson, pc, qc
Chairman,
Cassels Brock & Blackwell LLP
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 17
We Aspire...
To grow our company by building a brilliant digital future for Canadians
Who We Are
We are Rogers, a Canadian family business.
We believe in innovation in everything we do.
We invest ahead of the curve, and build for tomorrow.
We deliver value and quality. We don’t cut corners.
We understand you’re really busy, so we make things simple.
Customers are part of our family, and we always look after family.
We train and develop our people so you can always rely on us.
We work as one team, with one goal: to serve you better.
We love what we do. Tomorrow, we aim to do it even better.
“The best is yet to come.” Ted Rogers
What We Believe In
How We Work
The world always needs new ideas
Simplify and innovate
The customer’s problems are ours to solve
Take ownership of the what and the how
Investing in people always pays off
Equip people to succeed
Being the best is the only goal worth having
Execute with discipline and pride
We win as a team, or not at all
Talk straight, build trust, and over deliver
18 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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20 MANAGEMENT’S DISCUSSION AND ANALYSIS
65 Governance and Risk Management
22 Executive Summary
22 About Rogers Communications
23
24
2015 Highlights
Key Achievements
Social Responsibility
65 Governance at Rogers
67
68 Risk Management
69 Risks and Uncertainties Affecting Our Business
75 Controls and Procedures
25 Understanding Our Business
75 Regulation in Our Industry
Products and Services
25
26 Competition
28
Industry Trends
30 Our Strategy
30 Our Strategic Priorities
31 Our Progress in 2015
31 Key Performance Drivers and Strategic Highlights
31
34
35
2015 Strategic Highlights
2016 Objectives
Financial and Operating Guidance
77 Wireless
79 Cable
80 Media
80 Other Information
Key Performance Indicators
80 Accounting Policies
83
85 Non-GAAP Measures
87
88
Summary of Financial Results of Long-Term Debt Guarantor
Five-Year Summary of Consolidated Financial Results
89 CONSOLIDATED FINANCIAL STATEMENTS
36 Capability to Deliver Results
89 Management’s Responsibility for Financial Reporting
Leading Networks
Powerful Brands
36
38
38 Widespread Product Distribution
First Class Media Content
39
Engaged People
39
39
Financial Strength and Flexibility
39 Healthy Trading Volumes and Dividends
90 Report of Independent Registered Public Accounting Firm
92 Consolidated Statements of Income
93 Consolidated Statements of Comprehensive Income
94 Consolidated Statements of Financial Position
40 2015 Financial Results
95 Consolidated Statements of Changes in Shareholders’ Equity
96 Consolidated Statements of Cash Flows
97 Notes to Consolidated Financial Statements
40
41
Summary of Consolidated Results
Key Changes in Financial Results This Year
Compared to 2014
Business Solutions
42 Wireless
45 Cable
47
48 Media
49 Additions to Property, Plant and Equipment
50 Review of Consolidated Performance
53 Quarterly Results
56 Overview of Financial Position
57 Managing Our Liquidity and Financial Resources
Sources and Uses of Cash
57
Financial Condition
60
61
Financial Risk Management
64 Dividends and Share Information
65 Commitments and Other Contractual Obligations
65 Off-Balance Sheet Arrangements
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 19
MANAGEMENT’S DISCUSSION AND ANALYSIS
Management’s Discussion and Analysis
This Management’s Discussion and Analysis (MD&A) contains
important information about our business and our performance for
the year ended December 31, 2015. This MD&A should be read in
conjunction with our 2015 Audited Consolidated Financial
Statements, which have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board.
• additions to property, plant and equipment;
• cash income taxes;
• free cash flow;
• dividend payments;
• the growth of new products and services;
• expected growth in subscribers and the services to which they
subscribe;
All dollar amounts are in Canadian dollars unless otherwise stated.
All percentage changes are calculated using the rounded numbers
as they appear in the tables. Charts, graphs, and diagrams are
included for reference; however, they do not form part of this
MD&A. This MD&A is current as at February 11, 2016 and was
approved by the Rogers Communications Inc. Board of Directors
(the Board). This MD&A includes forward-looking statements and
assumptions. See “About Forward-Looking Information” for more
information.
We, us, our, Rogers, Rogers Communications, and the Company
refer to Rogers Communications Inc. and our subsidiaries. RCI
refers to the legal entity Rogers Communications Inc., not including
our subsidiaries. RCI also holds interests in various investments and
ventures.
We are publicly traded on the Toronto Stock Exchange (TSX: RCI.A
and RCI.B) and on the New York Stock Exchange (NYSE: RCI).
In this MD&A, this year refers to the year ended December 31,
2015, and last year refers to the year ended December 31, 2014.
All results commentary is compared to the equivalent period in
2014 or as at December 31, 2014, unless otherwise indicated.
ABOUT FORWARD-LOOKING INFORMATION
This MD&A includes “forward-looking information” and “forward-
looking statements” within the meaning of applicable securities
laws (collectively “forward-looking information”), and assumptions
about, among other things, our business, operations, and financial
performance and condition approved by our management on the
date of this MD&A. This forward-looking information and these
assumptions include, but are not limited to, statements about our
objectives and strategies to achieve those objectives, and about
our beliefs, plans, expectations, anticipations, estimates, or
intentions.
Forward-looking information:
• typically includes words like could, expect, may, anticipate,
intend, estimate, plan, project, guidance,
forward-
assume, believe,
outlook, and similar expressions, although not all
looking information includes them;
• includes conclusions, forecasts, and projections based on our
current objectives and strategies and on estimates, expectations,
assumptions, and other factors, most of which are confidential
and proprietary and that we believe to be reasonable at the time
they were applied but may prove to be incorrect; and
• was approved by our management on the date of this MD&A.
Our forward-looking information and statements include forecasts
and projections related to the following items, among others:
• operating revenue;
• adjusted operating profit;
20 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
• the cost of acquiring and retaining subscribers and deployment
of new services;
• continued cost reductions and efficiency improvements; and
• all other statements that are not historical facts.
Specific forward-looking information included or incorporated in
this document includes, but is not limited to, our information and
statements under “Financial and Operating Guidance” relating to
our 2016 consolidated guidance on operating revenue, adjusted
operating profit, additions to property, plant and equipment, and
free cash flow. All other statements that are not historical facts are
forward-looking statements.
We base our conclusions, forecasts and projections (including the
aforementioned guidance) on the following factors, among others:
• general economic and industry growth rates;
• currency exchange rates and interest rates;
• product pricing levels and competitive intensity;
• subscriber growth;
• pricing, usage, and churn rates;
• changes in government regulation;
• technology deployment;
• availability of devices;
• timing of new product launches;
• content and equipment costs;
• the integration of acquisitions; and
• industry structure and stability.
Except as otherwise indicated, this MD&A and our forward-looking
statements do not reflect the potential impact of any non-recurring
or other special
items or of any dispositions, monetizations,
mergers, acquisitions, other business combinations, or other
transactions that may be considered or announced or may occur
after
the date the statement containing the forward-looking
information is made.
RISKS AND UNCERTAINTIES
Actual events and results can be substantially different from what is
expressed or implied by forward-looking information because of
risks, uncertainties, and other factors, many of which are beyond
our control, including but not limited to:
• regulatory changes;
• technological changes;
• economic conditions;
• unanticipated changes in content or equipment costs;
• changing conditions in the communications, entertainment,
and/or information industries;
• the integration of acquisitions;
• litigation and tax matters;
• the level of competitive intensity;
• the emergence of new opportunities; and
• new interpretations and new accounting standards
from
accounting standards bodies.
These factors can also affect our objectives, strategies, and
intentions. Many of these factors are beyond our control or our
current expectations or knowledge. Should one or more of these
risks, uncertainties, or other factors materialize, our objectives,
strategies, or
factors or
assumptions underlying the forward-looking information prove
incorrect, our actual results and our plans could vary significantly
from what we currently foresee.
intentions change, or any other
BEFORE MAKING AN INVESTMENT DECISION
Before making any investment decisions and for a detailed
discussion of the risks, uncertainties, and environment associated
with our business, fully review the sections in this MD&A entitled
“Regulation in Our
Industry” and “Governance and Risk
Management”, as well as our various other filings with Canadian
and US securities regulators which can be found at sedar.com and
sec.gov, respectively.
Accordingly, we warn investors
to exercise caution when
considering statements containing forward-looking information
and caution them that it would be unreasonable to rely on such
statements as creating legal rights regarding our future results or
plans. We are under no obligation (and we expressly disclaim any
such obligation) to update or alter any statements containing
the factors or assumptions
forward-looking information or
underlying them, whether as a result of new information, future
events, or otherwise, except as required by law. All of the forward-
looking information in this MD&A is qualified by the cautionary
statements herein.
FOR MORE INFORMATION
You can find more information about us, including our Annual
Information Form, on our website (rogers.com/investors), on
SEDAR (sedar.com), and on EDGAR (sec.gov), or you can e-mail us
at investor.relations@rci.rogers.com. Information on or connected
to these and any other websites referenced in this document does
not constitute part of this MD&A.
You can also go to rogers.com/investors for information about our
governance practices, corporate social responsibility reporting, a
glossary of communications and media industry terms, and
additional information about our business.
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2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 21
MANAGEMENT’S DISCUSSION AND ANALYSIS
Executive Summary
ABOUT ROGERS COMMUNICATIONS
Rogers Communications is a leading diversified public Canadian communications and media company.
2015 OPERATING REVENUE BY SEGMENT
(%)
$13.4
BILLION
WIRELESS 56%
CABLE 26%
MEDIA 15%
BUSINESS SOLUTIONS 3%
2015 ADJUSTED OPERATING PROFIT BY SEGMENT
(%)
$5.0
BILLION
WIRELESS 63%
CABLE 32%
MEDIA 3%
BUSINESS SOLUTIONS 2%
We provide a broad range of services to individual consumers and
businesses,
including wireless voice and data communications,
high-speed Internet, cable television, cable telephony, and data
networking services. We also provide services in radio and
television broadcasting (including over-the-air and “over-the-top”
(OTT) programming through the Internet and mobile applications),
multi-platform shopping,
and trade
publications, sports media and entertainment, and digital media.
consumer magazines
Almost all of our operations and sales are in Canada. We have a
highly skilled and diversified workforce of approximately 26,000
employees. Our head office is in Toronto, Ontario and we have
numerous offices across Canada.
FOUR BUSINESS SEGMENTS
We report our results of operations in four segments. Each
segment and the nature of its business are as follows:
Segment
Wireless
Cable
Principal activities
Wireless telecommunications operations
for Canadian consumers and businesses
Cable telecommunications operations,
including Internet, television, and
telephony (phone) services for Canadian
consumers and businesses
Business Solutions Network connectivity through our fibre
network and data centre assets to support
a range of voice, data, networking,
hosting, and cloud-based services for
small, medium, and large Canadian
businesses, governments, and on a
wholesale basis to other
telecommunications providers
A diversified portfolio of media properties,
including television and radio
broadcasting, specialty channels, multi-
platform shopping, publishing, sports
media and entertainment, and digital
media
Media
22 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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2015 HIGHLIGHTS
KEY FINANCIAL INFORMATION
(In millions of dollars, except margins and per share amounts, unaudited)
2015
2014
% Chg
Years ended December 31
Consolidated
Operating revenue
As adjusted 1:
Operating profit
Operating profit margin
Net income
Basic earnings per share
Net income
Basic earnings per share
Additions to property, plant and equipment
Cash provided by operating activities
Free cash flow 1
Wireless
Operating revenue
Adjusted operating profit
Adjusted operating profit margin as a % of network revenue
Cable
Operating revenue
Adjusted operating profit
Adjusted operating profit margin
Business Solutions
Operating revenue
Adjusted operating profit
Media
Operating revenue
Adjusted operating profit
KEY PERFORMANCE INDICATORS
Subscriber count results (000s) 2
Wireless subscribers
Internet subscribers
Television subscribers
Phone subscribers
Additional Wireless metrics 2
Postpaid churn (monthly)
Postpaid ARPA (monthly)
Blended ARPU (monthly)
Ratios
Capital intensity 2
Dividend payout ratio of net income 2
Dividend payout ratio of free cash flow 1, 2
Return on assets 2
Adjusted net debt / adjusted operating profit 1, 3
Employee-related information
Total active employees (approximate)
13,414
12,850
4
5,032
37.5%
1,490
$ 2.89
1,381
$ 2.68
2,440
3,747
1,676
7,651
3,239
46.9%
3,465
1,658
47.8%
377
116
2,079
172
5,019
39.1%
1,532
$ 2.97
1,341
$ 2.60
2,366
3,698
1,437
7,305
3,246
48.1%
3,467
1,665
48.0%
382
122
1,826
131
–
(1.6 pts)
(3)
(3)
3
3
3
1
17
5
–
(1.2 pts)
–
–
(0.2 pts)
(1)
(5)
14
31
As at or years ended December 31
2015
2014
Chg
9,877
2,048
1,896
1,090
9,450
2,011
2,024
1,150
427
37
(128)
(60)
1.27%
$110.74
$ 59.71
1.27%
$106.41
$ 59.41
–
4.33
0.30
$
$
18.2%
72%
59%
4.7%
3.1
18.4%
70%
66%
5.1%
2.9
(0.2 pts)
2 pts
(7 pts)
(0.4 pts)
0.2
26,000
27,000
(1,000)
1 Adjusted operating profit, adjusted operating profit margin, adjusted net income, adjusted basic earnings per share, free cash flow, adjusted net debt / adjusted operating profit,
and dividend payout ratio of free cash flow are non-GAAP measures and should not be considered as a substitute or alternative for GAAP measures. They are not defined terms
under IFRS, and do not have standard meanings, so may not be a reliable way to compare us to other companies. See “Non-GAAP Measures” for information about these
measures, including how we calculate them.
2 As defined. See “Key Performance Indicators”.
3 Effective September 30, 2015, we have retrospectively amended our calculation of adjusted net debt to value the net debt derivatives without adjustment for credit risk. For
accounting purposes in accordance with IFRS, we recognize the fair values of our debt derivatives using an estimated credit-adjusted mark-to-market valuation by discounting
cash flows to the measurement date. For purposes of calculating adjusted net debt and adjusted net debt / adjusted operating profit, we believe including debt derivatives
valued without adjustment for credit risk is commonly used to evaluate debt leverage and for market valuation and transactional purposes.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 23
MANAGEMENT’S DISCUSSION AND ANALYSIS
KEY ACHIEVEMENTS
HIGHER OPERATING REVENUE
• Consolidated revenue increased by 4% this year, reflecting
revenue growth of 5% in Wireless and 14% in Media, while
Cable revenue remained stable and Business Solutions revenue
decreased by 1%. Wireless revenue increased on higher network
revenue from the continued adoption of higher-postpaid-ARPA-
generating Rogers Share Everything plans and greater
smartphone sales. Cable revenue was stable as the increase in
Internet revenue from the movement of customers to higher-end
speed and usage tiers was offset by lower Television and Phone
revenue primarily due to Television and Phone subscriber losses
over the past year. Business Solutions revenue decreased this
year primarily as a result of the continued reduction in lower
margin, off-net legacy revenue, which more than offset the
growth in on-net next generation services, including our data
centre businesses. Media revenue increased as a result of the
National Hockey League (NHL) licensing agreement, growth at
Sportsnet, and higher revenue at the Toronto Blue Jays, partially
offset by lower sales at The Shopping Channel
(TSC) and
continued softness in conventional broadcast TV and print
advertising.
• Consolidated adjusted operating profit was stable this year, with
a consolidated adjusted operating profit margin of 37.5%,
resulting from higher revenue offset by higher net subsidies in
Wireless and higher operating expenses in Media. Our net
income increased 3% to $1,381 million, mainly due to lower
restructuring, acquisition and other costs, finance costs, and
income taxes, partially offset by higher depreciation and
amortization.
• Postpaid Wireless subscriber net additions of 106,000 and
Internet net additions of 37,000 this year.
HIGHER CASH FLOW
• Free cash flow increased 17% this year to $1,676 million as a
result of lower cash income tax payments, partially offset by
higher additions to property, plant and equipment. Our cash
provided by operating activities increased 1% this year to
$3,747 million.
LIQUIDITY POSITION
• Ended the year with approximately $3.3 billion of available
liquidity (2014 – $2.8 billion), comprised of $0.01 billion cash on
hand (2014 – $0.2 billion), $3.0 billion available under our bank
credit facilities (2014 – $2.5 billion), and $0.25 billion available
under our $1.05 billion accounts receivable securitization
program (2014 – $0.06 billion available under our $0.9 billion
accounts receivable securitization program).
• Issued US$1,000 million ($1,338 million) of senior notes,
consisting of US$700 million ($937 million) 3.625% senior notes
due 2025 and US$300 million ($401 million) 5.000% senior
notes due 2044.
• Our overall weighted average cost of borrowings was 4.82% as
at December 31, 2015 (2014 – 5.20%) and our overall weighted
average term to maturity on our debt was 10.8 years as at
December 31, 2015 (2014 – 10.8 years).
24 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
OPERATING REVENUE BY SEGMENT
(IN MILLIONS OF DOLLARS)
2015
2014
2013
2,079
377
3,465
7,651
1,826
382
3,467
7,305
1,704
374
3,475
7,270
Media
Business Solutions
Cable
Wireless
ADJUSTED OPERATING PROFIT BY SEGMENT
(IN MILLIONS OF DOLLARS)
2015
2014
2013
172
116
1,658
3,239
131
122
1,665
3,246
161
106
1,718
3,157
Media
Business Solutions
Cable
Wireless
DIVIDENDS
• Increased our annualized dividend rate in January 2015 by 5% to
$1.92 per Class A Voting and Class B Non-Voting share and paid
a quarterly dividend of $0.48 per share during 2015.
OTHER SIGNIFICANT DEVELOPMENTS
• Completed the strategic acquisition of wireless provider Data &
Audio-Visual Enterprises Wireless Inc. (Mobilicity) and completed
the transaction to acquire Shaw Communication Inc.’s (Shaw)
AWS-1 spectrum licences. We added and activated 20 MHz of
contiguous AWS-1 spectrum adjacent to our existing 20 MHz of
AWS-1 holdings across British Columbia and Alberta, and added
10 MHz of contiguous AWS-1 spectrum across Southern
Ontario.
• Completed our purchase of 50% of the common shares of
Glentel Inc. (Glentel) from BCE Inc. (BCE). Glentel, which we
jointly own with BCE, is a large, multicarrier mobile phone retailer
with several hundred Canadian wireless retail distribution outlets,
as well as operations in the US and Australia.
ADJUSTED BASIC EARNINGS PER SHARE
($)
2015
2014
2013
$2.89
$2.97
$3.43
Understanding Our Business
Rogers Communications is a leading diversified public Canadian
communications and media company. We report our results based
on four segments, as follows:
consumers, businesses, governments,
Wireless provides wireless voice and data communication services to
individual
and other
telecommunications service providers. Our wireless network is one of
the most extensive and advanced independent high-speed wireless
data networks in Canada, capable of supporting wireless services on
smartphones, tablets, computers, and a broad variety of machine-to-
machine and specialized devices. See “Capability to Deliver Results”
for more information about our extensive wireless network and
significant spectrum position.
Cable provides high-speed Internet,
television, and voice
communication services to consumers, businesses, governments,
and wholesale resellers, leveraging our expansive fibre and hybrid
fibre-coaxial network infrastructure in Ontario, New Brunswick, and
Newfoundland. See “Capability to Deliver Results” for more
information about our expansive cable networks.
Business Solutions provides voice and data communications and
advanced services, including data centres and cloud computing, to a
wide range of small, medium, and large enterprise and government
customers,
to other
telecommunications service providers over our fibre network facilities.
as on a wholesale basis
as well
Media provides radio and television broadcasting services, multi-
platform shopping experiences, consumer magazines and trade
publications, sports media and entertainment, which includes both
the Toronto Blue Jays and our 12-year, exclusive national NHL
licensing agreement (NHL Agreement) to broadcast all nationally
televised live NHL hockey games within Canada on multiple
platforms, and digital media services.
During the year, our Wireless, Cable, and Business Solutions
reporting segments were operated by our wholly-owned
subsidiary, Rogers Communications Partnership (RCP), and certain
other wholly-owned subsidiaries. Our Media reporting segment is
operated by our wholly-owned subsidiary, Rogers Media Inc., and
its subsidiaries.
On January 1, 2016, Fido Solutions Inc., a subsidiary of RCI,
transferred its partnership interest in RCP to Rogers Cable and Data
Centres Inc. (RCDCI), a subsidiary of RCI, leaving RCDCI as the sole
partner of RCP, thereby causing RCP to cease to exist. RCDCI
became the owner of all the assets and assumed all the liabilities
previously held by RCP. Subsequent to the reorganization, RCDCI
changed its name to Rogers Communications Canada Inc. (RCCI).
PRODUCTS AND SERVICES
WIRELESS
Rogers is a Canadian leader
in innovative wireless network
technologies and services. We provide wireless services under the
Rogers, Fido, chatr, and Mobilicity brands, and provide consumers
and businesses with the best and latest wireless devices, services,
and applications including:
• mobile and fixed high-speed Internet access;
• wireless voice and enhanced voice features;
• wireless home phone;
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• device protection;
• text messaging;
• e-mail;
• global voice and data roaming, including Roam Like Home;
• machine-to-machine solutions; and
• advanced wireless solutions for businesses.
CABLE
Our cable network provides an innovative and leading selection of
high-speed broadband Internet access, digital television and online
viewing, phone, and advanced home Wi-Fi services to consumers
and businesses.
Internet services include:
• basic Internet access, unlimited usage packages, security
solutions, and e-mail;
• access speeds of up to 1 gigabit per second (Gbps), which we
expect to cover our entire Cable footprint by the end of 2016;
• Rogers IGNITE unlimited packages, combining fast and reliable
speeds and the freedom of unlimited usage; and
• plans available under both the Rogers and Fido brands.
Television services include:
• on-demand television, personal video recorders (PVRs), and
Whole Home PVRs;
• linear and time-shifted programming;
• digital specialty channels;
• 4K television programming, including all 2016 Toronto Blue Jays
home games and select marquee NHL games; and
• Rogers Anyplace
TV,
smartphones, tablets, and personal computers.
televised content delivered on
Phone services include:
• residential and small business local telephony service; and
• calling features such as voicemail, call waiting, and long distance.
BUSINESS SOLUTIONS
Our services aim to meet the increasing demands of today’s critical
business applications. These services include:
• voice, data networking,
(IP), and Ethernet
services over multiservice customer access devices that allow
customers to scale and add services, such as private networking,
Internet, IP voice, and cloud solutions, which blend seamlessly to
grow with their business requirements;
Internet protocol
• optical wave,
Internet, Ethernet, and multi-protocol
label
switching services, providing scalable and secure metro and
wide area private networking that enables and interconnects
critical business applications for businesses that have one or
many offices, data centres, or points of presence (as well as
cloud applications) across Canada;
with
security-embedded,
• simplified “leapfrog” information technology (IT) and network
cloud-based,
technologies
professionally-managed solutions, including:
• Managed Wi-Fi, which allows customers to remotely monitor
their networks at any site and view network performance
analytics via a web portal; this allows customers to better
understand how their network is being used, from almost
anywhere; and
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 25
MANAGEMENT’S DISCUSSION AND ANALYSIS
• Rapid Application Development Program, which allows
businesses to develop and deliver rich mobile experiences
across various Wi-Fi devices, leveraging our Managed Wi-Fi as
a Service; and
• extensive wireless and cable access networks services for primary,
bridging, and back-up connectivity.
OTHER
Other services we offer to consumers and businesses include:
• Rogers Smart Home Monitoring, an innovative home security
and automation system;
• Rogers Platinum MasterCard, a credit card that allows customers
to earn cashback rewards points on credit card spending; and
MEDIA
Our portfolio of Media assets reaches Canadians coast-to-coast.
In Television, we operate several conventional and specialty
television networks:
• City network, which,
together with affiliated stations, has
broadcast distribution to approximately 89% of Canadian
households;
• OMNI multicultural broadcast television stations;
• specialty channels that
include Outdoor Life Network, FX
(Canada), FXX (Canada), and G4 Canada;
• Sportsnet’s four regional stations, Sportsnet ONE, Sportsnet 360,
and Sportsnet World; and
• TSC, Canada’s only nationally televised shopping channel, which
generates a significant and growing portion of its revenue from
online sales.
In Radio, we operate more than 50 AM and FM radio stations in
including popular radio brands such as
markets across Canada,
98.1 CHFI, 680 News, Sportsnet The FAN, KISS, JACK FM, and
SONiC.
Our Publishing services and products include:
• many well-known consumer magazines, such as Maclean’s,
Chatelaine, Flare, Hello! Canada, and Canadian Business;
• a leading position in marketing, medical, financial, and trade
publications;
• a broad digital presence with a number of online publications
that continue the extension of content across new platforms; and
• Texture by Next Issue, our digital magazine service, which offers
unlimited access to a catalogue of over 190 premium Canadian
and US magazine titles.
Our NHL Agreement, which began with the 2014-2015 NHL
season, allows us
to deliver unprecedented coverage of
professional hockey, with more than 1,200 regular season games
per season streamed across television, smartphones, tablets, and
the Internet, both through traditional streaming services as well as
Rogers NHL GameCentre Live. Our NHL Agreement grants Rogers
national rights across television broadcasts, smartphones, tablets,
and Internet streaming to all NHL regular season and playoff
games, the Stanley Cup Final, all NHL-related special events and
non-game events (such as the NHL All-Star Game and the NHL
Draft), and rights to sublicense broadcasting rights to TVA and the
Canadian Broadcasting Corporation (CBC) and to use the Hockey
Night In Canada brand through a sublicense agreement.
In Sports Entertainment, we own the Toronto Blue Jays, Canada’s
only Major League Baseball (MLB) team, and the Rogers Centre
event venue, which hosts the Toronto Blue Jays’ home games,
other professional
trade shows, and
league games, concerts,
special events.
Our online and mobile digital media platforms include digital
advertising across websites and mobile platforms, including real-
time advertisement website banners, digital content subscriptions,
and e-commerce solutions.
26 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
• local digital services:
• OutRank, an online marketing and advertising tool for small
businesses; and
• Vicinity, an automated loyalty program for small businesses.
in a number of associates and joint
OTHER INVESTMENTS
We hold interests
arrangements, some of which include:
• our 37.5% ownership interest
in Maple Leaf Sports &
Entertainment Ltd. (MLSE), which owns the Toronto Maple Leafs,
the Toronto Raptors, Toronto FC, and the Toronto Marlies, as
well as various associated real estate holdings;
• our joint venture, shomi, a subscription-based video-on-demand
streaming service available online and via cable set-top boxes to
all Canadians, with a library of over 15,000 hours of movies and
past seasons of some of the most popular TV shows;
• our 50% ownership interest in Glentel, a large provider of
multicarrier wireless and wireline products and services with
several hundred Canadian retail distribution outlets, as well as
operations in the US and Australia; and
• our joint operation, Inukshuk Wireless Partnership, created to
operate a national fixed wireless telecommunications network to
the joint operation and their
be used by the partners of
subsidiaries.
COMPETITION
Competition in the wireless industry from national and regional
operators and resellers has
led to a highly competitive
environment, as consumers have considerable choice in service
providers and plan offerings across a wide array of pricing and
service points. This puts downward pressure on pricing, potentially
reducing profit margins, and could also impact our customer
churn.
Traditional wireline telephone and television services are offered
over the Internet. This has allowed more non-traditional providers
to enter the market and has changed how traditional providers
compete. This is changing the mix of packages and pricing that
service providers offer and could impact customer churn levels.
In the media industry, there continues to be a shift towards digital
and online media consumption by consumers, which in turn drives
advertisers to direct more advertising dollars to digital and online
versus traditional media. In addition, the number of competitors
has increased as more digital and online media companies,
including large global companies, enter the market.
WIRELESS
We compete on customer experience, quality of service, scope of
services, network coverage, sophistication of wireless technology,
breadth of distribution, selection of devices, branding and
positioning, and price.
• Wireless technology — our extensive LTE network caters to
customers seeking the increased capacity and speed it provides.
We compete with Bell, Telus, MTS, Videotron, SaskTel, and
Eastlink, all of whom operate LTE networks, as well as WIND
Mobile Corp. (WIND), which currently owns spectrum licences
required to operate an LTE network. We also compete with these
providers on HSPA and GSM networks and with providers that
use alternative wireless technologies, like Wi-Fi “hotspots” and
mobile virtual network operators, such as President’s Choice
Mobile and Primus.
• Product, branding, and pricing — we compete nationally with Bell
and Telus, including their discount brands Virgin Mobile and
Koodo. We also compete with various regional players and
resellers.
• Distribution — we compete with other service providers for
dealers, prime locations for our own stores, and third-party retail
distribution shelf space.
• Wireless networks and handset devices — consolidation amongst
regional players, or with incumbent carriers, could alter the
regional or national competitive landscapes for Wireless.
• Inbound roaming — we compete with other major national
carriers to provide service to international operators who have
customers who roam while in Canada.
• Spectrum — Innovation, Science and Economic Development
Canada (ISED Canada, formerly Industry Canada) has announced a
future 600 MHz spectrum auction, expected to take place in the
next two to three years. The outcome of this auction may increase
competition.
CABLE
Internet
We compete with other ISPs that offer residential and commercial
high-speed Internet access services. Rogers and Fido high-speed
Internet services compete directly with:
• Bell’s Internet service in Ontario;
• Bell Aliant’s
in New Brunswick
Internet
services
and
Newfoundland; and
• various resellers using wholesale telecommunication company DSL
and cable Third-Party Internet Access (TPIA) services in local markets.
Television
We compete with:
• other Canadian multi-channel
Undertakings (BDUs)
satellite TV services, and Internet Protocol television;
Broadcasting Distribution
including Bell, Shaw, other alternative
• OTT video offerings through providers like Netflix, YouTube, Apple,
• over-the-air
shomi, and other channels streaming their own content; and
local and regional broadcast
television signals
received directly through antennas, and the illegal reception of
US direct broadcast satellite services.
Phone
We compete with:
• Bell and Bell Aliant’s wireline phone service in Ontario, New
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BUSINESS SOLUTIONS
A number of different players in the Canadian market compete for
enterprise network and communications services. There are
relatively few national providers, but each market has its own
competitors that usually focus on the geographic markets where
they have the most extensive networks.
In the wireline voice and data market, we compete with facilities-
and non-facilities-based telecommunications service providers. In
markets where we own network infrastructure, we compete with
incumbent fibre-based providers. Our main competitors are as
follows, but there are also regional competitors:
• Ontario – Bell, Cogeco Data Services, and Allstream;
• Quebec – Bell, Telus, and Videotron;
• Atlantic Canada – Bell Aliant and Eastlink; and
• Western Canada – Shaw and Telus.
MEDIA
Television and specialty services compete for
advertisers with other:
• Canadian television stations that broadcast in their local markets,
including those owned and operated by the CBC, Bell Media,
and Shaw Media, some of which have greater national coverage;
viewers and
• specialty channels;
• distant Canadian signals and US border stations, given the time-
shifting capability available to subscribers;
• media, including newspapers, magazines, radio, and outdoor
advertising; and
• content available on the Internet.
Our radio stations compete mainly with individual stations in local
markets, but they also compete:
• nationally with other large radio operators, including the CBC,
Bell Media, Corus Entertainment, and satellite radio operator
Sirius XM;
• with other media, including newspapers, magazines, television,
and outdoor advertising; and
• with new technologies, such as online web information services,
music downloading, portable media players, and online music
streaming services.
TSC competes with:
• retail stores;
• catalogue, Internet, and direct mail retailers;
• infomercials that sell products on television; and
• other
television channels,
for channel placement,
viewer
attention, and loyalty.
Our magazines and other publications compete for readership and
advertisers with:
• other Canadian magazines, both digital and printed;
• foreign, mostly US, titles that sell directly into Canada, both
digital and printed; and
Brunswick, and Newfoundland and Labrador;
• online information and entertainment websites.
• Incumbent Local Exchange Carrier (ILEC) local loop resellers and
VoIP service providers (such as Primus and Comwave), other
VoIP-only service providers (such as Vonage and Skype), and
other voice applications riding over the Internet access services
of ISPs; and
• substitution of wireline for wireless products (commonly referred
to as cord-cutting), including mobile phones and wireless home
phone products.
Competition in Sports Entertainment includes other:
• televised and online sports programming;
• Toronto professional teams, for attendance at Toronto Blue Jays
games;
• Major League Baseball teams, for Toronto Blue Jays players and fans;
• local sporting and special event venues; and
• professional sports teams, for merchandise sales revenue.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 27
MANAGEMENT’S DISCUSSION AND ANALYSIS
INDUSTRY TRENDS
The telecommunications industry in Canada and our business segments are affected by several overarching trends.
CHANGING TECHNOLOGIES AND CONSUMER DEMANDS
Consumer demand for mobile devices, digital media, and on-
demand content across multiple platforms is pushing providers to
build networks
that can provide ever-increasing bandwidth
capacity. Increased adoption of smartphones and growth in our
data revenue continued this year, reflecting expanded use of
applications, mobile video, messaging, and other wireless data.
ECONOMIC CONDITIONS
We are affected by general economic conditions and consumer
confidence and spending, especially in our Media segment, where
advertising revenue is directly affected by the strength of the
economy, and in our Business Solutions
segment, where
businesses may delay significant capital purchases and business
services based on the strength of the economy.
Wireless carriers have been upgrading their HSPA networks to
faster, higher-bandwidth LTE networks. Cable companies continue
to improve television broadcasting technology, for example with 4K
TV broadcasting capability.
Cable and wireline companies are shifting their networks towards
higher speed and capacity data over cable service interface
specifications (DOCSIS) 3.0/3.1 and fibre-to-the-home (FTTH)
technologies. These new technologies provide faster potential data
communication speeds, allowing both television and Internet
signals to reach consumers more quickly. Telecommunications
operators have also begun to roll out FTTH; however,
these
deployments will be made to existing homes over several years.
REGULATION
Most areas of our business are highly regulated. These regulations
can affect the programming we can offer, where and how we use
our networks, how we build our businesses, the spectrum we can
purchase, the prices that we charge for certain services, and with
whom we compete. The wireless and cable segments of the
telecommunications industry are both being affected by increased
regulation and more reviews of
the current regulations. See
“Regulation in Our Industry” for more information.
28 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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WIRELESS TRENDS
CABLE TRENDS
More sophisticated wireless networks and devices and the rise of
multimedia and Internet-based applications are making it easier
and faster to receive data, driving growth in wireless data services.
Wireless providers are investing in the next generation of
broadband wireless data networks, such as LTE and future 5G
technologies, to support the growing data demand.
Wireless market penetration in Canada is approximately 82% of
the population and is expected to grow at an estimated 1.4%
annually over the next five years, per Goldman Sachs’ Global
Investment Research Reports.
Effective June 3, 2015,
the Canadian Radio-television and
Telecommunications Commission (CRTC) Wireless Code has
limited wireless term contracts to two years from three years, which
has resulted in a greater number of customers completing and
renewing contracts at any given time. Shorter-term contracts also
generally create lower product subsidies as there is less time for
carriers to recover those subsidies.
Subscribers are increasingly bringing their own devices or keeping
their existing devices for a longer period and therefore may not
enter into term contracts for wireless services. This may negatively
impact our subscriber churn, but may create gross addition
subscriber opportunities as a result of increased churn from other
carriers. This also may negatively impact the monthly service fees
charged to subscribers.
Wireless providers are collaborating with OTT services to offer their
customers unique, value-added benefits.
Mobile commerce continues to increase as more devices and
platforms
to facilitate wireless
transactions.
secure technology
adopt
The Internet and social media are increasingly being used as a
substitute for
traditional wireline telephone services, and
televised content is increasingly available online, on both wireline
and wireless devices. Downward Television tier migration (cord
shaving) and Television cancellation with the intent of
substitution (cord cutting) appear
to be on the rise with
increased adoption of OTT services, such as Apple TV, Netflix,
and Android-based TV boxes.
Broadcast television technology continues to improve with 4K TV
broadcasts and high dynamic range (HDR) for higher resolution
and improved motion video.
Regulatory rulings, such as the CRTC Let’s Talk TV hearing, will
result in an increase in à la carte, or “pick and pay”, TV channel
options that may negatively impact the industry.
Our digital cable and VoIP telephony services compete with
competitor IPTV deployments and non-facilities-based service
providers, respectively, which continue to increase competitive
intensity that have and may continue to negatively impact the
industry.
Cable and wireline companies are expanding their service
offerings to include faster broadband Internet. Canadian
companies, including Rogers, are beginning to offer download
speeds of 1 Gbps and Internet offerings with unlimited
bandwidth in response to the perceived “need for speed”.
Consumers are demanding ever-faster speeds for streaming
online media, playing online video games, and for their ever-
growing number of Internet-capable devices. In order to help
facilitate these speeds, companies are upgrading networks to
use fibre optic cable instead of traditional coaxial or copper core
cable. Traditional cables cannot transfer data with the speed of
fibre optics, allowing for a more engaging customer experience.
BUSINESS SOLUTIONS TRENDS
MEDIA TRENDS
Companies are using fibre-based access and cloud computing to
capture and share information in more secure and accessible
environments. This, combined with the rise of multimedia and
Internet-based business applications, is driving exponential growth
in data demand.
Enterprises and all
levels of government are dramatically
transforming data centre infrastructure by moving toward virtual
data storage and hosting. This is driving demand for more
advanced network functionality, robust, scalable services, and
supportive dynamic network infrastructure.
Carriers are dismantling legacy networks and investing in next
generation platforms and data centres that combine voice, data,
and video solutions onto a single distribution and access platform.
Companies are using third parties to increase security for their
data and information to address cyber
threats and other
information security risks.
Devices and machines are becoming more interconnected and
there is more reliance on the Internet and other networks to
facilitate updates and track usage.
Consumer demand for digital media, mobile devices, and on-
demand content is pushing advertisers to shift spending away
from conventional TV to digital platforms.
Competition has changed: traditional media assets in Canada
are increasingly being controlled by a small number of
competitors with significant scale and financial resources, and
technology has allowed new entrants and even individuals to
become media players in their own right.
Many players have become more vertically integrated across
both traditional and emerging platforms. Both providers and
purchasers of content have made the business plan more
uncertain as the relationship between these entities has become
more complex. Global aggregators have also emerged and are
competing for both content and viewers.
Access to live sports and other premium content has become
even more important for acquiring and retaining audiences that
in turn attract advertisers and subscribers. Ownership of content
and/or long-term agreements with content owners has therefore
also become increasingly important to media companies.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 29
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Strategy
OUR STRATEGIC PRIORITIES
We announced our new set of strategic priorities in May 2014
called Rogers 3.0. This strategy builds on our many strengths,
including a unique mix of network and media assets, and focuses
on how we can reaccelerate our growth relative to our industry
peers, increase the focus around the customer, reinvigorate our
brands, continue our network and innovation leadership, and
create an enhanced working environment for our employees.
To achieve these goals, Rogers 3.0 established strategic priorities
as follows:
• Be a Strong Canadian Growth Company
• Overhaul the Customer Experience
• Drive Growth in the Business Market
• Invest in and Develop our People
• Deliver Compelling Content Everywhere
• Focus on Innovation and Network Leadership
• Go to Market as One Rogers
BE A STRONG CANADIAN GROWTH COMPANY
The overarching goal of our Rogers 3.0 strategy is to reaccelerate
growth relative to our Canadian peers as measured by growth in
revenue and cash flow, and continuing to deliver healthy returns on
assets.
OVERHAUL THE CUSTOMER EXPERIENCE
Improving customer experience is core to our Rogers 3.0 strategy.
We believe that we can improve significantly in this area and have
started on that journey. Our goal is to make it easy for customers to
interact with Rogers when, how, and where they want. This means
simplifying our processes and policies and integrating them into
our IT systems and front-line employee training.
DRIVE GROWTH IN THE BUSINESS MARKET
The Canadian business market for communications services was
valued in September 2015 by International Data Corporation
Canada at an estimated $21 billion in 2016. We believe Rogers is
currently under-indexed in this market. Currently, we provide our
business customers with core telecommunication services such as
wireless, broadband, next generation IP, and data centre services.
We have aligned our organization to a new product and market
strategy to capture additional share and drive growth by bringing
innovative new services for business to market that leverage our
enterprise-grade network. We believe the business market is in the
transformation as new opportunities to
midst of a significant
provide managed services,
technology solutions, and network
security are gaining traction across the small, medium, and large
business segments. We believe our strategy of being first-to-market
with business service innovation, supported by an aligned and
execution-focused organization, will quickly
new
opportunities
in the business market. These
opportunities will be a key focus of ours going forward as we strive
to attract and serve more business customers.
for Rogers
deliver
30 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
INVEST IN AND DEVELOP OUR PEOPLE
Our employees are the heart and soul of Rogers and their passion
for our company and our customers is world-class. Our strategy is
to invest more in our people by updating our onboarding, training,
and development programs and establishing clear accountabilities
for all employees. We strive to provide our people, particularly our
front-line employees, with the training, tools, and support they
need. We believe that providing better training and tools to
empower our employees will
lead to increasingly positive
experiences for our customers.
DELIVER COMPELLING CONTENT EVERYWHERE
The ways in which Canadians consume content have fundamentally
changed. The new expectation is that content will be available “on
their
demand”. Whether it
favourite TV program at home or streaming a live sporting event on
their mobile device, Canadians now expect to be able to consume
any content they want, when and where they want, and on the
device that they want.
is watching the latest episode of
Rogers has some of the most sought-after media assets in Canada,
with a deep roster of leading sports assets, top radio stations, iconic
magazines, and award winning television programming. We will
continue to invest in compelling content for our customers and
focus on enhancing the cooperation between our Wireless, Cable,
Business Solutions, and Media teams so we can fully leverage our
highly popular content and make it available wherever our
customers want to consume it.
FOCUS ON INNOVATION AND NETWORK LEADERSHIP
Innovation has always been a part of our identity. Whether it is
bringing to market new products or
the latest network
technologies, Rogers has led the way with many “firsts”.
We will continue to invest in our wireless and cable networks and
innovative new products that run across them. We will aim to meet
the growing demand for data with the highest quality of service
while maintaining our network speed advantage. We will continue
to generate and develop technologies and services that support
our core product offerings.
GO TO MARKET AS ONE ROGERS
One Rogers is our plan for all of our employees, network, content,
and brand assets to work much more closely together. To operate
as One Rogers we must
remove barriers to collaboration,
cooperation, and agility across the organization. This allows for
assets and expertise in one part of the company to be easily shared
with other parts of the company to the benefit of our customers.
We will work as One Rogers across our business segments to
deliver enriched experiences right across our product sets and
customer base.
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OUR PROGRESS IN 2015
This was our first full year executing on Rogers 3.0, and we have
continued to accelerate our transformation and deliver significant
results. Specifically, we:
• Extended wireless coverage in even more rural markets across
Canada, allowing customers to stay connected in additional
places, at no extra charge, and with no sign-up or opt-in
requirements;
• Launched new Rogers
IGNITE broadband Internet-based
bundled offerings with new usage options and value-added
content, including Rogers NHL GameCentre LIVE and shomi
and introduced Rogers IGNITE Gigabit Internet, which we expect
to cover Rogers’ entire cable footprint by the end of 2016;
• Launched an initiative with Spotify, one of the world’s most
innovative music streaming services, delivering more value to our
Fido and Share Everything customers by including subscriptions
to Spotify Premium;
• Launched new products and services such as Fido Home
Internet, which allows customers access to a greater range of
Internet offerings at different price points; and
• Launched 4K TV and a new 4K set-top box and announced a
plan to broadcast over 100 live sporting events in 4K, including
all 2016 Toronto Blue Jays home games and 20 marquee NHL
games.
Delivering the Rogers 3.0 strategic plan is a journey and there is still
much work ahead of us. However, since implementing our plan, we
have made substantial progress in setting the structure and
framework that will enable us to continue to deliver against these
strategic priorities as we go forward.
Key Performance Drivers and Strategic Highlights
We set new corporate objectives each year to progress on our long-term strategic priorities and address short-term opportunities
and risks.
2015 STRATEGIC HIGHLIGHTS
OVERHAUL THE CUSTOMER EXPERIENCE
• Expanded Roam Like Home to over 100 destinations in Europe,
further
Asia, Mexico, South America, and Latin America,
simplifying how Wireless consumers use the Internet, make calls,
and send texts and emails with their Rogers Share Everything
plans. Customers have access to their Canadian plan features
while traveling, all at a relatively low cost.
• Reduced the number of customer complaints by more than 26%
over the 12-month period ended July 31, 2015 according to the
Commissioner for Complaints for Telecommunications Services’
(CCTS) December 2015 annual report. This builds off our
customer complaint reduction of almost 32% for the prior
12-month period. As part of our Rogers 3.0 plan, we are
committed to putting our customers first, and while our work is
far from over, this report shows our focus on customers is paying
off and we are heading in the right direction.
• Enhanced our Share Everything plans through the launch of new
Share Everything+ plans. The new plans allow customers to
choose from one of three content experiences: Texture by Next
Issue, shomi, or Spotify Premium.
• Introduced customer care on Facebook Messenger, a global first
in the telecommunications industry. With the tap of a screen or
the click of a mouse, customers can now contact Rogers in real-
time on Messenger, an environment where millions of
Canadians already spend time every day.
• Completed the purchase of a 50% interest in Glentel, previously
independent multicarrier of wireless and
Canada’s largest
wireline products with several hundred Canadian retail outlets.
• Launched Fido Home Internet in parts of Ontario, delivering
simple, hassle-free plans and service that is easy to install and use.
Customers can use their mobile phones to set up their connection
so they do not have to wait for technicians to install their products.
• Launched a new Platinum MasterCard with features including a
1.75% cashback reward points on all transactions, low annual
fees, and no foreign exchange transactions fees.
• Introduced a simplified customer bill for Rogers services, making
it easier
for customers to understand their spending and
addressing the number one reason customers have historically
called Rogers with questions. The new format makes usage
details easier to understand, while creating a new layout and
interactive graphical features so customers can more easily see
how we calculated their bill. Our new bill is less complicated, is
available across multiple platforms, and is an important step in
our ongoing commitment to continuous improvement for our
customers’ experiences.
• Introduced a new Wireless Hardware Upgrade Program wherein
customers now have the option to upgrade their wireless device
online.
• Unveiled a new look and feel, improved search and navigation
capabilities, and accelerated response times for our online
Community Forums. More customers want self-serve and our
Community Forums are one of many ways our customers will be
able to get the information they need quickly and easily.
• Launched our Retail Academy, an employee training program
designed to further enhance how we serve and support our
customers in our branded retail stores. In addition, we started
refreshing our brand at our national retail stores and transitioning
certain other locations to a new design concept, which includes
a connected Home Zone lounge where customers can
experience Rogers IGNITE Internet bundles and Smart Home
Monitoring.
• Increased the speed and responsiveness of our rogers.com and
fido.ca websites. In addition, we launched new, easier-to-navigate
homepages and mobile-friendly product landing and promotion
pages to provide customers with an improved digital experience.
• Enhanced and simplified our customer-facing Integrated Voice
Response (IVR) system along with our technical support transfer
process to minimize the customers’ time from when they dial
Rogers to when they talk to a live agent.
• Released Rogers’ 2015 Transparency Report, our third annual
report on how we share customer information in response to
requests from legal authorities.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 31
MANAGEMENT’S DISCUSSION AND ANALYSIS
DRIVE GROWTH IN THE BUSINESS MARKET
• Launched Managed Wi-Fi as a Service, a suite of services that
gives business customers the ability to easily manage and
monitor their network and performance from any location and
tailor alerts by activity.
• Introduced “leapfrog” global cybersecurity solutions as a service
to help protect Canadian businesses. Through a partnership with
Trustwave Inc., a global leader in cybersecurity services, our new
suite of cybersecurity solutions will give businesses access to a
team of experts who will help them manage real-time
monitoring of security events, proactively run cybersecurity
diagnostics, and maintain their network infrastructure.
• Introduced Rogers Voice with Skype for Business, a cloud-based
tool that lets businesses experience the commercial version of
Skype with enhanced features and better communication with
their teams, partners, and customers.
• Expanded our third Toronto data centre, doubling our available
floor space capacity. This next generation data centre is ‘Uptime
for design and construction, providing
Certified Tier
customers with best-in-class uptime guarantees for their mission-
critical applications.
III’
• Deployed the GSMA Embedded SIM Specification of the M2M
World Alliance, a global coalition of
telecommunications
providers. This standard allows for remote wireless provisioning
of machine-to-machine (M2M) devices, significantly reducing the
cost and time for enabling globally connected devices.
• Recognized, along with AT&T, Verizon, and Vodafone, as a world
leader in the M2M retail space by prominent global market
research firm Research and Markets. Rogers is a Canadian leader
in M2M and this recognition affirms our belief that our in-market
solutions for business are world class.
INVEST IN AND DEVELOP OUR PEOPLE
• Recognized again as a Top Employer for 2016 in November
2015 and as a Top Employer for Young People in May 2015 by
the editors of Canada’s Top 100 Employers.
• Selected as one of Canada’s Best Diversity Employers for 2015 in
a report
in March 2015 for
recognition of our efforts to promote diversity and inclusion in
the workplace.
released by Mediacorp Inc.
• Named one of Canada’s Greenest Employers for 2015 by the
editors of Canada’s Top 100 Employers in April 2015, an award
that
recognizes employers with innovative environmental
programs and earth-friendly policies that actively involve their
employees.
• Named one of the 50 Best Corporate Citizens in Canada by
Corporate Knights in June 2015, an award that recognizes
employers that incorporate social, economic, and ecological
benefits and costs in their normal course of business.
DELIVER COMPELLING CONTENT EVERYWHERE
• Sportsnet was the most-watched televised sports brand in
Canada, as verified by data collected by Numeris, a leading
broadcast measurement source, between May 2014 and May
2015. Following a year of double-digit audience growth and
record-setting ratings, for the first time in its 17-year history, more
32 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
Canadians tuned in to Sportsnet channels than to the
competition. In October 2015, driven by our Toronto Blue Jays’
unforgettable 2015 MLB Postseason and the launch of the 2015-
2016 NHL season, Sportsnet recorded its best month ever – and
the best month ever for a sports TV network in Canada – for
audience share, based on data collected by Numeris.
• Introduced Rogers IGNITE Gigabit Internet; expected to cover
Rogers’ entire cable footprint by the end of 2016.
• Launched 4K TV and 4K set-top boxes; in 2016, we will broadcast
over 100 live sporting events in 4K, including every 2016 Toronto
Blue Jays home game and over 20 marquee NHL games.
• Successfully and profitably completed the first year of our
exclusive 12-year national NHL Agreement while bringing the
NHL to more Canadians than ever before. We provided
Canadians with new ways to experience games, through NHL
GameCentre Live and NHL GamePlus, and on multiple platforms
such as their computer, mobile phone, or
tablet. Rogers
Hometown Hockey has returned for a second season and is
rolling into 24 new Canadian communities during the 2015-2016
NHL season with even more hockey festivities and entertainment.
• Introduced Fido Pulse wireless plans, delivering more value by
including a 24-month subscription to Spotify Premium, one of
the world’s most innovative music streaming services, and access
to exclusive Daily VICE, an edgy, ground-breaking news app.
• Acquired exclusive Canadian English-language multimedia
rights for Sportsnet to the 2016 World Cup of Hockey, including
television, online, and mobile rights for every game of the highly-
anticipated tournament.
series
exclusive
• Broadened the popular shomi video streaming service, making it
available to all Canadians from coast to coast. shomi offers
numerous
expert-recommended
collections, including programming for kids and families, not
offered on other services. shomi is accessible to Canadians on
their TVs and a variety of other platforms,
including tablets,
mobile, online, Xbox 360, PlayStation 4, Apple TV, and
Chromecast. More titles and exclusive content were also added
to shomi through an agreement with Corus Entertainment.
and
• Announced a five-year renewal agreement through 2020 as the
title sponsor for the Rogers Cup professional tennis tournament,
with Sportsnet garnering coverage rights for a comprehensive
suite of televised, online, mobile, and multimedia platforms. The
Rogers Cup is a renowned international professional tennis
tournament and supports a key pillar in our strategy of delivering
world-class content and experiences to Canadians.
• Expanded Texture by Next
Issue for French-speaking and
bilingual Canadians by adding 20 Québec-based French-
language magazines to the more than 170 Canadian and US
English magazines already on offer. In addition to providing full
magazine issues, we also introduced more personalization for
readers and more opportunity to search for and discover specific
articles and stories of interest.
• Rogers and VICE Media LLC (VICE) unveiled a world-class
Canadian production studio and announced a new specialty
channel, VICELAND, to be launched in early 2016. VICELAND
will
feature hundreds of hours of new and exclusive
programming developed and produced by the young, creative
minds that are the heart and soul of VICE.
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• Completed our
FOCUS ON INNOVATION AND NETWORK LEADERSHIP
strategic acquisition of wireless provider
Mobilicity and completed our transaction to acquire Shaw’s
AWS-1 spectrum licences. We added and activated 20 MHz of
contiguous AWS-1 spectrum adjacent to our existing 20 MHz of
AWS-1 holdings across all of British Columbia and Alberta, and
added 10 MHz of contiguous AWS-1 spectrum across Southern
Ontario, the largest population centre in Canada. We also
divested certain non-contiguous AWS-1 spectrum licences to
WIND.
• Augmented our extensive 2500 MHz spectrum holdings during
the recent 2500 MHz spectrum auction. We successfully
executed a tactical fill-in and top-up strategy to acquire nearly
our entire allowable spectrum at an average cost of $0.10/MHz/
pop, lower than other auction participants. We now hold 40 MHz
of contiguous, paired 2500 MHz spectrum across nearly all of
Canada, as well as an additional 20 MHz of unpaired 2500 MHz
spectrum in many key population areas.
• Launched new Rogers
IGNITE broadband Internet-based
bundled offerings with new unlimited usage options and value-
added content, including Rogers NHL GameCentre LIVE and
shomi.
• Extended wireless network coverage in even more rural markets
within Canada.
• Named in 2015 as both Canada’s Fastest ISP and Canada’s
Fastest Mobile Network by Ookla, a global leader in broadband
speed testing.
• Released independent testing research from SamKnows, an
independent broadband performance
company, dated
February 2015 confirming that Rogers’ broadband Internet
customers continue to enjoy fast and reliable upload and
download service, delivered at 100 percent or more, on average,
of advertised speeds, even during peak network hours.
• Rogers’ wireless network was the first in Canada to be Category
6-enabled, allowing customers in select communities across
Ontario and British Columbia to enjoy faster download speeds
and a higher quality video experience on Category 6-enabled
smartphones and tablets.
• Extended Rogers Smart Home Monitoring services to residents
in Vancouver and the Lower Mainland, British Columbia, and
Calgary and Edmonton, allowing them to connect, protect, and
manage what is happening at home using their mobile devices
or computers.
• First in Canada to launch Voice over LTE (VoLTE) technology,
giving our Wireless customers across the country access to
higher-quality high-definition voice and video calls, faster call
setup and connection times, and the ability to simultaneously
place calls, browse the web, and stream video at considerably
greater LTE speeds.
• Introduced complimentary Wi-Fi service throughout the Rogers
Centre, our multi-purpose event venue and home to the Toronto
Blue Jays, in yet another example of Rogers’ commitment to
deliver the best-connected experience to Canadians.
• Became the first company in the world to launch programmatic
advertising for NHL GameCentre Live, whereby Internet users will
see advertising banners (created and placed in real-time, with
the help of Google) for recent events, such as a scored goal in a
hockey game, and be encouraged to watch the goal.
GO TO MARKET AS ONE ROGERS
• Successfully worked as one company, showing we can bring our
entire team together to achieve our goals. We demonstrated this
through the successful launch of our NHL Agreement, utilizing
Wireless, Cable, and Media to bring the NHL to Canadians, and
our launch of new initiatives such as Roam Like Home and
Rogers IGNITE, while delivering more value with offerings such as
Spotify Premium, shomi, and VICE.
• Appointed executive leaders with significant experience in our
industry and global best practices: Dirk Woessner as President,
Consumer Business Unit, Rick Brace as President, Media Business
Unit, and the internal appointment of Jamie Williams as our
Chief Information Officer.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 33
MANAGEMENT’S DISCUSSION AND ANALYSIS
2016 OBJECTIVES
Rogers 3.0 Priority
Be a strong Canadian growth company
Overhaul the customer experience
Drive growth in the business market
Invest in and develop our people
Deliver compelling content everywhere
Focus on innovation and network leadership
Go to market as one Rogers
2016 Objectives
Achieve our 2016 financial targets while investing to support
future growth
Save our customers time by making it easier for them to do
business with us online and in-person
Expand our sales reach and introduce “leapfrog” technologies
using our enterprise-grade networks
Build a high-performing culture by investing in employee
development, new technology, and the workplace
Deliver our content where our audiences want it and leverage it
to differentiate our businesses
Reclaim our leadership in Cable, maintain it in Wireless, and
grow it in our business markets
Work together, using all our assets and resources, to set Rogers
apart from competitors
34 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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FINANCIAL AND OPERATING GUIDANCE
We provide consolidated annual guidance ranges for selected financial metrics on a consolidated basis consistent with the annual plans
approved by our Board.
2015 ACHIEVEMENTS AGAINST GUIDANCE
The following table outlines guidance ranges that we had
previously provided and our actual results and achievements for the
selected full year 2015 financial metrics.
(In millions of dollars)
Consolidated Guidance 1
2015
Guidance
2015
Actual Achievement
Adjusted operating profit 2 5,020 to 5,175 5,032
Additions to property,
plant and equipment 3
Free cash flow 2
2,350 to 2,450 2,440
1,525 to 1,675 1,676
✓
✓
✓✓
Achieved ✓
Exceeded ✓✓
1 The above table outlines guidance ranges for selected full-year 2015 consolidated
financial metrics provided in our January 29, 2015 earnings release and subsequently
updated on July 23, 2015 to increase our free cash flow guidance by $175 million,
which reflected the value of tax loss carry forwards acquired as part of the Mobilicity
transaction that closed on July 2, 2015.
2 Adjusted operating profit and free cash flow are non-GAAP measures and should not
be considered as a substitute or alternative for GAAP measures. These are not
defined terms under IFRS and do not have standard meanings, so may not be a
reliable way to compare us to other companies. See “Non-GAAP Measures” for
information about these measures, including how we calculate them.
3 Includes additions to property, plant and equipment for the Wireless, Cable, Business
Solutions, Media, and Corporate segments and does not include expenditures on
spectrum licences.
2016 FULL YEAR CONSOLIDATED GUIDANCE
We expect steady growth in operating revenue and adjusted
operating profit and lower additions to property, plant and
equipment to drive higher free cash flow. We expect to have the
financial flexibility to maintain our network advantages, to begin
reducing debt, and to continue to return cash to shareholders.
(In millions of dollars, except
percentages)
2015
Actual
2016 Guidance
Ranges 1
Consolidated Guidance
Operating revenue
Adjusted operating profit 2
Additions to property, plant
and equipment 3
Free cash flow 2
13,414
5,032
Increase of 1% to 3%
Increase of 1% to 3%
2,440
1,676
2,300 to 2,400
Increase of 1% to 3%
1 Guidance ranges presented as percentages reflect percentage increases over 2015
actual results.
2 Adjusted operating profit and free cash flow are non-GAAP measures and should not
be considered as a substitute or alternative for GAAP measures. These are not
defined terms under IFRS and do not have standard meanings, so may not be a
reliable way to compare us to other companies. See “Non-GAAP Measures” for
information about these measures, including how we calculate them.
3 Includes additions to property, plant and equipment for the Wireless, Cable, Business
Solutions, Media and Corporate segments, and does not include expenditures on
spectrum licences.
The above table outlines guidance ranges for selected full year
2016 consolidated financial metrics. These ranges take into
consideration our current outlook and our actual results for 2015.
The purpose of
investors,
shareholders, and others in understanding certain financial metrics
the financial outlook is to assist
relating to expected 2016 financial results for evaluating the
performance of our business. This information may not be
appropriate for other purposes. Information about our guidance,
including the various assumptions underlying it, is forward-looking
and should be read in conjunction with “About Forward-Looking
Information”, “Risks and Uncertainties Affecting Our Business”, and
the related disclosure and information about various economic,
competitive, and regulatory assumptions, factors, and risks that may
cause our actual future financial and operating results to differ from
what we currently expect.
We provide annual guidance ranges on a consolidated full-year
basis, which are consistent with annual full-year Board-approved
plans. Any updates to our full-year financial guidance over the
course of the year would only be made to the consolidated
guidance ranges that appear above.
Key underlying assumptions
Our 2016 guidance ranges above are based on many assumptions
including, but not limited to, the following material assumptions:
• continued intense competition in all segments in which we
operate;
• a substantial portion of our US dollar-denominated expenditures
has been hedged at an average exchange rate of $1.22/US$;
• key interest rates will remain relatively stable throughout 2016;
• no significant additional
regulatory developments, shifts in
economic conditions, or macro changes in the competitive
environment affecting our business activities. We note that
regulatory decisions expected during 2016 could materially alter
underlying assumptions around our 2016 Wireless, Cable,
Business Solutions, and/or Media results in the current and future
years, the impacts of which are currently unknown and not
factored into our guidance;
• the CRTC decision to require distributors to offer a basic entry-
level television package capped at $25 per month, as well as
channels above the basic tier on an “à la carte” basis or in
smaller, reasonably priced packages by March 1, 2016, and both
“à la carte” and in smaller, reasonably priced packages by
December 1, 2016, is not expected to materially impact our
Cable operating revenue;
• Wireless customers will continue to adopt, and upgrade to,
higher-value smartphones and a similar proportion of customers
will remain on term contracts;
• overall wireless market penetration in Canada is expected to
grow in 2016 at a similar rate as in 2015;
• continued subscriber growth in Wireless and Cable Internet;
moderating net losses in Cable Television and Home Phone
subscribers;
• in Business Solutions, continued declines in our legacy and off-
net business, and the continued execution of our plan to grow
higher-margin next generation IP- and cloud-based services;
• in Media, continued growth in Sportsnet and declines in our
traditional media businesses; and
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 35
MANAGEMENT’S DISCUSSION AND ANALYSIS
• with respect to additions to property, plant and equipment:
• we expect
to complete our analog-to-digital conversion
during the first quarter of 2016;
• we can offer IGNITE Gigabit Internet services in 2016 using
available spectrum capacity on our fibre-coaxial network at an
incremental capital cost of less than $50 per home. We will
increase capacity as the demand for speed grows with further
annual success-based capital investments;
Capability to Deliver Results
LEADING NETWORKS
• we have rolled out LTE across the majority of our coverage
area as well as deployed newly-acquired 700 MHz and AWS-1
spectrum; and
• we made significant investments in our IPTV technology and
legacy set-top boxes to bridge the customer experience pre-
IPTV, thus gaining measurable unit cost efficiencies.
WIRELESS
Rogers has one of the most extensive and advanced wireless
networks in Canada, which:
• was the first LTE high-speed network in Canada;
• reached approximately 93% of the Canadian population as at
We are continuously enhancing our IP service infrastructure for all
of our wireless services. Advances in technology have transformed
how our customers interact and how they use the variety of tools
that are available to them in their personal and professional lives.
Technology has also changed the way businesses operate.
December 31, 2015 on our LTE network alone;
• is supported by voice and data roaming agreements with
international carriers in more than 200 countries, including a
growing number of LTE roaming operators; and
• includes network sharing arrangements with three regional
wireless operators which operate in urban and rural parts of
Canada.
Significant spectrum position
Our wireless services are supported by our significant wireless
spectrum holdings in both high-band and low-band frequency
ranges. As part of our network strategy, we expect to continue
making significant capital investments in spectrum to:
• support the rapidly growing usage of wireless data services; and
• introduce new innovative network-enabled features and
functionality.
Our spectrum holdings as at December 31, 2015 include:
Type of spectrum
Rogers licence
700 MHz
24 MHz in Canada’s major geographic markets, covering 99.7%
of the Canadian population.
850 MHz
25 MHz across Canada.
1900 MHz
60 MHz in all areas of Canada except 40 MHz Northern Quebec,
50 MHz in Southern Ontario, and 40 MHz in the Yukon,
Northwest Territories, and Nunavut.
Who it supports
4G LTE subscribers.
2G GSM and 3.5G / 4G HSPA+
subscribers (4G LTE in the future).
2G GSM and 3.5G / 4G HSPA+
subscribers (4G LTE in the future).
AWS 1700/2100 MHz
40 MHz in British Columbia, Alberta, 30 MHz in Southern Ontario
and 20 MHz in the rest of Canada
4G LTE subscribers.
2500 MHz
40 MHz FDD across Canada and an additional 20 MHz TDD in
key population areas in Quebec, Ontario and British Columbia.
4G LTE subscribers.
36 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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We also have access to additional spectrum through network sharing agreements:
Type of spectrum
Kind of venture
Who it supports
Mobile and fixed wireless subscribers.
2.3 GHz/3.5 GHz range
Inukshuk Wireless Partnership is a joint operation with BCE in
which Rogers holds a 50% interest. Inukshuk holds 30 MHz (of
which 20 MHz is usable) of 2.3 GHz spectrum primarily in Eastern
Canada, including certain population centres in Southern and
Eastern Ontario, Southern Quebec, and smaller holdings in New
Brunswick, Manitoba, Alberta, and British Columbia. Inukshuk also
holds 3.5 GHz licences (between 50-175 MHz) in most of the
major population centres across Canada. The arrangement
initially included 2500 MHz spectrum. This spectrum was
distributed equally to the partners in late 2012. The current fixed
wireless LTE national network utilizes the jointly held 2.3 GHz and
3.5 GHz spectrum bands.
850 MHz, 1900 MHz
AWS spectrum
Three network-sharing arrangements to enhance coverage and
network capabilities:
• with Manitoba Telecom Services, which covers 96% of the
population across Manitoba;
3.5G /4G HSPA+, 4G LTE subscribers.
• with TBayTel, that covers the combined base of customers in
3.5G / 4G HSPA+ subscribers.
North Western Ontario; and
• with Quebecor (Videotron) to provide LTE services across the
4G LTE subscribers.
province of Quebec.
We have an option arrangement to buy additional spectrum, subject to commercial terms and regulatory approvals:
Type of spectrum
Transaction
AWS-1 spectrum
Part of a larger strategic transaction with Videotron, which could
lead to the acquisition of Videotron’s Tier 3 Toronto AWS-1
spectrum.
it will be subject to
regulatory approval.
If a transaction is to occur,
Who it will support
4G LTE subscribers.
CABLE
Our expansive fibre and hybrid fibre-coaxial infrastructure delivers
services to consumers and businesses in Ontario, New Brunswick,
and Newfoundland. We also operate a transcontinental fibre-optic
network that extends over 48,000 route kilometres and is used to
service enterprise customers,
including government and other
telecommunications service providers. We also use our extensive
fibre network for backhaul for wireless cell site traffic. In Canada, the
network extends coast-to-coast and includes local and regional
fibre, transmission electronics and systems, hubs, POPs, and IP
Routing and switching infrastructure. The network also extends to
the US, from Vancouver south to Seattle, from the Manitoba-
Minnesota border through Minneapolis, Milwaukee, and Chicago,
from Toronto through Buffalo, and from Montreal through Albany
to New York City and Ashburn, allowing us to connect Canada’s
largest markets, while also reaching key US markets for the
exchange of data and voice traffic.
The network is structured to optimize performance and reliability
and to allow for the simultaneous delivery of video, voice, and
Internet over a single platform. It is generally constructed in rings
that interconnect with distribution hubs, minimizing disruptions
that can result from fibre cuts and other events.
Homes and commercial buildings are connected to our network
through hybrid fibre-coaxial nodes. We connect the node to the
network using fibre optic cable and the home to the node using
coaxial cable. Using 860 MHz (Ontario) and 750 MHz (Atlantic
Canada) of shared cable spectrum, we deliver video, voice, and
broadband services to our customers. Hybrid fibre-coaxial node
segmentation increases bandwidth per home passed by reducing
the number of customers that share the cable spectrum.
We continually upgrade the network to improve capacity, enhance
performance and reliability, reduce operating costs, and introduce
new features and functionality. For example, we invest in:
• further segmenting our network nodes to reduce the number of
homes sharing spectrum in each node;
• improving video signal compression by moving to more
advanced video protocols;
• improving channel and on-demand capacity through switched
digital video; and
• increasing the FTTH footprint by connecting more homes
directly to fibre.
In early 2016, we expect to complete the transitioning of customers
receiving television signals over our analog broadcast channels to
all-digital services, freeing up significant cable network capacity for
additional features and services. The analog-to-digital subscriber
migration will continue to strengthen the customer experience and,
in addition to allowing us to reclaim significant amounts of network
capacity, enable us to reduce future network operating and
maintenance costs. The migration from analog to digital required
additional spending because it involved fitting analog homes with
digital
and removing existing analog filtering
equipment.
converters
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 37
MANAGEMENT’S DISCUSSION AND ANALYSIS
at
the
Broadband Internet service is provided using the DOCSIS 3.0/3.1
standard, which combines multiple RF channels onto one access
point
customer premise, delivering exceptional
performance. The bandwidth of our Internet service offerings has
increased 166-fold in the last 10 years as we bring new
technologies to market when they become available. This track
record of
investing in our networks and demonstrating the
capability to deploy best-in-class service is one of our key strategies
for ensuring that we stay competitive with other service providers
that provide Internet service into homes and businesses over
copper facilities.
Through our advanced, hybrid fibre-coaxial network, we expect to
be able to offer consumers across our entire DOCSIS 3.0/3.1
footprint Internet download speeds up to 1 Gbps by the end of
2016. We will be able to upgrade our entire footprint of over four
million homes with Gigabit Internet at an incremental in-year capital
cost of less than $50 per home. We will increase capacity as the
demand for speed grows with further annual success-based capital
investments.
We continue to invest in and improve our cable network; for
example, with technology to support the launch of gigabit Internet
speeds, Rogers 4K TV, a new 4K set-top box, and North America’s
largest commitment to live broadcasting in 4K with HDR.
Voice-over-cable telephony services are provided over a dedicated
DOCSIS network. Our offerings ensure a high quality of service by
including network redundancy as well as network and customer
premise backup powering. Our phone service includes a rich set of
features, such as TV Call Display, three-way calling, and advanced
voicemail features that allow customers to be notified of, and listen
to, their home voicemail on their wireless phone or over the
Internet.
BUSINESS SOLUTIONS
We own and operate some of the most advanced networks and
data centres in Canada. We leverage our national fibre, cable, and
wireless networks and data centre infrastructure to enable
businesses to deliver greater value to their customers through
proactive network monitoring and problem resolution with
enterprise-level reliability, security, and performance. We operate
our own robust,
transcontinental network with
100% digital fibre optic backbone and strategic interconnect points
to the US and overseas for cross-border and international coverage.
Our primary and secondary Network Operation Centres proactively
monitor Rogers’ networks
service
to mitigate the risk of
interruptions and allow for rapid responses to any outages.
facilities-based,
Our data centres provide guaranteed uptime and expertise in
colocation, cloud, and managed services solutions. We own and
operate 17 state-of-the-art, highly reliable, certified data centres
across Canada, including:
• Canada’s
III Design and Construction certified
first Tier
multi-tenant facility, opened in 2012 in Toronto;
• Alberta’s first Tier III certified data centre, opened in 2014; and
• a third Tier III certified data centre in Ottawa, opened in 2015.
38 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
POWERFUL BRANDS
The Rogers brand has strong national recognition through our:
• established networks;
• extensive distribution;
• recognizable media content and programming;
• advertising;
• event sponsorships, including the Rogers Cup;
• community investment, including Rogers Youth Fund; and
• naming rights to some of Canada’s landmark buildings,
including the Rogers Centre in Toronto, Rogers Arena in
Vancouver, and Rogers Place in Edmonton.
We also own or utilize some of Canada’s most recognized brands
including:
• the wireless brands of Rogers, Fido, chatr, and Mobilicity;
• over 20 TV stations and specialty channels, including Sportsnet,
FX (Canada) and FXX (Canada), OMNI, and City;
• over 30 publications,
including Maclean’s, Chatelaine, Flare,
Hello! Canada, and Canadian Business;
• Texture by Next Issue, with a catalogue of over 190 premium
Canadian and US magazine titles;
• over 50 radio stations, including 98.1 CHFI, 680 News, Sportsnet
The FAN, KISS, JACK FM, and SONiC;
• major league sports teams, including the Toronto Blue Jays, and
teams owned by MLSE, such as the Toronto Maple Leafs, the
Toronto Raptors, and Toronto FC;
• TSC, the only nationally broadcast,
interactive, multi-channel
Canadian retailer;
• shomi, a subscription-based video-on-demand service; and
• VICE, a global youth media company that produces and
distributes global online video and text content.
WIDESPREAD PRODUCT DISTRIBUTION
WIRELESS
We distribute our wireless products nationally using various
channels including:
• an extensive independent dealer network;
• company-owned Rogers and Fido retail stores;
• major retail chains and convenience stores;
• other distribution channels, such as WOW! Mobile boutique, as
well as Wireless Wave and TBooth Wireless through our
ownership interest in Glentel;
• customer self-serve using rogers.com, fido.ca, chatrwireless.com,
mobilicity.ca, or e-commerce sites;
• our call centres; and
• outbound telemarketing.
CABLE
We distribute our cable products using various channels including:
• company-owned Rogers and Fido retail stores;
• customer self-serve using rogers.com;
• our call centres, outbound telemarketing, and door-to-door
agents;
• major retail chains; and
• an extensive network of third-party retail locations.
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BUSINESS SOLUTIONS
Our sales team sells Business Solutions services to Canadian
business and public sector telecommunications customers. An
extensive network of third-party channel distributors deals with IT
integrators, consultants, local service providers, and other indirect
sales relationships. This diverse approach gives greater breadth of
coverage and allows for strong sales growth for next generation
services.
FIRST CLASS MEDIA CONTENT
We deliver highly sought-after sports content enhanced by the
following initiatives:
• an exclusive national 12-year agreement with the NHL, which
began with the 2014-2015 NHL season and allows us to deliver
unprecedented coverage of North American professional
hockey across television, smartphones, tablets, and the Internet;
• Rogers NHL GameCentre LIVE, an upgraded online destination
for enhancing NHL action on any screen;
• NHL GamePlus, an innovative and interactive experience within
Rogers NHL GameCentre LIVE that
includes revolutionary
camera angles, exclusive interviews and analysis, and original
video-on-demand content;
• Rogers Hometown Hockey Tour, which brings hockey-themed
festivities and outdoor viewing parties to 24 communities across
Canada over the 2015-2016 NHL season;
• the MLB Network, a 24-hour network dedicated to baseball,
brought to Canada for the first time on Rogers digital cable;
• an 8-year, multi-platform broadcast rights agreement with MLB
Properties and MLB Advanced Media to show live and in-
progress games and highlights within Canada through 2021;
• a 10-year multi-platform agreement that commenced in August
2014, which makes Rogers the exclusive wholesaler and a
distributor of World Wrestling Entertainment’s (WWE) flagship
programming in Canada;
• exclusive broadcasting and distribution rights of the Toronto
Blue Jays through our ownership of the team; and
• exclusive Canadian English language broadcast and mobile
rights for the highly anticipated 2016 World Cup of Hockey.
ENGAGED PEOPLE
For our team of approximately 26,000 employees, we strive to
create a great workplace, focusing on all aspects of the employee
experience, which include:
• engaging employees and building high-performing teams
through initiatives including engagement surveys and leadership
development programs;
• aiming to attract and retain top talent through effective training
and development, performance-driven employee recognition
programs, and career progression programs for
front-line
employees;
• maintaining our commitment to diversity and inclusion; and
• providing a safe, collaborative, and agile workplace that provides
employees the tools and training to be successful.
FINANCIAL STRENGTH AND FLEXIBILITY
We have an investment-grade balance sheet, conservative debt
leverage, and substantial available liquidity of $3.3 billion as at
December 31, 2015. Our capital resources consist primarily of cash
provided by operating activities, cash and cash equivalents,
available lines of credit,
funds available under our accounts
receivable securitization program, and issuances of long-term debt.
We also own approximately $966 million of marketable equity
securities in publicly traded companies as at December 31, 2015.
The following information is forward-looking and should be read in
conjunction with “About Forward-Looking Information”, “Financial
and Operating Guidance”, “Risks and Uncertainties Affecting Our
Business”, and our other disclosures about various economic,
competitive, and regulatory assumptions, factors, and risks that
could cause our actual future financial and operating results to
differ from those currently expected.
Similar to 2015, we anticipate generating a net cash surplus in 2016
from our cash provided by operating activities. We expect that we
will have sufficient capital resources to satisfy our cash funding
requirements in 2016, including the funding of dividends on our
common shares, repayment of maturing long-term debt, and other
financing activities, investing activities, and other requirements. This
takes into account our opening cash balance, cash provided by
operating activities, the amount available under our $3.5 billion
bank credit
receivable securitization
program, and funds available to us from the issuance of other bank,
publicly issued, or private placement debt from time to time. As at
December 31, 2015, there were no significant restrictions on the
flow of funds between Rogers and its subsidiary companies.
facilities, our accounts
funding
We believe we can satisfy foreseeable additional
requirements by
financing, which,
issuing additional debt
depending on market conditions, could include restructuring our
existing bank credit and letter of credit facilities, or entering into
new bank credit facilities, issuing public or private debt, amending
the terms of our accounts receivable securitization program, or
issuing equity. We may also opportunistically refinance a portion of
existing debt depending on market conditions and other factors.
There is no assurance, however, that these financing initiatives will
or can be done as they become necessary.
HEALTHY TRADING VOLUMES AND
DIVIDENDS
Our Class B Non-Voting common shares actively trade on the TSX
and NYSE with a combined average daily trading volume of
approximately 1.6 million shares. In addition, our Class A Voting
common shares trade on the TSX. Dividends are the same on both
classes of shares. In 2015, each share paid an annualized dividend
of $1.92.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 39
MANAGEMENT’S DISCUSSION AND ANALYSIS
2015 Financial Results
See “Accounting Policies” in this MD&A and the notes to our 2015
Audited Consolidated Financial Statements
important
accounting policies and estimates as they relate to the following
discussion.
for
We use several key performance indicators to measure our
performance against our strategies and the results of our peers and
SUMMARY OF CONSOLIDATED RESULTS
(In millions of dollars, except margins and per share amounts)
Operating revenue
Wireless
Cable
Business Solutions
Media
Corporate items and intercompany eliminations
Operating revenue
Adjusted operating profit (loss)
Wireless
Cable
Business Solutions
Media
Corporate items and intercompany eliminations
Adjusted operating profit 1
Adjusted operating profit margin 1
Net income
Basic earnings per share
Adjusted net income 1
Adjusted basic earnings per share 1
Additions to property, plant and equipment
Free cash flow 1
Cash provided by operating activities
competitors. Many of these are not defined terms under IFRS and
should not be considered as alternative measures to net income or
any other financial measure of performance under IFRS. See “Key
Performance Indicators” and “Non-GAAP Measures” for more
information.
Years ended December 31
2015
2014 % Chg
7,651
3,465
377
2,079
(158)
7,305
3,467
382
1,826
(130)
13,414
12,850
3,239
1,658
116
172
(153)
3,246
1,665
122
131
(145)
5,032
5,019
5
–
(1)
14
22
4
–
–
(5)
31
6
–
37.5%
1,381
39.1% (1.6 pts)
3
1,341
$ 2.68 $ 2.60
3
(3)
1,532
$ 2.89 $ 2.97
(3)
1,490
2,440
1,676
3,747
2,366
1,437
3,698
3
17
1
1 Adjusted operating profit, adjusted operating profit margin, adjusted net income, adjusted basic earnings per share, and free cash flow are non-GAAP measures and should not
be considered as a substitute or alternative for GAAP measures. These are not defined terms under IFRS and do not have standard meanings, so may not be a reliable way to
compare us to other companies. See “Non-GAAP Measures” for information about these measures, including how we calculate them.
40 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
Cable adjusted operating profit this year was consistent with last
year as higher
investments in customer care, network, and
customer value enhancement-related costs were offset by various
efficiency and productivity initiatives.
Business Solutions adjusted operating profit decreased this year as
a result of continued declines in the legacy, off-net business,
partially offset by continued growth in the higher-margin on-net,
next generation business and productivity improvements.
Media’s adjusted operating profit increased this year primarily as a
result of the success of the Toronto Blue Jays.
NET INCOME AND ADJUSTED NET INCOME
Net income increased this year primarily as a result of
lower
restructuring, acquisition and other costs, lower finance costs, lower
income taxes, and higher other income, partially offset by higher
depreciation and amortization. Adjusted net income decreased
this year as this measure excludes the impact of the gain on
acquisition of Mobilicity and the loss on non-controlling interest
purchase obligation.
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KEY CHANGES IN FINANCIAL RESULTS THIS
YEAR COMPARED TO 2014
OPERATING REVENUE
Wireless network revenue increased this year primarily as a result of
the continued adoption of higher-postpaid ARPA-generating
Rogers Share Everything plans, partially offset by the introduction
over the past year of lower-priced roaming plans.
Cable operating revenue remained consistent this year as the
impact of a higher subscriber base for our Internet products and
the movement of customers to higher-end speed and usage tiers
were offset by Television and Phone subscriber losses over the past
year.
Business Solutions operating revenue decreased this year primarily
as a result of the continued reduction in lower margin, off-net
legacy revenue, which more than offset the growth in on-net next
generation services, including our data centre businesses.
Media operating revenue increased this year primarily as a result of
revenue generated by our NHL Agreement, growth at Sportsnet,
and higher revenue at the Toronto Blue Jays, partially offset by
continued softness in conventional TV and print advertising, as well
as lower consumer retail sales at TSC.
ADJUSTED OPERATING PROFIT
Wireless adjusted operating profit decreased this year primarily as a
result of higher net unit costs for equipment and a greater number
of upgrades, partially offset by continued adoption of higher-
postpaid-ARPA-generating service plans and higher equipment
revenue.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 41
MANAGEMENT’S DISCUSSION AND ANALYSIS
WIRELESS
2015 WIRELESS OPERATING REVENUE MIX
(%)
ROGERS IS CANADA’S LARGEST PROVIDER OF
WIRELESS COMMUNICATIONS SERVICES
As at December 31, 2015, we had:
• approximately 9.9 million subscribers; and
• approximately 34% subscriber share and 34% revenue share
of the Canadian wireless market.
WIRELESS FINANCIAL RESULTS
$7.7
BILLION
NETWORK 90%
EQUIPMENT 10%
Years ended December 31
WIRELESS SUBSCRIBER RESULTS 1
(In millions of dollars, except margins)
2015 1
2014
% Chg
Operating revenue
Network revenue
Equipment sales
Operating revenue
Operating expenses
Cost of equipment 2
Other operating expenses
Operating expenses
Adjusted operating profit
6,902
749
6,743
562
7,651
7,305
1,845
2,567
1,488
2,571
4,412
4,059
3,239
3,246
2
33
5
24
–
9
–
Adjusted operating profit margin as a % of
network revenue
Additions to property, plant and equipment
46.9% 48.1% (1.2 pts)
(11)
978
866
(In thousands, except churn, postpaid ARPA,
and blended ARPU)
Years ended December 31
2015
2014
Chg
Postpaid
Gross additions
Net additions (losses)
Total postpaid subscribers 2,3
Churn (monthly)
ARPA (monthly)
Prepaid
Gross additions
Net additions (losses)
Total prepaid subscribers 3,4
Churn (monthly)
Blended ARPU (monthly)
1,354
106
8,271
1.27%
1,238
(1)
8,073
1.27%
$110.74 $106.41
$
116
107
198
–
4.33
677
75
1,606
3.45%
507
(52)
1,377
3.42%
$ 59.71 $ 59.41
170
127
229
0.03 pts
0.30
$
1 Subscriber counts, subscriber churn, postpaid ARPA, and blended ARPU are key
1 The operating results of Mobilicity are included in the Wireless results of operations
performance indicators. See “Key Performance Indicators”.
from the date of acquisition on July 2, 2015.
2 Includes the cost of equipment sales and direct channel subsidies.
WIRELESS NETWORK REVENUE
(IN MILLIONS OF DOLLARS)
2015
2014
2013
WIRELESS POSTPAID AND PREPAID SUBSCRIBERS
(IN THOUSANDS)
2015
2014
2013
Prepaid
Postpaid
$6,902
$6,743
$6,748
1,606
8,271
1,377
8,073
1,429
8,074
2 Effective January 1, 2015 and on a prospective basis, our Wireless postpaid subscriber
results included Wireless Home Phone subscribers resulting in a base adjustment of
included in net
approximately 92,000 cumulative subscribers, which are not
additions, but do appear in the ending total balance for December 31, 2015.
3 As at end of period.
4 On July 2, 2015, we acquired approximately 154,000 Wireless prepaid subscribers as
a result of our acquisition of Mobilicity, which are not included in net additions, but
do appear in the ending total balance for December 31, 2015.
WIRELESS POSTPAID MONTHLY CHURN
(%)
2015
2014
2013
1.27%
1.27%
1.24%
42 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
OPERATING REVENUE
Our operating revenue depends on the size of our subscriber base,
the revenue per account, the revenue from the sale of wireless
devices, and other equipment sales.
Network revenue
Network revenue includes revenue derived from voice and data
services from:
• postpaid and prepaid monthly fees;
• data usage;
• airtime;
• long distance charges;
• essential services charges;
• inbound and outbound roaming charges; and
• certain fees.
The 2% increase in network revenue this year was a result of:
• the continued adoption of customer-friendly Rogers Share
Everything plans, which generate higher postpaid ARPA, bundle
in various calling features and long distance, provide the ability
to pool data usage across multiple devices, and grant access to
our other offerings, such as Roam Like Home, Rogers NHL
GameCentre LIVE, Spotify Premium, shomi, and Texture by Next
Issue;
• our acquisition of Mobilicity; and
• an adjustment pertaining to the anticipated usage of our loyalty
programs; partially offset by
• a 13% decrease in roaming revenue this year as a result of
changes to roaming plans, including the introduction of Roam
Like Home in the US, Caribbean, Mexico, Latin America, and
Europe, which simplify the customer experience and provide
greater value to the customer.
The 4% increase in postpaid ARPA was a result of the continued
adoption of Rogers Share Everything plans relative to the number
of subscriber accounts as customers increasingly utilize the
advantages of premium offerings and access their shareable plans
with multiple devices on the same account.
The 1% increase in blended ARPU this year was a result of:
• increased network revenue as discussed above; partially offset by
• the impact of expanding our lower-blended-ARPU-generating
prepaid subscriber base relative to our total subscriber base as a
result of our acquisition of Mobilicity and the general increase in
prepaid net additions; and
• the inclusion of lower-blended-ARPU-generating Wireless Home
Phone subscribers in our postpaid base.
Excluding the impact of roaming revenue and the addition of
Mobilicity and Wireless Home Phone subscribers, blended ARPU
would have increased by 4% this year.
We believe the increases in gross and net additions to our postpaid
subscriber base and stable postpaid churn this year were results of
our strategic focus on enhancing the customer experience by
providing higher-value offerings, such as our new Share Everything
plans, and improving our customer service. Significantly, this was
achieved during the industry’s “double cohort” period and with
heightened competitive activity.
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ROAM LIKE HOME SUBSCRIBERS
(IN THOUSANDS)
2015
2014
Not applicable for 2013.
2,252
457
The “double cohort” refers to the greater-than-usual number of
subscriber contracts that ended as both three-year and two-year
contracts expired near the same time. This industry-wide impact
commenced late in the second quarter of 2015 and will generally
result in subscribers being on shorter-term contracts than in the
past.
activated and upgraded approximately
We
3.0 million
smartphones for new and existing subscribers this year, compared
to approximately 2.6 million in 2014. The increase was due to an
11% increase in hardware upgrades and a 9% increase in gross
additions.
POSTPAID ARPA
($)
2015
2014
No data available for the year 2013.
SHARE EVERYTHING SUBSCRIBERS AS A PERCENTAGE OF OUR
ROGERS-BRANDED POSTPAID SUBSCRIBER BASE (%)
2015
2014
2013
$110.74
$106.41
The increase in our prepaid subscriber base was primarily a result of
the acquisition of approximately 154,000 subscribers upon our
acquisition of Mobilicity and an increase in net additions of 75,000
subscribers mainly due to our chatr national expansion initiative.
Equipment sales
Equipment sales (net of subsidies) include revenue from sales to:
• independent dealers, agents, and retailers; and
• subscribers through fulfillment by Wireless’ customer service
groups, websites, telesales, and corporate stores.
The 33% increase in revenue from equipment sales this year, in part
due to the impact of the industry’s double cohort, was a result of:
• 11% more device upgrades by existing subscribers; and
• increases in equipment sales prices.
51%
31%
7%
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 43
OTHER DEVELOPMENTS
Investment in Glentel
In May 2015, we completed our purchase of 50% of the common
shares of Glentel from BCE for cash consideration of $473 million.
Glentel is now jointly owned with BCE. Glentel is a large multicarrier
of wireless and wireline products and services with several hundred
Canadian wireless retail distribution outlets, as well as operations in
the US and Australia. Our investment in Glentel is accounted for as
a joint venture using the equity method.
Acquisition of Mobilicity
In July 2015, we completed the acquisition of 100% of
the
outstanding common shares of Mobilicity for cash consideration of
$443 million. On acquisition, Mobilicity provided wireless
Toronto, Ottawa, Calgary,
in
telecommunication
Edmonton, and Vancouver to its 154,000 prepaid subscribers and
owned AWS-1 spectrum licences.
services
Subsequent to the acquisition of Mobilicity, Rogers and WIND
undertook an AWS-1 spectrum licence asset exchange in Southern
Ontario to create an additional 10 MHz of contiguous, paired
AWS-1 spectrum for Rogers. In addition, Rogers transferred certain
non-contiguous AWS-1 spectrum licences to WIND in British
Columbia, Alberta, and various regions in Ontario for nominal cash
proceeds.
Spectrum licences
In April 2015, we participated in the 2500 MHz spectrum licence
auction in Canada. We were awarded 41 spectrum licences
consisting of 20 MHz blocks of contiguous, paired spectrum in
Canada’s major geographic markets. We paid to ISED Canada and
capitalized a total of $27 million for the licences, which included $3
million of costs directly attributable to the acquisition of the
spectrum licences.
In June 2015, we obtained AWS-1 spectrum licences from Shaw
after exercising a previously acquired option and paying the final
$100 million installment. We recognized the spectrum licences as
intangible assets of $352 million, which included $2 million of
directly attributable costs. The spectrum licences provide us with
more contiguous spectrum in British Columbia and Alberta.
Subsequent
to exercising the option, other non-contiguous
spectrum acquired from Shaw was transferred to WIND.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OPERATING EXPENSES
We assess operating expenses in two categories:
• the cost of wireless handsets and equipment; and
• all other expenses involved in day-to-day operations, to service
existing subscriber relationships, and to attract new subscribers.
The 24% increase in the cost of equipment sales this year was a
result of:
• a shift in the product mix of device sales and upgrades towards
higher-cost smartphones; and
• increased equipment sales volumes as discussed above, the
majority of which were higher-cost smartphones.
Total customer
retention spending (primarily consisting of
subsidies on handset upgrades) increased by 12% this year as a
result of:
• increased device upgrades by existing subscribers due in part to
the industry’s double cohort, as discussed above; and
• increased subsidy rates provided on higher-cost smartphones;
partially offset by
• improvements
commissions.
in our
sales channels
resulting in lower
Other operating expenses
(excluding retention spending)
increased this year as a result of higher service costs and
incremental expenses resulting from our acquisition of Mobilicity,
partially offset by efficiency gains and improvements in cost
management.
ADJUSTED OPERATING PROFIT
The marginal decrease in adjusted operating profit this year was a
result of higher operating revenue, partially offset by higher
operating expenses, as discussed above.
WIRELESS ADJUSTED OPERATING PROFIT
(IN MILLIONS OF DOLLARS)
2015
2014
2013
$3,239
$3,246
$3,157
LTE COVERAGE AS A PERCENTAGE OF THE CANADIAN POPULATION
(%)
2015
2014
2013
93%
84%
75%
44 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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CABLE
2015 CABLE SERVICE REVENUE MIX
(%)
ONE OF CANADA’S LEADING PROVIDERS OF HIGH-
SPEED INTERNET, CABLE TELEVISION, AND PHONE
SERVICES
As at December 31, 2015, we had:
• approximately 2.0 million high-speed Internet subscribers;
• approximately 1.9 million Television subscribers –
approximately 31% of Canadian cable television subscribers;
• approximately 1.1 million Phone subscribers; and
• a network that passes approximately 4.2 million homes in
Ontario, New Brunswick, and Newfoundland.
CABLE FINANCIAL RESULTS
(In millions of dollars, except margins)
2015 1
2014
% Chg
Years ended December 31
Operating revenue
Internet
Television
Phone
Service revenue
Equipment sales
Operating revenue
Operating expenses
Cost of equipment
Other operating expenses
Operating expenses
Adjusted operating profit
1,343
1,669
445
3,457
8
1,245
1,734
478
3,457
10
3,465
3,467
4
1,803
6
1,796
1,807
1,802
1,658
1,665
8
(4)
(7)
–
(20)
–
(33)
–
–
–
Adjusted operating profit margin
Additions to property, plant and equipment
47.8% 48.0% (0.2 pts)
1,030
(2)
1,055
1 The operating results of Source Cable are included in the Cable results of operations
from the date of acquisition on November 4, 2014.
CABLE OPERATING REVENUE
(IN MILLIONS OF DOLLARS)
2015
2014
2013
$3,465
$3,467
$3,475
CABLE SERVICE REVENUE BREAKDOWN
(IN MILLIONS OF DOLLARS)
2015
2014
2013
Phone
Internet
Television
445
1,343
1,669
478
1,245
1,734
498
1,159
1,809
$3.5
BILLION
TELEVISION 48%
INTERNET 39%
PHONE 13%
CABLE SUBSCRIBER RESULTS 1
(In thousands)
Internet
Net additions
Total Internet subscribers 2,3
Television
Net losses
Total Television subscribers 2,3
Phone
Net losses
Total Phone subscribers 2,3
Cable homes passed 2,3
Total service units 4
Net losses
Total service units 2,3
Years ended December 31
2015
2014 2 Chg
37
2,048
34
2,011
3
37
(128)
1,896
(119)
2,024
(9)
(128)
(60)
1,090
(14)
1,150
4,153
4,068
(46)
(60)
85
(151)
5,034
(99)
5,185
(52)
(151)
1 Subscriber count is a key performance indicator. See “Key Performance Indicators”.
2 On November 4, 2014, we acquired approximately 16,000 cable high-speed Internet
subscribers, 16,000 Television subscribers, and 11,000 Phone subscribers from our
acquisition of Source Cable. These subscribers are not included in net additions, but
do appear in the ending total balance for December 31, 2014 and 2015. The
acquisition also increased homes passed by approximately 26,000.
3 As at end of period.
4 Includes Internet, Television, and Phone subscribers.
CABLE SUBSCRIBER BREAKDOWN
(IN THOUSANDS)
2015
2014
2013
Phone
Internet
Television
1,090
2,048
1,896
1,150
2,011
2,024
1,153
1,961
2,127
OPERATING REVENUE
Internet revenue includes:
• monthly subscription and additional use service revenue from
residential, small business, and wholesale Internet access
subscribers; and
• modem rental fees.
Television revenue includes:
• digital and analog cable services – comprised of:
• basic cable service fees;
• tier service fees;
• access fees for use of channel capacity by third parties; and
• premium and specialty service subscription fees, including pay
per view service fees and video-on-demand service fees; and
• rentals of digital cable set-top boxes.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 45
MANAGEMENT’S DISCUSSION AND ANALYSIS
Phone revenue includes revenue from residential and small
business local telephony service from:
• monthly service fees;
• calling features such as voicemail, call waiting, and caller ID; and
• long distance calling.
The stable total operating revenue this year was a result of:
• the movement of Internet customers to higher speed and usage
tiers;
• a higher subscriber base for our Internet products;
• the impact and timing of general pricing increases implemented
over the past year, net of promotional pricing; and
• an adjustment pertaining to the anticipated usage of our loyalty
programs; offset by
• Television and Phone subscriber losses over the past year; and
• Television subscribers downgrading their
service plans
compared to the prior year.
The implementation of a CRTC decision mandating that, effective
January 23, 2015, telecommunications providers could no longer
require customers to provide a minimum of 30 days’ notice when
canceling services effectively resulted in an extra month of
customer deactivations being counted this year. As cancellations
occur throughout the year, we believe this caused a $24 million
decrease in Cable operating revenue for the remainder of the year.
Internet revenue
The 8% increase in Internet revenue this year was a result of:
• the general movement of customers to higher speed and usage
tiers through the launch of our new IGNITE broadband Internet
offerings that provide subscribers with broader choices of speed
and data usage and incorporate bundled, value-added content;
• a larger Internet subscriber base; and
• the impact and timing of changes in Internet service pricing;
partially offset by
• declines in Internet additional usage revenue as portions of the
subscriber base move to the higher-value, unlimited usage plans.
INTERNET SUBSCRIBERS
(IN THOUSANDS)
2015
2014
2013
PERCENTAGE GROWTH IN INTERNET SUBSCRIBERS
WITH SERVICE OVER 100 Mbps (%)
2015
2014
No data available for the year 2013.
2,048
2,011
1,961
664%
700%
46 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
Television revenue
The 4% decrease in Television revenue this year was a result of:
• the decline in Television subscribers over the past year primarily
consumption
changing television
the
associated with
environment; and
• Television subscribers downgrading their
compared to the prior year; partially offset by
service plans
• the impact and timing of general pricing increases implemented
over the past year, net of promotional pricing.
The digital cable subscriber base represented 91% of our total
Television subscriber base as at December 31, 2015, compared to
88% as at December 31, 2014. The larger selection of digital content,
video-on-demand, and HDTV and PVR equipment combined with
our ongoing analog-to-digital network conversion continue to
contribute to the increasing penetration of digital as a percentage of
our total Television subscriber base. We expect to complete our
analog-to-digital conversion during the first quarter of 2016.
Phone revenue
The 7% decrease in Phone revenue this year was a result of a
smaller subscriber base.
Equipment sales
Equipment sales include revenue generated from the sale of digital
cable set-top boxes and Internet modems.
The decrease in revenue from equipment sales this year was a
result of a decrease in cable set-top box sales compared to the
prior year.
OPERATING EXPENSES
We assess Cable operating expenses in three categories:
• the cost of programming;
• the cost of equipment sales (cable digital set-top boxes and
Internet modem equipment); and
• all other expenses involved in day-to-day operations, to service
and retain existing subscriber relationships, and to attract new
subscribers.
The stable operating expenses this year were a result of:
• higher investments in programming and customer offerings;
offset by
• relative shifts in product mix to higher-margin Internet from
conventional Television broadcasting; and
• various cost efficiency and productivity initiatives.
ADJUSTED OPERATING PROFIT
The stable adjusted operating profit this year was a result of the
revenue and expense changes described above.
CABLE ADJUSTED OPERATING PROFIT
(IN MILLIONS OF DOLLARS)
2015
2014
2013
$1,658
$1,665
$1,718
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BUSINESS SOLUTIONS
2015 BUSINESS SOLUTIONS SERVICE REVENUE MIX
(%)
LEADING-EDGE WIRELINE TELECOM AND DATA
COMMUNICATIONS SERVICES TO CANADIAN
BUSINESSES
As at December 31, 2015, Business Solutions:
• sells to small, medium, and large enterprises and
governments;
• sells to other carriers on a wholesale basis;
• has 8,500 on-net fibre connected buildings; and
• has fibre passing close to an additional 23,000 near-net
buildings.
BUSINESS SOLUTIONS FINANCIAL RESULTS
(In millions of dollars, except margins)
2015 1
2014
% Chg
Years ended December 31
Operating revenue
Next generation
Legacy
Service revenue
Equipment sales
Operating revenue
Operating expenses
Adjusted operating profit
288
85
373
4
377
261
116
271
106
377
5
382
260
122
6
(20)
(1)
(20)
(1)
–
(5)
Adjusted operating profit margin
Additions to property, plant and equipment
30.8% 31.9% (1.1 pts)
28
146
187
1 The operating results of Internetworking Atlantic Inc. are included in the Business
Solutions results of operations from the date of acquisition on November 30, 2015.
$0.4
BILLION
NEXT GENERATION 77%
LEGACY 23%
Business Solutions continues to focus primarily on next generation
IP-based services, leveraging higher margin on-net and near-net
service revenue opportunities, and using existing network facilities
to expand offerings to the small, medium, and large sized
enterprise, public sector, and carrier wholesale markets. Business
Solutions also provides voice and data communications and
advanced services, including data centres, cloud computing, fibre
networking, and professional services.
OPERATING REVENUE
The 1% decrease in service revenue this year was a result of:
• the continued decline in the legacy and off-net voice business, a
trend we expect to continue as we focus the business on next
generation on-net and near-net opportunities and customers
move to more advanced and cost-effective IP-based services and
solutions; partially offset by
• the continuing execution of our plan to grow higher margin,
next generation on-net and near-net IP-based services revenue.
Next generation services, which include our data centre operations,
represented 77% (2014 – 72%) of total service revenue during the year.
Business Solutions generates revenue from the provision of wireline
communications services and the sale of related equipment to
Canadian businesses and governments at retail rates and to other
telecommunications providers on a wholesale basis.
OPERATING EXPENSES
The marginal increase in operating expenses this year was a result of:
• higher service costs; partially offset by
• ongoing initiatives to reduce costs and increase productivity.
Next generation revenue is generated by the provision of high-
speed, high-reliability data and voice communications, provided on
Rogers’ advanced IP, Ethernet, and cloud platforms, and mainly
through Rogers’ extensive communications network and data
centre infrastructure.
Legacy revenue is generated mainly by circuit-switched local and
long distance voice services and legacy data services, provided over
TDM and prior generation data platforms, with client access often
delivered using leased third-party network elements and tariffed
ILEC services.
BUSINESS SOLUTIONS SERVICE REVENUE MIX
(IN MILLIONS OF DOLLARS)
2015
2014
2013
Legacy
Next Generation
85
288
106
271
149
213
ADJUSTED OPERATING PROFIT
The 5% decrease in adjusted operating profit this year was a result
of the revenue and expense changes discussed above.
OTHER DEVELOPMENTS
In November 2015, we acquired 100% of the common shares of
Internetworking Atlantic Inc.
IAI provided
(IAI)
enhanced technology solutions and services for business and
public sector clients in Atlantic Canada. The acquisition of IAI will
enable us to offer greater local expertise in the areas of cloud
computing, data centre services, fibre networking, and professional
services.
for $6 million.
BUSINESS SOLUTIONS ADJUSTED OPERATING PROFIT
(IN MILLIONS OF DOLLARS)
2015
2014
2013
$116
$122
$106
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 47
MANAGEMENT’S DISCUSSION AND ANALYSIS
MEDIA
SPORTS REVENUE AND SPORTS REVENUE AS A PERCENTAGE
OF MEDIA OPERATING REVENUE (% or IN MILLIONS OF DOLLARS)
DIVERSIFIED CANADIAN MEDIA COMPANY
We have a broad portfolio of media properties, which most
significantly includes:
• sports media and entertainment, such as the Toronto Blue
2015
2014
2013
52%
43%
37%
$1,106
$778
$634
Jays;
• our exclusive national 12-year NHL Agreement;
• category-leading television and radio broadcasting
properties;
• multi-platform televised and online shopping;
• publishing including Texture by Next Issue; and
• digital media.
MEDIA FINANCIAL RESULTS
(In millions of dollars, except margins)
2015
2014
% Chg
Years ended December 31
The 14% increase in operating revenue this year was a result of:
• higher subscription and advertising revenue generated by our
Sportsnet properties, including the NHL Agreement;
• higher Toronto Blue Jays game day and merchandise revenue as
a result of the success of the team; and
• higher revenue generated from Texture by Next Issue; partially
offset by
• continued softness
advertising; and
in conventional
television and print
• lower merchandise sales at TSC.
Operating revenue
Operating expenses
Adjusted operating profit
2,079
1,907
1,826
1,695
172
131
14
13
31
OPERATING EXPENSES
We assess Media operating expenses in four general areas:
• the cost of broadcast content (including sports programming
and production);
• the cost of retail products sold by TSC and Sports Media and
Entertainment;
• Toronto Blue Jays player payroll; and
• all other expenses involved in day-to-day operations.
The 13% increase in operating expenses this year was a result of:
• higher sports-related programming and other operating costs,
including our NHL Agreement, which started in the fourth
quarter of 2014; and
• higher costs related to the Toronto Blue Jays; partially offset by
• lower conventional broadcast TV programming costs;
• lower publishing costs; and
• lower merchandise costs at TSC.
ADJUSTED OPERATING PROFIT
The 31% increase in adjusted operating profit this year was a net
result of the success of the Toronto Blue Jays.
MEDIA ADJUSTED OPERATING PROFIT
(IN MILLIONS OF DOLLARS)
2015
2014
2013
$172
$131
$161
Adjusted operating profit margin
Additions to property, plant and equipment
8.3%
60
7.2%
94
1.1 pts
(36)
OPERATING REVENUE
Media generates revenue in five areas:
• advertising sales across its television, radio, publishing, and
digital media properties;
• subscriptions to televised products;
• retail product sales;
• circulation of published products; and
• ticket sales, receipts of MLB revenue sharing, and concession
sales associated with Sports Media and Entertainment.
MEDIA OPERATING REVENUE
(IN MILLIONS OF DOLLARS)
2015
2014
2013
2015 MEDIA OPERATING REVENUE MIX
(%)
$2,079
$1,826
$1,704
$2.1
BILLION
SPORTS 52%
BROADCASTING 26%
THE SHOPPING CHANNEL 13%
PUBLISHING 9%
48 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Additions to property, plant and equipment
include costs
associated with acquiring property, plant and equipment and
placing it into service. The telecommunications business requires
extensive and continual investments, including investment in new
technologies and the expansion of capacity and geographical
reach. The expenditures related to the acquisition of spectrum
licences are not included in additions to property, plant and
equipment and do not factor into the calculation of free cash flow
intensity. Please see “Managing Our Liquidity and
or capital
Financial Resources”, “Key Performance Indicators”, and “Non-
GAAP Measures” for more information.
Additions to property, plant and equipment are significant and
therefore our
have a material
management teams focus on planning, funding, and managing
them.
impact on our cash flows,
Additions to property, plant and equipment before related
changes to non-cash working capital represent capital assets to
which we took title. We believe this measure best reflects our cost
of property, plant and equipment in a given period and is a simpler
measure for comparing between periods.
(In millions of dollars, except capital intensity)
2015
2014
% Chg
Additions to property, plant and equipment
Years ended December 31
Wireless
Cable
Business Solutions
Media
Corporate
866
1,030
187
60
297
978
1,055
146
94
93
Total additions to property, plant and equipment 1
2,440
2,366
(11)
(2)
28
(36)
n/m
3
Capital intensity 2
18.2% 18.4% (0.2 pts)
1 Additions to property, plant and equipment do not
include expenditures on
spectrum licences.
2 Capital intensity is a key performance indicator. See “Key Performance Indicators”.
n/m: not meaningful.
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
(IN MILLIONS OF DOLLARS)
2015
2014
2013
$2,440
$2,366
$2,240
2015 ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
(%)
$2.4
BILLION
CABLE 42%
WIRELESS 36%
CORPORATE 12%
BUSINESS SOLUTIONS 8%
MEDIA 2%
WIRELESS
The decrease in additions to property, plant and equipment in
Wireless this year was a result of lower expenditures on our wireless
network, partially offset by higher software and information
technology costs
the spectrum
acquisitions made this year. As at December 31, 2015, our LTE
network reached approximately 93% of Canada’s population
(2014 – 84%).
from the deployment of
CABLE
The decrease in additions to property, plant and equipment in
Cable this year was a result of
lower purchases of our next
generation NextBox digital set-top box compared to last year,
partially offset by greater investment in network and information
technology infrastructure to further improve the reliability and
quality of the network and to improve the capacity of our Internet
platform to deliver gigabit Internet speeds. We also continued to
expand our bandwidth towards the development of our next
generation IP-based video service and digital television guides.
BUSINESS SOLUTIONS
The increase in additions to property, plant and equipment in
Business Solutions this year was a result of data centre investments
and network expansion to reach additional customers and sites.
MEDIA
The decrease in additions to property, plant and equipment in
Media this year was a result of greater prior year investments made
to our broadcast facilities and IT infrastructure.
CORPORATE
The increase in additions to property, plant and equipment in
Corporate this year was a result of higher spending on premise
improvements at our various offices as well as higher information
technology costs.
CAPITAL INTENSITY
Capital intensity decreased this year as the increase in additions to
property, plant and equipment as described above was more than
offset by the increase in revenue described previously in this
MD&A.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 49
MANAGEMENT’S DISCUSSION AND ANALYSIS
REVIEW OF CONSOLIDATED PERFORMANCE
DEPRECIATION AND AMORTIZATION
This section discusses our consolidated operating income, net
income, and other expenses that do not form part of the segment
discussions above.
(In millions of dollars)
2015
2014 % Chg
Years ended December 31
(In millions of dollars)
2015
2014 % Chg
Total depreciation and amortization
2,277
2,144
Years ended December 31
Depreciation
Amortization
2,117
160
1,979
165
7
(3)
6
Adjusted operating profit 1
Deduct (add):
Stock-based compensation
Depreciation and amortization
Restructuring, acquisition and
other
Finance costs
Other (income) expense
Income taxes
Net income
5,032
5,019
55
2,277
37
2,144
111
774
(32)
466
173
817
1
506
1,381
1,341
–
49
6
(36)
(5)
n/m
(8)
3
1 Adjusted operating profit is a non-GAAP measure and should not be considered as a
substitute or alternative for GAAP measures. It is not a defined term under IFRS and
does not have a standard meaning, so may not be a reliable way to compare us to
other companies. See “Non-GAAP Measures” for information about this measure,
including how we calculate it.
ADJUSTED OPERATING PROFIT
Please see “Key Changes in Financial Results This Year Compared
to 2014” for a discussion of the increase in adjusted operating
profit this year.
STOCK-BASED COMPENSATION
Our stock-based compensation, which includes stock options (with
stock appreciation rights), restricted share units, and deferred share
units, is generally determined by:
• the vesting of stock options and share units; and
• changes in the market price of RCI Class B shares; offset by
• the impact of certain derivative instruments to hedge a portion of
stock-based
the stock price appreciation risk
compensation program. See “Financial Risk Management” for
information about equity derivatives.
for our
(In millions of dollars)
2015
2014
Years ended December 31
Impact of vesting
Impact of change in price
Equity derivatives, net of interest
receipt
Total stock-based compensation
57
20
(22)
55
44
(17)
10
37
Stock-based compensation increased to $55 million in 2015 (2014
- $37 million) primarily as a result of the vesting of additional stock-
based compensation to employees, directors, and key executives.
We had a liability of $157 million as at December 31, 2015 (2014 –
$144 million) related to stock-based compensation recorded at its
including stock options, restricted share units, and
fair value,
deferred share units.
We paid $73 million in 2015 (2014 – $48 million) to holders of
stock options, restricted share units, and deferred share units upon
exercise.
50 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
Depreciation and amortization increased this year primarily as a
result of:
• the overall
increase in additions to property, plant and
equipment over the last several years, which has resulted in more
depreciable assets;
• the availability for use of certain network and system investments,
including the launch and expansion of our LTE network in various
municipalities; and
• significant
investment
in, and rollout of, new customer
equipment at Cable in recent years, mostly in next generation
NextBox digital TV set-top boxes which are depreciated over
three years.
RESTRUCTURING, ACQUISITION AND OTHER
Restructuring, acquisition and other included:
• $75 million (2014 – $131 million) of restructuring expenses.
Expenses this year primarily reflect severance costs associated
with the targeted restructuring of our employee base and the
write-off of certain programming rights that are no longer usable
following a reorganization of the OMNI television stations. In
restructuring expenses related to the reorganization
2014,
associated with the implementation of
the Rogers 3.0
reorganization plan; and
• $36 million (2014 – $42 million) of acquisition-related transaction
costs, contract termination costs, and other costs.
FINANCE COSTS
(In millions of dollars)
2015
2014
% Chg
Years ended December 31
Interest on borrowings 1
Interest on post-employment
benefits liability
Loss on repayment of long-term
debt
Loss on foreign exchange
Capitalized interest
Other
761
782
11
7
7
11
(29)
13
29
11
(26)
14
Total finance costs
774
817
(3)
57
(76)
–
12
(7)
(5)
1 Borrowings include long-term debt and short-term borrowings associated with our
accounts receivable securitization program.
Interest on borrowings
The decrease in interest on borrowings this year was a result of a
decrease in the weighted average interest rate on our outstanding
debt, partially offset by an increase in our outstanding debt. As at
December 31, 2015, our borrowings had a weighted average cost
of 4.82% (2014 – 5.20%) and a weighted average term to maturity
of 10.8 years (2014 – 10.8 years).
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Our effective income tax rate this year was 25.2% compared to
27.4% for 2014. The effective income tax rate for 2015 was lower
than the statutory tax rate primarily as a result of the non-taxable
gain on the acquisition of Mobilicity, partially offset by a deferred
tax revaluation due to an increase in the Alberta corporate income
tax rate.
Cash income taxes paid this year decreased as a result of the
utilization of tax loss carryforwards acquired as part of the Mobilicity
transaction.
In 2011, legislative changes eliminated the deferral of partnership
income,
thereby accelerating the payment of approximately
$700 million of previously deferred cash taxes over a five-year
amortization period, beginning in 2012, at 15%, 20% in each of
2013 through 2015, and 25% in 2016. Our cash income tax
payments for the 2016 taxation year will continue to include this
additional amount. While the elimination of
the deferral of
partnership income affects the timing of cash income tax
payments, it does not affect our income tax expense for accounting
purposes. See “About Forward-Looking Information” for more
information.
NET INCOME
Net income was 3% higher than last year. See “Key Changes in
Financial Results
for more
information.
this Year Compared to 2014”
(In millions of dollars, except per share
amounts)
Net income
Basic earnings per share
Diluted earnings per share
Years ended December 31
2015
2014 % Chg
1,381
1,341
$ 2.68 $ 2.60
$ 2.67 $ 2.56
3
3
4
Loss on repayment of long-term debt
We recognized a $7 million loss on repayment of long-term debt
this year (2014 – $29 million loss) related to debt derivatives
associated with the repayment or repurchase of certain senior
notes in March 2015 and March 2014. These losses were deferred
in the hedging reserve until maturity of the notes and were then
recognized in net income. The 2015 loss relates to transactions in
2013 (2014 – transactions in 2008 and 2013) wherein foreign
exchange rates on the related debt derivatives were updated to
then-current rates.
Foreign exchange losses recognized in 2015 and 2014 were
primarily related to the impact of fluctuations in the value of the
Canadian dollar relative to the US dollar on working capital,
consisting mainly of the unhedged portion of our US dollar-
denominated accounts payable. During 2015, all of our US dollar-
denominated debt was hedged for accounting purposes.
See “Managing our Liquidity and Financial Resources” for more
information about our debt and related finance costs.
OTHER (INCOME) EXPENSE
The increase in other income this year was a result of:
• a $102 million gain on acquisition of Mobilicity; partially offset by
• lower equity income pertaining to our various investments and
joint ventures, which included a $72 million loss related to our
share of an obligation to purchase at
fair value the non-
controlling interest in one of our joint ventures, partially offset by
our share of a gain related to tax recoveries in one of our joint
ventures.
INCOME TAXES
The table below shows the difference between income taxes
computed by applying the statutory income tax rate to income
before income taxes and the actual income tax expense for the
year:
Years ended December 31
(In millions of dollars, except tax rates)
Statutory income tax rate
Income before income taxes
Computed income tax expense
Increase (decrease) in income taxes
resulting from:
Non-deductible (non-taxable)
stock-based compensation
Income tax adjustment, legislative
tax change
Non-taxable gain on acquisition
Other items
Total income taxes
Effective income tax rate
Cash income taxes paid
2015
26.5%
1,847
489
5
6
(27)
(7)
466
25.2%
184
2014
26.5%
1,847
489
(2)
14
–
5
506
27.4%
460
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 51
MANAGEMENT’S DISCUSSION AND ANALYSIS
ADJUSTED NET INCOME
Excluding certain items, adjusted net
income was 3% lower
compared to 2014, mainly as a result of higher depreciation and
amortization, partially offset by higher adjusted operating profit,
lower finance costs, and lower income taxes.
including shared services and the corporate office. Total salaries
and benefits for full-time employees and part-time employees in
2015 were approximately $1,975 million (2014 – $1,940 million).
The increase was mainly due to higher pension expenses and
stock-based compensation.
(In millions of dollars, except per share
amounts)
Adjusted operating profit 1
Deduct (add):
Depreciation and amortization
Finance costs 2
Other (income) expense 3
Income taxes 4
Adjusted net income 1
Years ended December 31
2015
2014 % Chg
5,032
5,019
–
2,277
767
(2)
500
2,144
788
1
554
1,490
1,532
6
(3)
n/m
(10)
(3)
(3)
(3)
Adjusted basic earnings per share 1
Adjusted diluted earnings per share 1
$ 2.89 $ 2.97
$ 2.88 $ 2.96
1 Adjusted operating profit, adjusted net income, and adjusted basic and diluted
earnings per share are non-GAAP measures and should not be considered as a
substitute or alternative for GAAP measures. They are not defined terms under IFRS,
and do not have standard meanings, so may not be a reliable way to compare us to
other companies. See “Non-GAAP Measures” for information about these measures,
including how we calculate them.
2 Finance costs exclude the $7 million loss on repayment of long-term debt for the year
ended December 31, 2015 (2014 – $29 million loss).
3 Other (income) expense excludes a $102 million gain on acquisition of Mobilicity and
a $72 million loss related to our share of an obligation to purchase at fair value the
non-controlling interest in one of our joint ventures.
4 Income taxes exclude the $40 million recovery (2014 – $62 million recovery) for the
year ended December 31, 2015 related to income tax impact for adjusted items. For
2015,
income taxes also exclude the $6 million expense for the revaluation of
deferred tax balances due to legislative income tax rate changes. For 2014, income
taxes also exclude the $14 million expense adjusting previously recognized Ontario
harmonization transitional tax credits.
ADJUSTED NET INCOME
(IN MILLIONS OF DOLLARS)
2015
2014
2013
$1,490
$1,532
$1,769
2014 FULL YEAR RESULTS COMPARED TO 2013
Operating revenue
Consolidated revenue increased by 1% in 2014, reflecting revenue
growth of 2% in Business Solutions and 7% in Media, while Wireless
and Cable revenue were stable. Wireless revenue was stable as a
result of the impact of continued adoption of the customer-friendly
Rogers Share Everything plans, which generate higher postpaid
ARPA, offset by lower roaming revenue. Cable revenue was stable
as the increase in Internet revenue was offset by decreases in
Television and Phone revenue. Media revenue increased as a result
of
the NHL Agreement, growth at Sportsnet, and higher
merchandise sales at TSC, the Toronto Blue Jays, and Radio,
partially offset by continued softness in conventional broadcast TV
and print advertising.
Adjusted operating profit
Consolidated adjusted operating profit increased 1% in 2014 to
$5,019 million, reflecting increases in Wireless of $89 million and
Business Solutions of $16 million, partially offset by decreases in
Cable and Media of $53 million and $30 million, respectively. The
increase in Wireless was a result of growth in equipment sales. The
increase in Business Solutions was a result of growth in service
revenue and improvements in cost management and efficiency.
The decrease in Cable was a result of higher investments in
customer care and network, customer value enhancement-related
costs and a one-time cumulative CRTC fee adjustment. The
decrease in Media was a result of higher costs at the Toronto Blue
Jays, increased merchandise costs at TSC, costs associated with the
launch of Texture by Next Issue (formerly branded as Next Issue
Canada in 2014), and increased programming costs, partially offset
by lower publishing costs.
Net income and adjusted net income
Consolidated net income decreased from $1,669 million in 2013
to $1,341 million in 2014 primarily as a result of greater
depreciation and amortization, restructuring, acquisition and other
and finance costs in 2014, partially offset by lower stock-based
compensation and income taxes.
EMPLOYEES
Employee salaries and benefits represent a material portion of our
expenses. As at December 31, 2015, we had approximately 26,000
(2014 – 27,000) employees across all of our operating groups,
Consolidated adjusted net income decreased to $1,532 million in
2014 from $1,769 million in 2013, primarily as a result of increases
in finance costs and depreciation and amortization, partially offset
by lower income taxes.
52 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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The table below shows our quarterly consolidated financial results and key performance indicators for 2015 and 2014.
QUARTERLY CONSOLIDATED FINANCIAL SUMMARY
(In millions of dollars, except per share amounts)
Full Year
Q4
Q3
Q2
Q1
Full Year
Q4
Q3
Q2
Q1
2015
2014
Operating revenue
Wireless
Cable
Business Solutions
Media
Corporate items and intercompany eliminations
Total operating revenue
Adjusted operating profit (loss)
Wireless
Cable
Business Solutions
Media
Corporate items and intercompany eliminations
Adjusted operating profit 1
Deduct (add):
Stock-based compensation
Depreciation and amortization
Restructuring, acquisition and other
Finance costs
Other (income) expense
Net income before income taxes
Income taxes
Net income
Earnings per share:
Basic
Diluted
Net income
Add (deduct):
Stock-based compensation
Restructuring, acquisition and other
Gain on acquisition of Mobilicity
Loss on non-controlling interest purchase obligation
Loss on repayment of long-term debt
Income tax impact of above items
Income tax adjustment, legislative tax change
Adjusted net income 1
Adjusted earnings per share 1:
Basic
Diluted
Additions to property, plant and equipment
Free cash flow 1
Cash provided by operating activities
7,651
3,465
377
2,079
(158)
1,981
855
95
560
(39)
1,973
871
94
473
(27)
1,903
869
94
582
(45)
1,794
870
94
464
(47)
7,305
3,467
382
1,826
(130)
1,898
871
97
544
(44)
1,880
864
96
440
(28)
1,800
872
95
475
(30)
1,727
860
94
367
(28)
13,414
3,452
3,384
3,403
3,175
12,850
3,366
3,252
3,212
3,020
3,239
1,658
116
172
(153)
754
426
30
56
(40)
879
416
31
58
(39)
841
414
27
90
(35)
765
402
28
(32)
(39)
3,246
1,665
122
131
(145)
725
424
34
78
(28)
888
409
32
23
(40)
843
423
28
54
(35)
790
409
28
(24)
(42)
5,032
1,226
1,345
1,337
1,124
5,019
1,233
1,312
1,313
1,161
55
2,277
111
774
(32)
1,847
466
1,381
16
580
23
192
4
411
112
299
13
576
37
190
(59)
588
124
464
14
562
42
182
26
511
148
363
12
559
9
210
(3)
337
82
255
37
2,144
173
817
1
1,847
506
1,341
12
560
43
202
(10)
426
129
297
9
533
91
202
12
465
133
332
11
532
30
188
9
543
138
405
5
519
9
225
(10)
413
106
307
$ 2.68 $ 0.58 $ 0.90 $ 0.70 $ 0.50
$ 2.67 $ 0.58 $ 0.90 $ 0.70 $ 0.48
$ 2.60 $ 0.58 $ 0.64 $ 0.79 $ 0.60
$ 2.56 $ 0.57 $ 0.64 $ 0.76 $ 0.57
1,381
299
464
363
255
1,341
297
332
405
307
55
111
(102)
72
7
(40)
6
16
23
–
–
–
(7)
–
13
37
(102)
72
–
(12)
–
14
42
–
–
–
(13)
6
12
9
–
–
7
(8)
–
37
173
–
–
29
(62)
14
12
43
–
–
–
(11)
14
9
91
–
–
–
(27)
–
11
30
–
–
–
(14)
–
5
9
–
–
29
(10)
–
1,490
331
472
412
275
1,532
355
405
432
340
$ 2.89 $ 0.64 $ 0.92 $ 0.80 $ 0.53
$ 2.88 $ 0.64 $ 0.91 $ 0.80 $ 0.53
475
266
227
2,440
1,676
3,747
621
476
1,114
571
660
1,456
773
274
950
$ 2.97 $ 0.69 $ 0.79 $ 0.84 $ 0.66
$ 2.96 $ 0.69 $ 0.78 $ 0.84 $ 0.66
488
356
408
2,366
1,437
3,698
664
275
1,031
638
370
1,057
576
436
1,202
1 Adjusted operating profit, adjusted net income, adjusted basic and diluted earnings per share, and free cash flow are non-GAAP measures and should not be considered as a
substitute or alternative for GAAP measures. They are not defined terms under IFRS, and do not have standard meanings, so may not be a reliable way to compare us to other
companies. See “Non-GAAP Measures” for information about these measures, including how we calculate them.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 53
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOURTH QUARTER 2015 RESULTS
Results commentary in “Fourth Quarter 2015 Results” compares
the fourth quarter of 2015 with the fourth quarter of 2014.
Operating revenue
Wireless network revenue increased 3% in the fourth quarter
primarily as a result of the continued adoption of higher-postpaid-
ARPA-generating Rogers Share Everything plans
and an
adjustment pertaining to reflected usage of our loyalty programs,
partially offset by a decrease in roaming revenue. Wireless
equipment sales increased 19% in the fourth quarter as a result of
greater device volumes and equipment sales prices.
Cable operating revenue decreased 2% in the fourth quarter as a
result of Television and Phone subscriber losses over the past year,
partially offset by the movement of customers to higher-end
Internet speed and usage tiers and the impact of pricing changes
implemented over the past year.
Business Solutions operating revenue decreased 2% in the fourth
quarter as a result of the continued decline in our legacy off-net
voice and data business, partially offset by continued growth of on-
net and next generation IP-based services revenue.
Media operating revenue increased 3% in the fourth quarter
primarily as a result of higher subscription and advertising revenue
generated by our Sportsnet properties and revenue generated as a
result of the postseason success of the Toronto Blue Jays, partially
offset by continued softness in conventional broadcast television
and print advertising and lower merchandise sales at TSC.
Adjusted operating profit
Wireless adjusted operating profit increased 4% in the fourth
quarter primarily as a result of the increased network revenue,
partially offset by the increased net subsidies associated with higher
gross additions and higher cost smartphones.
Cable adjusted operating profit increased marginally in the fourth
quarter primarily as a result of relative shifts in the product mix to
higher-margin Internet from conventional Television broadcasting
and various cost efficiency and productivity initiatives, which more
than offset the decline in revenue.
Business Solution’s adjusted operating profit decreased 12% in the
fourth quarter as a result of the decrease in revenue described
above as well as an increase in operating expenses relating to
higher service costs.
Media’s adjusted operating profit decreased 28% in the fourth
quarter as a result of the declines in conventional areas of TV and
publishing, partially offset by the postseason success of the Toronto
Blue Jays.
Net income and adjusted net income
Net income increased 1% in the fourth quarter primarily as a result
of lower restructuring, acquisition and other costs, lower finance
income taxes, partially offset by higher
costs, and lower
depreciation and amortization, while adjusted net
income
decreased this quarter as this measure excludes restructuring,
acquisition and other costs.
54 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
QUARTERLY TRENDS AND SEASONALITY
Our operating results generally vary from quarter to quarter as a
result of changes in general economic conditions and seasonal
fluctuations, among other
in each of our business
things,
segments. This means our results in one quarter are not necessarily
a good indication of how we will perform in a future quarter.
Wireless, Cable, and Media each have unique seasonal aspects to,
and certain other historical trends in, their businesses.
Fluctuations in net income from quarter to quarter can also be
attributed to losses on the repayment of debt, foreign exchange
gains or losses, changes in the fair value of derivative instruments,
other income and expenses, impairment of assets, and changes in
income taxes.
Wireless
The trends in Wireless revenue and adjusted operating profit
reflect:
• the growing number of wireless voice and data subscribers;
• higher usage of wireless data;
• higher handset sales as more consumers shift to smartphones;
and
• stable postpaid churn, which we believe is beginning to reflect
the realization of our heightened focus towards higher valued
customers and our enhanced customer service efforts; partially
offset by
• decreasing voice revenue as rate plans increasingly incorporate
more monthly minutes and calling features, such as long
distance; and
• lower
roaming revenue as more subscribers are taking
advantage of value-added roaming plans, such as Roam Like
Home.
The trends in Wireless adjusted operating profit reflect:
• higher handset subsidies that offset the higher handset sales as
more consumers shift to smartphones; and
• higher voice and data costs related to the increasing number of
subscribers.
Notably, over the last two years since the CRTC introduced the
Wireless Code, we have been anticipating the double cohort,
which resulted in term contracts being limited from a three-year
term to a two-year term. As a result of the Wireless Code and the
double cohort, we worked to upgrade subscribers earlier than
usual, causing a significant increase in our fourth quarter 2014
equipment sales and cost of equipment as a result of higher
subsidies. This effect continued in our first and second quarters of
2015, until the Wireless Code took effect in June 2015. The third
and fourth quarters of 2015 had higher equipment sales and costs
than the prior year due to the greater number of term contracts
ending at any point in time.
We expect our equipment sales and cost of equipment to be
higher than they typically have been historically as a result of the
introduction of the Wireless Code, which resulted in term contracts
being limited to a two-year period. We expect this to result in a
greater absolute number of customers upgrading their device
hardware in any given period.
We continue to target organic growth in higher-value postpaid
subscribers. We have maintained a stable mix of postpaid versus
the Mobilicity
prepaid subscribers excluding the addition of
subscribers effective July 2015. Prepaid plans are evolving to have
properties similar to those of traditional postpaid plans. We believe
this evolution provides Canadians with greater choice of
subscribing to a postpaid or prepaid service plan. Growth in our
customer base over time has resulted in higher costs for customer
service, retention, credit, and collection; however, most of the cost
increases have been offset by gains in operating efficiencies.
Wireless operating results are influenced by the timing of our
marketing and promotional expenditures and higher levels of
subscriber additions and related subsidies, resulting in higher
subscriber acquisition and activation-related expenses, typically in
the third and fourth quarters. The launch of popular new wireless
handset models can also affect the level of subscriber additions.
Highly-anticipated device launches typically occur in the fall season
of each year. We typically see lower subscriber additions in the first
quarter of the year, which is a direct impact of the higher additions
around the fourth quarter holiday season. Wireless roaming
travel volumes, which is
revenue is dependent on customer
impacted by the value of
the
Canadian dollar and general economic conditions.
the foreign exchange rate of
Recently, we have noticed a significant increase in customers
choosing to bring their own devices. We believe customers have
chosen to do this as a result of the introduction of the Wireless
Code as carriers have increased the upfront cost of a mobile device
to offset the shorter time period in which subscribers have to fully
pay off the device subsidy.
Cable
The trends in Cable services revenue primarily reflect:
• higher
Internet subscription fees as customers increasingly
including those with
upgrade to higher-tier speed plans,
unlimited usage; and
• general pricing increases over the past year; offset by
• competitive losses of Television and Phone subscribers;
• Television subscribers downgrading their service plans; and
• lower additional usage of
Internet, Television, and Phone
products and services as service plans are increasingly bundling
more features, such as unlimited bandwidth or a greater number
of TV channels.
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Television subscribers. In addition, trends in the use of wireless
products and Internet or social media to substitute for traditional
home Phone products have resulted in fewer Phone subscribers.
Business Solutions
The trends in Business Solutions operating profit margin primarily
reflect the ongoing shift from lower-margin, off-net legacy long
distance and data services to higher-margin, next generation
services and data centre businesses.
Business Solutions does not generally have any unique seasonal
aspects to its business.
Media
The trends in Media’s results are generally the result of:
• continual investment in primetime and specialty programming
relating to both our broadcast networks (such as City) and our
specialty channels (such as FX (Canada));
• higher sports rights costs as we move further along in our NHL
Agreement;
• subscriber rate increases; and
• fluctuations in advertising and consumer market conditions.
Seasonal fluctuations relate to:
• periods of increased consumer activity and their impact on
advertising and related retail cycles, which tend to be most active
in the fourth quarter due to holiday spending and slower in the
first quarter;
• the MLB season, where:
• games played are concentrated in the spring, summer, and fall
months (generally the second and third quarters of the year);
• revenue related to game day ticket sales, merchandise sales,
and advertising are concentrated in the spring, summer, and
fall months (generally the second and third quarters of the
year), with postseason games commanding a premium in
advertising revenue and additional revenue from game day
ticket sales and merchandise sales, when the Toronto Blue
Jays play in the postseason; and
• programming and production costs and player payroll are
expensed based on the number of games aired; and
• the NHL season, where:
The trends in Cable adjusted operating profit primarily reflect:
• higher Internet operating expenses, in line with the increased
Internet subscription fees; and
• higher premium supplier
fees in Television as a result of
bundling more value-added offerings into our Cable products;
offset by
• lower general Television and Phone operating expenses.
• regular season games are concentrated in the fall and winter
months (generally the first and fourth quarters of the year) and
playoff games are concentrated in the spring months
(generally the second quarter of the year);
• programming and production costs are expensed based on
the timing of when the rights are aired or are expected to be
consumed; and
Cable’s operating results are affected by modest seasonal
fluctuations in subscriber additions and disconnections, typically
caused by:
• university and college students who live in residences moving
out early in the second quarter and cancelling their service as
well as students moving in late in the third quarter and signing
up for cable service;
• individuals
temporarily
vacations or seasonal relocations; and
suspending service for extended
• the concentrated marketing we generally conduct in our fourth
quarter.
Cable operating results are also influenced by trends in cord
shaving and cord cutting, which has resulted in fewer subscribers
watching traditional cable television, as well as a lower number of
• advertising revenue
are
concentrated in the fall, winter, and spring months, with playoff
games commanding a premium in advertising revenue.
and programming expenses
Other expenses
Depreciation and amortization has been trending upward over the
past several years as a result of an increase in our general
depreciable asset base, related significantly to our recent rollout and
expansion of our wireless network. This is a direct result of increasing
additions to property, plant and equipment in previous and current
years as we worked to upgrade our wireless network, purchase
NextBox set-top boxes, and roll out IGNITE Gigabit Internet and 4K
TV to our Cable footprint. We expect
the depreciation and
amortization to be relatively stable for the next several years as our
additions to property, plant and equipment moderate.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 55
MANAGEMENT’S DISCUSSION AND ANALYSIS
OVERVIEW OF FINANCIAL POSITION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at December 31
(In millions of dollars)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable
Inventories
Other current assets
Current portion of derivative instruments
198
136
62
46
Total current assets
Property, plant and equipment
2,622
10,997
2,345
10,655
277
342
Intangible assets
7,243
6,588
655
Investments
2,271
1,898
373
12
3
10
20
Derivative instruments
Other long-term assets
Deferred tax assets
Goodwill
Total assets
1,992
150
9
3,891
788
356
1,204
(206)
9
3,883
–
8
29,175
26,522
2,653
Liabilities and shareholders’ equity
Current liabilities:
Short-term borrowings
Accounts payable and accrued liabilities
800
2,708
842
2,578
(42)
130
Income tax payable
Current portion of provisions
Unearned revenue
96
10
388
Current portion of long-term debt
Current portion of derivative instruments
1,000
15
47
7
443
963
40
49
3
(55)
37
(25)
Total current liabilities
Provisions
Long-term debt
5,017
50
15,870
4,920
55
13,824
97
(5)
2,046
2015
2014
$ Chg % Chg
Explanation of significant changes
11
1,792
318
303
176
1,591
251
191
(165)
201
67
112
(94)
13
27
59
See “Managing our Liquidity and Financial Resources” for more information.
Reflects higher subscriber receivables as a result of timing of collections.
Reflects higher Wireless handset inventory.
Reflects a receivable pertaining to our planned divestiture of Glentel’s
international operations.
Reflects changes in market values of debt and expenditure derivatives primarily
as a result of the depreciation of the Cdn$ relative to the US$, offset by the
settlement and maturity of certain derivatives. See “Financial Risk Management”
for more information.
Reflects additions to property, plant and equipment and asset depreciation.
See “Additions to Property, Plant and Equipment” for more information.
Reflects purchases of spectrum licences from Shaw and in conjunction with the
Mobilicity acquisition, partially offset by amortization of other intangible assets.
Reflects the acquisition of our interest in Glentel, offset by declines in the value
of our shares in publicly traded marketable equity securities.
See “Current portion of derivative instruments” for more information.
153
(58) Primarily reflects the utilization of $250 million of deposits for the Shaw
spectrum licences.
n/m
n/m
–
–
10
(5) Reflects net repayments under the accounts receivable securitization program.
5
Reflects a payable pertaining to our planned divestiture of Glentel’s
international operations and an increase in trade payables as a result of the
timing of payments made.
Reflects the excess of income tax payable over tax installments paid.
n/m
104
43
(12) Reflects the reduction of certain revenue deferrals pertaining to our loyalty
programs, partially offset by higher customer deposits relating to 2016 Toronto
Blue Jays ticket sales.
n/m
4
(63) Reflects changes in market values of equity derivatives due to the increase in the
market price of RCI Class B shares. See “Financial Risk Management” for more
information.
2
(9) n/m
15
Reflects the net issuance of $279 million in senior notes in December 2015, the
net additional $500 million drawn under our bank credit facilities, as well as the
strengthening of the US$ relative to the Cdn$. See “Financial Risk Management”
for more information.
Derivative instruments
95
11
84
n/m Reflects changes in market values of bond forwards, due to changes in
Other long-term liabilities
Deferred tax liabilities
455
1,943
462
1,769
(7)
174
expectations for the Government of Canada borrowing rate.
See “Financial Risk Management” for more information.
(2) n/m
10
Primarily reflects the impact of additional temporary differences arising from
property, plant and equipment and intangible assets.
Total liabilities
Shareholders’ equity
23,430
5,745
21,041
5,481
2,389
264
Total liabilities and shareholders’ equity
29,175
26,522
2,653
11
5
10
Reflects changes in retained earnings and equity reserves.
56 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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Managing Our Liquidity and Financial Resources
SOURCES AND USES OF CASH
OPERATING, INVESTING AND FINANCING ACTIVITIES
(In millions of dollars)
Cash provided by operating activities before changes in non-cash working capital, income taxes paid, and
interest paid
Change in non-cash operating working capital items
Cash provided by operating activities before income taxes paid and interest paid
Income taxes paid
Interest paid
Cash provided by operating activities
Investing activities:
Additions to property, plant and equipment
Additions to program rights
Changes in non-cash working capital related to property, plant and equipment and intangible assets
Acquisitions and other strategic transactions, net of cash acquired
Other
Cash used in investing activities
Financing activities:
Proceeds received on short-term borrowings
Repayment of short-term borrowings
Issuance of long-term debt
Repayment of long-term debt
Proceeds on settlement of debt derivatives and forward contracts
Payments on settlement of debt derivatives, forward contracts, and bond forwards
Transaction costs incurred
Dividends paid
Cash (used in) provided by financing activities
Change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Years ended December 31
2015
2014
5,004
(302)
4,702
(184)
(771)
3,747
(2,440)
(64)
(116)
(1,077)
(70)
(3,767)
294
(336)
7,338
(6,584)
1,059
(930)
(9)
(977)
(145)
(165)
176
11
4,925
11
4,936
(460)
(778)
3,698
(2,366)
(231)
153
(3,456)
(51)
(5,951)
276
(84)
3,412
(2,551)
2,150
(2,115)
(30)
(930)
128
(2,125)
2,301
176
OPERATING ACTIVITIES
The 1% increase in cash provided by operating activities this year
was a result of lower cash income tax payments resulting from the
acquisition of Mobilicity, partially offset by higher net investment in
non-cash working capital.
INVESTING ACTIVITIES
Additions to property, plant and equipment
We spent $2,440 million this year on property, plant and
equipment additions before changes in non-cash working capital
items, which was 3% higher than 2014. See “Additions to Property,
Plant and Equipment” for more information.
Acquisitions and other strategic transactions
We made total payments of $129 million this year related to the
acquisition of 2500 MHz spectrum licences and Shaw spectrum
licences (including $2 million of related transaction costs) and $948
million related to the acquisitions of Mobilicity, our investment in
Glentel, certain dealer stores, and IAI. Expenditures in 2014 were
for the acquisition of our 700 MHz spectrum and our acquisition of
Source Cable.
Additions to program rights
This year, we spent $64 million on additions to program rights. We
spent $231 million last year on additions to program rights
primarily as a result of the NHL Agreement.
FINANCING ACTIVITIES
Accounts receivable securitization
The $294 million (2014 – $276 million) of funding we received this
year under our accounts receivable securitization program and the
related $336 million (2014 – $84 million) of repayments we made
changed our total funding under the program to $800 million as at
December 31, 2015 (2014 – $842 million). As at December 31,
2015, the program was committed to fund up to a maximum of
$1,050 million (2014 – $900 million). Effective January 2015, we
amended the terms of the program,
increasing the maximum
potential proceeds under
the program to $1.05 billion and
extending the term to January 1, 2018.
We continue to service and retain substantially all of the risks and
rewards relating to the accounts receivables we sell, and therefore,
the receivables remain recognized on our consolidated statements
of financial position and the funding received is recorded as short-
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 57
MANAGEMENT’S DISCUSSION AND ANALYSIS
term borrowings. The buyer’s interest in these trade receivables
ranks ahead of our interest. The program restricts us from using the
receivables as collateral for any other purpose. The buyer of our
trade receivables has no claim on any of our other assets.
Bank credit and letter of credit facilities
Effective April 16, 2014, we amended the terms of our existing
revolving credit facility (revolving credit facility) to increase the
maximum amount available from $2.0 billion to $2.5 billion while
extending the maturity date from July 20, 2017 to July 19, 2019.
facility (non-revolving credit
In April 2015, we borrowed the full amount of a new $1.0 billion
bank credit
facility) which was
established in addition to our existing $2.5 billion revolving credit
facility. The non-revolving credit facility is available on a non-
revolving basis and matures in April 2017 with no scheduled
principal repayments prior to maturity.
In December 2015, we
amended our non-revolving bank credit facility to allow partial,
temporary repayment of this facility from December 2015 through
May 2016; the maximum credit limit remains $1.0 billion. The
interest rate charged on borrowings under the non-revolving credit
facility falls within the range of pricing indicated for our revolving
credit facility.
(In millions of dollars, except interest and discount rates)
This year, we borrowed $6,025 million (2014 – $1,330 million)
under our revolving and non-revolving credit facilities and repaid
$5,525 million (2014 – $1,330 million).
As at December 31, 2015, we had $500 million (2014 — nil)
outstanding under our revolving and non-revolving credit facilities.
As at December 31, 2015, we had available liquidity of $3.0 billion
(2014 – $2.5 billion) under our $3.6 billion of revolving and non-
revolving credit and letter of credit facilities (2014 – $2.6 billion), of
which we had utilized approximately $0.1 billion (2014 –
$0.1 billion) related to outstanding letters of credit and $0.5 billion
of borrowings (2014 – nil of borrowings). Each of these facilities is
unsecured and guaranteed by RCCI and ranks equally with all of
our senior notes and debentures. See “Dissolution of RCP” for
more information.
Issuance of senior notes and related debt derivatives
The table below provides a summary of the senior notes we issued
during 2015 and 2014, with the proceeds used to repay
outstanding advances under our credit facilities and for general
corporate purposes.
Date issued
2015 issuances
December 8, 2015
December 8, 2015
Total for 2015
2014 issuances
March 10, 2014
March 10, 2014
March 10, 2014
March 10, 2014
Total for 2014
Principal
amount
Due
date
Interest
rate
Discount/premium
at issuance
Total gross
proceeds 1
Transaction costs
and discounts 2
US
US
700
300
2025
2044
3.625%
5.000%
99.252%
101.700%
250
400
600
750
2017
2019
2024
2044
Floating
2.80%
4.00%
5.00%
US
100.000%
99.972%
99.706%
99.231%
937
401
1,338
250
400
600
832
2,082
13
24
1 Gross proceeds before transaction costs, discounts, and premiums.
2 Transaction costs, discounts, and premiums are included as deferred transaction costs and discounts in the carrying value of the long-term debt, and recognized in net income
using the effective interest method.
In 2015, the US$1.0 billion of senior notes was issued pursuant to a
public offering in the US. In 2014, the $1.25 billion of senior notes
issued was pursuant to a public offering in Canada and US$750
million of senior notes issued was pursuant to a separate public
offering in the US.
Concurrent with the 2015 issuances, and the 2014 issuance
denominated in US dollars, we entered into debt derivatives to
convert all interest and principal payments obligations to Canadian
dollars (see “Financial Risk Management” for more information).
All the notes issued are unsecured and guaranteed by RCCI,
ranking equally with all of our other senior unsecured notes and
debentures, bank credit and letter of credit facilities.
Repayment of senior notes and related derivative settlements
This year, we repaid our US$550 million ($702 million) and
US$280 million ($357 million) senior notes that were due in March
2015. At the same time, the associated debt derivatives were
settled at maturity for net proceeds received of $154 million,
resulting in a net repayment of $905 million including settlement of
the associated debt derivatives.
58 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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repurchased our US$750 million
In 2014, we repaid or
($834 million) and US$350 million ($387 million) senior notes that
were due in March 2014. At the same time, the associated debt
derivatives were settled at maturity for net proceeds received of
$35 million,
repayment of $1,186 million
including settlement of the associated debt derivatives.
resulting in a net
Weighted average cost of borrowings
Our borrowings had a weighted average cost of 4.82% as at
December 31, 2015 (2014 – 5.20%) and a weighted average term
to maturity of 10.8 years (2014 – 10.8 years). This comparatively
favourable decline in our 2015 weighted average interest rate
reflects the combined effects of:
• greater utilization of our bank credit facilities;
• our issuance of senior notes in December 2015 at comparatively
lower interest rates; and
• the scheduled repayments and repurchases of comparatively
more expensive senior notes made in March 2014 and March
2015.
WEIGHTED AVERAGE COST OF BORROWINGS
(%)
2015
2014
2013
RATIO OF ADJUSTED NET DEBT / ADJUSTED OPERATING PROFIT
2015
2014
2013
4.82%
5.20%
5.54%
3.1x
2.9x
2.3x
Dividends
In 2015, we declared and paid dividends on each of our
outstanding Class A Voting and Class B Non-Voting shares. We
paid $977 million in cash dividends, an increase of $47 million from
2014. See “Dividends and Share Information” for more information.
Shelf prospectuses
We have two shelf prospectuses that qualify the offering of debt
securities from time to time. One shelf prospectus qualifies the
public offering of up to $4 billion of our debt securities in each of
the provinces of Canada (Canadian Shelf) and the other shelf
prospectus (together with a corresponding registration statement
filed with the US Securities and Exchange Commission) qualifies
the public offering of up to US$4 billion of our debt securities in
the United States and Ontario (US Shelf). Both the Canadian Shelf
and the US Shelf expire in March 2016. In March 2014, we issued
$1.25 billion of debt securities under the Canadian Shelf and
US$750 million ($832 million) of debt securities under the US Shelf.
In December 2015, we issued US$1,000 million ($1,338 million) of
debt securities under the US Shelf. See “Issuance of senior notes
and related debt derivatives” for more information.
Dissolution of RCP
On January 1, 2016, Fido Solutions Inc., a subsidiary of RCI,
transferred its partnership interest in RCP to Rogers Cable and Data
Centres Inc. (RCDCI), a subsidiary of RCI, leaving RCDCI as the sole
partner of RCP, thereby causing RCP to cease to exist. RCDCI
became the owner of all the assets and assumed all the liabilities
previously held by RCP. Subsequent to the reorganization, RCDCI
changed its name to Rogers Communications Canada Inc. (RCCI).
Effective January 1, 2016, as a result of the dissolution, RCP is no
longer a guarantor, or co-obligor, as applicable, for the Company’s
bank credit and letter of credit
facilities, senior notes and
debentures, and derivative instruments. RCI continues to be the
obligor in respect of each of these, while RCCI remains either a co-
obligor or guarantor for the senior notes and debentures and a
guarantor, as applicable, for the bank credit and letter of credit
facilities and derivative instruments.
FREE CASH FLOW
Years ended December 31
(In millions of dollars)
2015
2014 % Chg
Adjusted operating profit 1
Deduct (add):
Additions to property, plant and
equipment 2
Interest on borrowings, net of
capitalized interest
Cash income taxes 3
Free cash flow 1
5,032
5,019
2,440
2,366
732
184
756
460
1,676
1,437
–
3
(3)
(60)
17
1 Adjusted operating profit and free cash flow are non-GAAP measures and should not
be considered as a substitute or alternative for GAAP measures. They are not defined
terms under IFRS, and do not have standard meanings, so may not be a reliable way
to compare us to other companies. See “Non-GAAP Measures” for information about
these measures, including how we calculate them.
2 Additions to property, plant and equipment do not
include expenditures for
spectrum licences.
3 Cash income taxes are net of refunds received.
The 17% increase in free cash flow this year was mainly a result of:
• lower cash income tax payments resulting from the acquisition of
Mobilicity; partially offset by
• higher additions to property, plant and equipment.
FREE CASH FLOW
(IN MILLIONS OF DOLLARS)
2015
2014
2013
$1,676
$1,437
$1,548
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 59
MANAGEMENT’S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION
LIQUIDITY
We had approximately $3.3 billion of available liquidity as at
December 31, 2015 (2014 – $2.8 billion), which includes:
• $0.01 billion in cash and cash equivalents (2014 – $0.2 billion);
• $3.0 billion available under our bank credit facility (2014 –
$2.5 billion); and
• $0.25 billion available under our
accounts
receivable
securitization program (2014 – $0.06 billion).
In addition to the sources of available liquidity noted above, we
held approximately $966 million (2014 – $1,130 million) of
marketable equity securities in publicly traded companies.
COVENANTS
The provisions of our $3.5 billion revolving and non-revolving bank
credit facilities described above impose certain restrictions on our
operations and activities, the most significant of which are leverage-
related maintenance tests. As at December 31, 2015 and 2014, we
were in compliance with all financial covenants, financial ratios, and
all of
the terms and conditions of our debt agreements.
Throughout 2015, these covenants did not impose restrictions of
any material consequence on our operations.
CREDIT RATINGS
Credit ratings provide an independent measure of credit quality of
an issue of securities and can affect our ability to obtain short-term
and long-term financing and the terms of the financing. If rating
agencies lower the credit ratings on our debt, particularly a
downgrade below investment grade, it could adversely affect our
cost of financing and access to liquidity and capital.
We have engaged each of Standard & Poor’s Ratings Services
(Standard & Poor’s), Fitch Ratings (Fitch), and Moody’s Investors
Service (Moody’s) to rate our public debt issues.
In December
2015, Standard & Poor’s affirmed RCI’s senior unsecured debt at
BBB+ with a stable outlook, Fitch affirmed its BBB+ rating with a
negative outlook, and Moody’s affirmed its comparably equivalent
rating of Baa1 with a stable outlook.
The table below shows the credit ratings on our borrowings received from the rating agencies as at December 31, 2015:
Issuance
Standard & Poor’s
Fitch
Moody’s
Corporate credit issuer default rating
Senior unsecured debt
BBB+ with a stable outlook
BBB+ with a stable outlook
BBB+ with a negative outlook
BBB+ with a negative outlook
Baa1, stable outlook
Baa1, stable outlook
Ratings for debt instruments across the universe of composite rates
range from AAA (Standard & Poor’s and Fitch) or Aaa (Moody’s)
representing the highest quality of
to D
(Standard & Poor’s), Substantial Risk (Fitch), and C (Moody’s) for the
lowest quality of securities rated. Investment-grade credit ratings
are generally considered to range from BBB- (Standard & Poor’s
and Fitch) or Baa3 (Moody’s) to AAA (Standard & Poor’s and Fitch)
or Aaa (Moody’s).
securities
rated,
Credit ratings are not recommendations for investors to purchase,
hold, or sell the rated securities, nor are they a comment on market
price or investor suitability. There is no assurance that a rating will
remain in effect for a given period, or that a rating will not be
revised or withdrawn entirely by a rating agency if it believes
circumstances warrant it. The ratings on our senior debt provided
by Standard & Poor’s, Fitch, and Moody’s are investment-grade
ratings.
RATIO OF ADJUSTED OPERATING PROFIT / INTEREST ON BORROWINGS
2015
2014
2013
6.6x
6.4x
6.8x
PENSION OBLIGATIONS
Our retiree pension plans had a funding deficit of approximately
$281 million as at December 31, 2015 (2014 – $307 million).
During 2015, our funding deficit decreased by $26 million primarily
as a result of an increase in the discount rate we used to measure
these obligations.
60 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
We made a total of $118 million (2014 – $106 million) of
contributions to our pension plans. We expect our total estimated
funding requirements to be $119 million in 2016 and to be
adjusted annually thereafter, based on various market factors such
as interest rates, expected returns, and staffing assumptions.
Changes in factors such as the discount rate, participation rates,
increases in compensation, and the expected return on plan assets
can affect the accrued benefit obligation, pension expense, and
the deficiency of plan assets over accrued obligations in the future.
See “Critical Accounting Estimates and Judgments” for more
information. In order to manage the rising cost of our pension
plans, effective June 30, 2016, the Rogers Defined Benefit pension
plan will be closed to new enrolment. Beginning July 1, 2016,
employees that do not participate in defined benefit pension plans
will be eligible to enrol in a new defined contribution pension plan.
Purchase of annuities
From time to time, we have made additional
lump-sum
contributions to our pension plans, and the pension plans have
purchased annuities from insurance companies to fund the
pension benefit obligations for certain groups of retired employees
in the plans. Purchasing the annuities relieves us of our primary
responsibility for that portion of the accrued benefit obligations for
the retired employees and eliminates the significant risk associated
with the obligations.
We did not make any additional lump-sum contributions to our
pension plans in 2015 or 2014, and the pension plans did not
purchase additional annuities.
FINANCIAL RISK MANAGEMENT
We use derivative instruments from time to time to manage risks related to our business activities, summarized as follows:
Derivative
The risk they manage
Types of derivative instruments
Debt derivatives
Bond forwards
• Impact of fluctuations in foreign exchange rates
on principal and interest payments for US dollar-
denominated long-term debt
• Impact of fluctuations in market interest rates on
forecasted interest payments for expected long-
term debt
• Cross-currency interest rate exchange
agreements
• Forward foreign exchange agreements
(from time to time as necessary)
• Forward interest rate agreements
Expenditure derivatives
• Impact of fluctuations in foreign exchange rates on
forecasted US dollar-denominated expenditures
• Forward foreign exchange agreements
Equity derivatives
• Impact of fluctuations in share price on stock-
• Total return swap agreements
based compensation expense
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We also manage our exposure to fluctuating interest rates and we
have fixed the interest rate on 90.3% of our debt, including short-
term borrowings, as at December 31, 2015 (2014 – 92.7%).
FIXED AND FLOATING DEBT AS A PERCENTAGE OF TOTAL BORROWINGS
(%)
$15.9
BILLION
FIXED 90.3%
FLOATING 9.7%
All of our currently outstanding debt derivatives, bond forwards,
and expenditure derivatives have been designated as hedges for
accounting purposes.
DEBT DERIVATIVES
We use cross-currency interest rate exchange agreements (debt
derivatives) to hedge the foreign exchange risk on all of the interest
and principal payment obligations of our US dollar-denominated
senior notes and debentures.
New debt derivatives to hedge new senior notes issued
US
Hedging effect
(In millions of dollars,
except interest rates)
Effective date
December 8, 2015
December 8, 2015
Principal/
Notional
amount
(US$)
Maturity
date
Coupon
rate
Fixed
hedged
Cdn$
interest
rate 1
700
300
2025 3.625% 3.566%
2044 5.000% 5.145%
March 10, 2014
750
2044 5.000% 4.990%
Equivalent
(Cdn$)
937
401
832
1 Converting from a fixed US$ coupon rate to a weighted average Cdn$ fixed rate.
Matured debt derivatives
(In millions of dollars)
Maturity date
March 15, 2015
March 15, 2015
Total
March 1, 2014
March 15, 2014
Total
Notional amount
(US$)
Net cash
(proceeds) settlement
(Cdn$)
550
280
830
750
350
1,100
(106)
(48)
(154)
(61)
26
(35)
As at December 31, 2015, we had US$6.2 billion of US dollar-
denominated senior notes and debentures, all of which were
hedged using debt derivatives.
(In millions of dollars, except exchange rates,
percentages, and years)
US dollar-denominated long-term debt 1
Hedged with debt derivatives
Hedged exchange rate
Percent hedged 2
Amount of borrowings at fixed rates 3
As at December 31
2015
2014
US$ 6,200 US$ 6,030
US$ 6,200 US$ 6,030
1.0470
100.0%
1.0882
100.0%
Total borrowings
Total borrowings at fixed rates
Percent of borrowings at fixed rates
Weighted average interest rate on borrowings
Weighted average term to maturity
$
$
15,947 $
14,397 $
90.3%
4.82%
10.8 years
15,055
13,963
92.7%
5.20%
10.8 years
1 US dollar-denominated long-term debt reflects the hedged exchange rate and the
hedged interest rate.
2 Pursuant
to the requirements for hedge accounting under
IAS 39, Financial
Instruments: Recognition and Measurement, on December 31, 2015, and
December 31, 2014, RCI accounted for 100% of its debt derivatives as hedges
against designated US dollar-denominated debt. As a result, on December 31, 2015
and 2014, 100% of our US dollar-denominated debt is hedged for accounting and
economic purposes.
3 Borrowings include long-term debt, including the impact of debt derivatives, and
short-term borrowings associated with our accounts receivable securitization
program.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 61
MANAGEMENT’S DISCUSSION AND ANALYSIS
BOND FORWARDS
From time to time, we use extendible bond forward derivatives
(bond forwards) to hedge interest rate risk on the debt instruments
we expect to issue in the future. As at December 31, 2015,
approximately $5.5 billion of our outstanding public debt matures
over the next five years (2014 – $5.2 billion) and we anticipate that
we will issue public debt over that time to fund at least a portion of
those maturities together with other general corporate funding
requirements. We use bond forwards for
risk management
purposes only. The bond forwards noted below have been
designated as hedges for accounting purposes.
During 2014, we entered into bond forwards to hedge the
underlying Government of Canada (GoC) interest rate risk that will
comprise a portion of the interest rate risk associated with our
anticipated future debt issuances. As a result of these bond
forwards, we hedged the underlying GoC 10-year
rate on
$1.5 billion notional amount for anticipated future debt issuances
from 2015 to 2018 and the underlying GoC 30-year rate on
$0.4 billion notional amount for December 31, 2018. The bond
forwards are effective from December 2014.
On December 8, 2015, we exercised the $500 million notional
bond forward due December 31, 2015 in relation to the issuance
of the US$700 million senior notes due 2025 and paid $25 million
to settle the derivative. The amount paid represents the fair value of
the bond forward at the time of settlement and will be amortized to
finance costs over the life of the $700 million senior notes due
2025. For our remaining bond forwards, we reset the rates and
extended the next re-pricing dates.
As at December 31, 2015 we had $1.4 billion notional amount of bond forwards outstanding (2014 – $1.9 billion), all of which were
designated as hedges for accounting purposes.
(In millions of dollars, except interest rates)
GoC term (years)
Effective date
Maturity date 1
Notional
amount
Hedged GoC
interest rate as at
December 31, 2015
Hedged GoC
interest rate as at
December 31, 2014 1
2015
2014
10
10
10
30
Total
December 2014
December 2014
December 2014
December 2014
December 31, 2015
January 4, 2017
April 30, 2018
December 31, 2018
500
500
500
400
1,900
–
2.34%
2.23%
2.52%
2.05%
2.04%
2.07%
2.41%
–
500
500
400
500
500
500
400
1,400
1,900
1 Bond forwards with maturity dates beyond December 31, 2015 are subject to GoC rate re-setting from time to time. The $500 million due April 2018 was extended in October
2015 to reset in April 2016. The $500 million due January 2017 was extended in December 2015 to reset in January 2017. The $400 million due December 2018 was extended in
December 2015 to reset in January 2017.
EXPENDITURE DERIVATIVES
We use foreign currency forward contracts (expenditure derivatives)
to hedge the foreign exchange risk on the notional amount of certain
forecasted US dollar-denominated expenditures. The table below
shows the expenditure derivatives into which we entered to manage
foreign exchange risk related to certain forecasted expenditures.
(In millions of dollars, except exchange rates)
Notional trade date Maturity dates
Notional
amount
(US$)
Exchange
Rate
Converted
amount
(Cdn$)
The expenditure derivatives noted above have been designated as
hedges for accounting purposes. In the year ended December 31,
2015, we settled US$810 million (2014 – US$900 million) of
expenditure derivatives for $902 million (2014 – $923 million).
As at December 31, 2015, we had US$1,140 million of expenditure
derivatives outstanding (2014 – US$960 million) with terms to
maturity
ranging from January 2016 to December 2017
(2014 – January 2015 to December 2015) at an average rate of
$1.24/US$ (2014 – $1.09/US$).
April 2015
June 2015
September 2015
October 2015
Total during 2015
February 2014
May 2014
June 2014
July 2014
Total during 2014
July 2015 to
December 2016
January 2016 to
December 2016
January 2016 to
December 2016
January 2017 to
December 2017
January 2015 to
April 2015
May 2015 to
December 2015
January 2015 to
December 2015
January 2016 to
December 2016
270
1.2222
60
1.2167
360
1.3194
300
990
1.2933
1.2788
200
1.1100
232
1.0948
288
1.0903
240
960
1.0833
1.0940
330
73
475
388
1,266
222
254
314
260
1,050
EQUITY DERIVATIVES
We use stock-based compensation derivatives (equity derivatives)
to hedge the market price appreciation risk of the RCI Class B
shares granted under our stock-based compensation programs. As
at December 31, 2015, we had equity derivatives for 5.7 million RCI
Class B shares with a weighted average price of $50.37. These
derivatives have not been designated as hedges for accounting
purposes. We record changes in their fair value as a stock-based
compensation expense, or offset thereto, which serves to offset a
substantial portion of the impact of changes in the market price of
RCI Class B shares on the accrued value of the stock-based
stock-based compensation
compensation liability
programs. In April 2015, we executed extension agreements for
each of our equity derivative contracts under substantially the same
terms and conditions with revised expiry dates to April 2016 (from
April 2015).
for our
62 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
MARK-TO-MARKET VALUE
We record our derivatives using an estimated credit-adjusted,
mark-to-market valuation, calculated in accordance with IFRS.
As at December 31, 2015
Notional
amount
(US$)
Exchange
rate
Notional
amount
(Cdn$)
Fair
value
(Cdn$)
(In millions of dollars, except
exchange rates)
Debt derivatives accounted for
as cash flow hedges:
As assets
As liabilities
5,900
300
1.0755
1.3367
6,345
401
2,032
(4)
ADJUSTED NET DEBT AND ADJUSTED NET DEBT /
ADJUSTED OPERATING PROFIT
We use adjusted net debt and adjusted net debt / adjusted
operating profit to conduct valuation-related analysis and make
capital structure-related decisions. Adjusted net debt includes
long-term debt, net debt derivatives assets or liabilities, short-term
borrowings, and cash and cash equivalents.
(In millions of dollars, except ratios)
2015
2014
As at December 31
2,028
Long-term debt 1
Net debt derivative assets valued without
any adjustment for credit risk 2
Short-term borrowings
Cash and cash equivalents
16,981
14,895
(2,180)
800
(11)
(885)
842
(176)
15,590
14,676
–
–
1,400
(91)
Adjusted net debt 3
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Net mark-to-market asset
debt derivatives
Bond forwards accounted for
as cash flow hedges:
As liabilities
Expenditure derivatives
accounted for as cash flow
hedges:
As assets
Equity derivatives not
accounted for as hedges:
As liabilities
Net mark-to-market asset
(In millions of dollars, except
exchange rates)
Debt derivatives accounted for
as cash flow hedges:
1,140
1.2410
1,415
158
–
–
286
(15)
2,080
As at December 31, 2014
Notional
amount
(US$)
Exchange
rate
Notional
amount
(Cdn$)
Fair
value
(Cdn$)
As assets
As liabilities
5,725
305
1.0396
1.1857
5,952
362
853
(7)
Net mark-to-market asset
debt derivatives
Bond forwards accounted for as
cash flow hedges:
As assets
As liabilities
Net mark-to-market liability
bond forwards
Expenditure derivatives
accounted for as cash flow
hedges:
846
–
–
–
–
250
1,650
1
(14)
1,900
(13)
As assets
960
1.0940
1,050
70
Equity derivatives not
accounted for as hedges:
As liabilities
Net mark-to-market asset
–
–
286
(30)
873
Adjusted net debt / adjusted operating
profit 3, 4
3.1
2.9
1 Includes current and long-term portion of long-term debt before the reduction in
carrying value arising from purchase accounting and deferred transaction costs and
discounts. See “Reconciliation of adjusted net debt” in the section “Non-GAAP
Measures” for the calculation of this amount.
2 Effective September 30, 2015, we retrospectively amended our calculation of
adjusted net debt to value the net debt derivatives without adjustment for credit risk.
For accounting purposes in accordance with IFRS, we recognize the fair values of our
debt derivatives using an estimated credit-adjusted mark-to-market valuation by
discounting cash flows to the measurement date. For purposes of calculating
adjusted net debt and adjusted net debt / adjusted operating profit, we believe
including debt derivatives valued without adjustment for credit risk is commonly used
to evaluate debt leverage and for market valuation and transactional purposes. As at
December 31, 2015, the net debt derivative assets presented in the table above
consist of the credit-adjusted net debt derivative assets of $2,028 million (2014 –
$846 million) and the credit risk adjustment of $152 million (2014 – $39 million).
3 Adjusted net debt and adjusted net debt / adjusted operating profit are non-GAAP
measures and should not be considered as a substitute or alternative for GAAP
measures. These are not defined terms under IFRS and do not have standard
meanings, so may not be a reliable way to compare us to other companies. See
“Non-GAAP Measures” for information about these measures, including how we
calculate them.
4 Adjusted net debt / adjusted operating profit is measured using adjusted operating
profit for the last 12 consecutive months.
In addition to the cash and cash equivalents as at December 31,
2015 noted above, we held $966 million of marketable equity
securities in publicly traded companies as at December 31, 2015
(2014 – $1,130 million).
Our adjusted net debt increased by $914 million this year and our
adjusted net debt / adjusted operating profit increased to 3.1. This
increase is primarily attributable to our acquisitions and investments
made in 2015. Our long-term target for adjusted net debt /
adjusted operating profit remains a range of 2.0 to 2.5.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 63
MANAGEMENT’S DISCUSSION AND ANALYSIS
DIVIDENDS AND SHARE INFORMATION
DIVIDENDS
In January 2015, the Board authorized an increase to the annualized dividend rate from $1.83 to $1.92 per Class A Voting and Class B
Non-Voting share. In January 2016, the Board declared a quarterly dividend of $0.48 per Class A Voting share and Class B Non-Voting
share, to be paid on April 1, 2016, to shareholders of record on March 13, 2016.
The table below shows when dividends have been declared and paid on both classes of our shares:
Declaration date
Record date
January 28, 2015
April 21, 2015
August 13, 2015
October 22, 2015
February 12, 2014
April 22, 2014
August 14, 2014
October 23, 2014
March 13, 2015
June 12, 2015
September 11, 2015
December 11, 2015
March 14, 2014
June 13, 2014
September 12, 2014
December 11, 2014
Payment date
April 1, 2015
July 2, 2015
October 1, 2015
January 4, 2016
April 4, 2014
July 2, 2014
October 1, 2014
January 2, 2015
Dividend per
share (dollars)
Dividends paid
(in millions of dollars)
0.48
0.48
0.48
0.48
0.4575
0.4575
0.4575
0.4575
248
247
247
247
235
235
235
235
We currently expect that the record and payment dates for the
2016 declaration of dividends will be as follows, subject to the
declaration by our Board each quarter at its sole discretion:
Record date
March 13, 2016
June 12, 2016
September 11, 2016
December 11, 2016
Payment date
April 1, 2016
July 4, 2016
October 3, 2016
January 3, 2017
We use the weighted average number of shares outstanding to
calculate earnings per share and adjusted earnings per share.
Years ended December 31
(Number of shares in millions)
2015
2014
Basic weighted average number of
shares outstanding
Diluted weighted average number of
shares outstanding
515
517
515
517
OUTSTANDING COMMON SHARES
ANNUALIZED DIVIDENDS PER SHARE AT YEAR END
($)
$1.92
$1.83
$1.74
2015
2014
2013
As at December 31
2015
2014
Common shares outstanding 1
Class A Voting
Class B Non-Voting
112,438,692 112,448,000
402,307,976 402,297,667
Total common shares
514,746,668 514,745,667
Options to purchase Class B Non-
Voting shares
Outstanding options
Outstanding options
exercisable
4,873,940
5,759,786
2,457,005
3,363,046
1 Holders of our Class B Non-Voting shares are entitled to receive notice of and to
attend shareholder meetings; however, they are not entitled to vote at these
meetings except as required by law or stipulated by stock exchanges. If an offer is
made to purchase outstanding Class A Voting shares, there is no requirement under
applicable law or our 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 our constating documents. If an offer is made to purchase both
classes of 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.
64 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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COMMITMENTS AND OTHER CONTRACTUAL OBLIGATIONS
CONTRACTUAL OBLIGATIONS
The table below shows a summary of our obligations under firm contractual arrangements as at December 31, 2015. See notes 3, 22, and
29 to our 2015 audited consolidated financial statements for more information.
(In millions of dollars)
Short-term borrowings
Long-term debt 1
Net interest payments
Debt derivative instruments 2
Expenditure derivative instruments 2
Bond forwards 2
Operating leases
Player contracts 3
Purchase obligations 4
Property, plant and equipment
Intangible assets
Program rights 5
Other long-term liabilities
Total
Less than
1 Year
1-3 Years
4-5 Years
800
1,000
714
–
(138)
–
153
137
457
85
45
620
–
3,873
–
3,188
1,313
(503)
(25)
91
229
166
286
110
75
1,135
19
6,084
–
1,800
1,042
–
–
–
114
80
136
51
24
1,096
5
4,348
After
5 Years
–
10,993
6,025
(1,332)
–
–
64
–
94
36
12
2,948
4
18,844
Total
800
16,981
9,094
(1,835)
(163)
91
560
383
973
282
156
5,799
28
33,149
1 Principal obligations of long-term debt (including current portion) due at maturity.
2 Net (receipts) disbursements due at maturity. US dollar amounts have been translated into Canadian dollars at the Bank of Canada year-end rate.
3 Player contracts are Toronto Blue Jays players’ salary contracts into which we have entered and are contractually obligated to pay.
4 Purchase obligations are the contractual obligations under service, product, and handset contracts we have committed to for at least the next five years.
5 Program rights are the agreements into which we have entered to acquire broadcasting rights for sports broadcasting programs and films for periods in excess of one year at
contract inception.
OFF-BALANCE SHEET ARRANGEMENTS
GUARANTEES
As a regular part of our business, we enter into agreements that
provide for indemnification and guarantees to counterparties in
transactions involving business sale and business combination
agreements, sales of services, and purchases and development of
assets. Due to the nature of these indemnifications, we are unable
to make a reasonable estimate of the maximum potential amount
we could be required to pay counterparties. Historically, we have
not made any significant payment under these indemnifications or
guarantees. See note 28 to our 2015 audited consolidated
financial statements.
OPERATING LEASES
We have entered into operating leases for the rental of premises,
distribution facilities, equipment and wireless towers, and other
contracts. Terminating any of these lease agreements would not
have a material adverse effect on us as a whole. See “Commitments
and Other Contractual Obligations” and note 29 to our 2015
audited consolidated financial statements for quantification.
Governance and Risk Management
GOVERNANCE AT ROGERS
Rogers is a family-founded, family-controlled company and we take
pride in our proactive and disciplined approach to ensuring that
our governance structure and practices instil the confidence of our
shareholders.
With the passing in December 2008 of our founder and previous
President and CEO, Ted Rogers, his voting control of Rogers
Communications passed to a trust, the beneficiaries of which are
members of the Rogers family. The trust holds voting control of
Rogers Communications for the benefit of successive generations
of the Rogers family via the trust’s ownership of 90.9% of the
outstanding Class A Voting shares of the Company. The Rogers
family are substantial stakeholders and owned approximately 28%
of our equity as of December 31, 2015 (2014 – 28%) through its
ownership of a combined total of 142 million Class A Voting and
Class B Non-Voting shares (2014 – 142 million).
Our Board is made up of four members of the Rogers family and
another 11 directors who bring a rich mix of experience as business
leaders in North America. All of our directors are firmly committed
to firm governance, strong oversight, and the ongoing creation of
shareholder value. The Board as a whole is committed to sound
corporate governance and continually reviews its governance
practices and benchmarks them against acknowledged leaders
and evolving legislation. The Board believes
that Rogers’
governance system is effective and that there are appropriate
structures and procedures in place.
GOVERNANCE BEST PRACTICES
The majority of our directors are independent and we have
adopted many best practices for effective governance, including:
• separation of CEO and chairman roles;
• independent lead director;
• formal corporate governance policy and charters;
• code of business conduct and whistleblower hotline;
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 65
MANAGEMENT’S DISCUSSION AND ANALYSIS
• director share ownership guidelines;
• Board and committee in camera discussions;
• annual reviews of Board and director performance;
• Audit and Risk Committee meetings with internal and external
auditors;
• orientation programs for new directors;
• regular Board education sessions;
• committee authority to retain independent advisors; and
• director material relationship standards.
We comply with all relevant corporate governance guidelines and
standards as a Canadian public company listed on the TSX and as a
foreign private issuer listed on the NYSE in the US.
BOARD OVERSIGHT
The Board delegates certain responsibilities to its seven standing
committees to ensure proper oversight and accountability:
• Audit and Risk Committee - reviews our accounting policies and
practices, the integrity of our financial reporting processes and
procedures, and the financial statements and other relevant
disclosure for release to shareholders and the public. It assists
the Board in its oversight of our compliance with legal and
regulatory requirements for financial reporting, assesses our
accounting and financial control systems, and evaluates the
qualifications,
independence, and work of our internal and
external auditors. It also reviews risk management policies and
associated processes to identify major risk exposures.
• Corporate Governance Committee - assists the Board to ensure
it has appropriate systems and procedures for carrying out its
responsibilities. This committee develops governance policies
and practices, recommends them to the Board for approval, and
leads the Board in its periodic review of Board and committee
performance.
• Nominating Committee – identifies prospective candidates to
serve on our Board. Nominated directors are either elected by
shareholders at a meeting or appointed by the Board. The
committee also recommends nominees
for each Board
committee, including each committee chair.
• Human Resources Committee – assists the Board in monitoring,
reviewing, and approving compensation and benefit policies
and practices.
It is also responsible for recommending the
compensation of senior management and monitoring senior
executive succession planning.
• Executive Committee – assists the Board in discharging its
responsibilities between meetings, including acting in such areas
as are specifically designated and authorized at a preceding
Board meeting to consider matters that may arise from time to
time.
• Finance Committee – reviews our investment strategies, general
debt, and equity structure and reports on them to the Board.
• Pension Committee – oversees the administration of our retiree
pension plans and reviews the investment performance and
provisions of the plans.
You can find more details about governance at Rogers in the
Investor Relations section of our website (rogers.com/governance),
including:
• a complete statement of our corporate governance practices;
• our codes of conduct and ethics;
• full Board committee charters;
• director biographies; and
• a summary of the differences between the NYSE corporate
governance rules that apply to US-based companies and our
governance practices as a non-US-based issuer listed on the
NYSE.
Board of Directors and its Committees
Audit
and Risk
Corporate
Governance
Nominating
Human
Resources
Executive
Finance
Pension
As of February 11, 2016
Chair
Member
Alan D. Horn, CPA, CA
Charles Sirois
C. William D. Birchall
Bonnie R. Brooks
Stephen A. Burch
John H. Clappison, FCPA, FCA
Guy Laurence
Philip B. Lind, CM
John A. MacDonald
Isabelle Marcoux
The Hon. David R. Peterson, PC, QC
Edward S. Rogers
Loretta A. Rogers
Martha L. Rogers
Melinda M. Rogers
66 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
SOCIAL RESPONSIBILITY
CORPORATE SOCIAL RESPONSIBILITY
At Rogers, being socially responsible and sustainable is important
to our business and competitive advantage and is an important
It helps us build customer loyalty,
part of good governance.
enhances employee recruitment and retention, and provides value
to all of our stakeholders. Our material issues, grouped into six
Corporate Social Responsibility focus areas, are listed below along
with our approaches in addressing them:
Good governance
• Governance and Ethics: We strive to uphold the highest
standards of integrity, ethical behaviour, and good corporate
citizenship, underpinned by guidelines and policies that govern
the actions of our directors and employees and promote
responsible conduct.
Customer experience
• Customer Service and Transparency: Customer service is a core
pillar of our Rogers 3.0 strategy. We are committed to an
improved customer experience and have started the journey to
do so.
• Network Leadership and Innovation: Innovation has always been
a part of our identity. Whether it is bringing new products or the
latest network technologies to market, Rogers has led with many
“firsts”. Focusing on innovation and network
leadership
continues to be a key priority under our Rogers 3.0 business
plan.
• Product Responsibility: We look at the lifecycle of our products
and services, including sourcing, transport, product take-back,
and recycling, with device trade-in programs such as Rogers
Trade-Up and FidoTrade, and go beyond legal compliance as
we work to meet customer and community expectations for
product quality, safety, and environmental impacts. We offer an
extensive range of accessibility-specific offerings, with a bilingual
Accessibility Service Centre, which also offers service in multiple
languages for our customers.
• Customer Privacy: Rogers highly values the security, integrity, and
sensitivity of our customers’ private information. We fully comply
with all relevant privacy legislation and aim to uphold strong
privacy and security practices to safeguard the personal details of
our customers.
Employee experience
• Talent Management: Our people are the heartbeat of our
trained,
business. We believe that
engaged in their jobs, and passionate about working for Rogers,
they will do a better job serving our customers. In 2015, we
increased our commitment to our employees by increasing our
investment in training and launching a new development plan
and internal hiring process.
if our people are well
• Diversity and Inclusion: At Rogers, we believe that an inclusive
workplace reflective of the diverse communities we serve drives
better performance – for our employees, our customers, and our
company. In January 2015, the Inclusion and Diversity Council
was
is
re-launched under new leadership. The Council
comprised of leaders from across the business and oversees the
development of our inclusion and diversity strategy.
• Health, Safety, and Wellness: We have a comprehensive,
integrated healthy workplace program. Our goal is always to
protect people by preventing injuries and we invest millions of
dollars as well as thousands of hours in safety training every year.
We have robust programs and practices in place to identify and
those
minimize potential hazards. We continually monitor
practices, our sites, and our work to ensure employees remain
safe. Our employees,
through to
management, are committed to continuously improving these
processes and our practice of safety toward our vision of zero
injuries.
from the front
lines
Environmental responsibility
• Energy Use and Climate Change: Rogers operates thousands of
facilities, which include owned and leased buildings, cell
transmission sites, power supply stations, and retail stores, as well
as an extensive vehicle fleet. We are committed to reducing the
associated greenhouse gas emissions and energy consumption
reflected in our corporate targets to reduce our greenhouse gas
emissions by 25% and energy consumption by 10% from 2011
levels by 2025.
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• Paper Reduction: We are committed to reducing the
environmental impact of our paper use. Our Publishing Paper
Procurement Practices promise guides our purchasing decisions
for paper used for publishing. We also work with suppliers to
ensure responsible paper sourcing, production, and recycling,
and encourage our employees
to reduce their paper
consumption. We also promote the benefits of e-billing to our
customers, which help to reduce both paper and energy usage.
In addition, our transition to digital publishing formats, such as
Texture by Next
reduce our paper
consumption.
Issue, will
further
• Waste and Recycling: Reducing the amount of waste we
produce is another important way in which we are managing our
environmental footprint. To reduce and responsibly manage
waste we produce, we look for opportunities to avoid waste
generation, run programs to recycle and reuse materials, and
work to increase employees’ recycling behaviours through our
award-winning “Get Up and Get Green” program.
Community investment
• Community Giving: We stand by the principles of good
corporate citizenship, committing at least 1% of our net earnings
before taxes each year to charities and non-profit organizations.
In 2015, Rogers provided over $65 million in cash and in-kind
donations to support various organizations and causes. Through
Rogers Youth Fund, we support education programs for at-risk
youth offered by Boys & Girls Clubs and local non-profit
organizations across Canada. We also support our employees
and their community activities through the Rogers Employee
Volunteer Program, which gives employees the opportunity to
volunteer in their communities for one paid day per year. The
Jays Care Foundation also works to ensure children in need
make positive life choices through programs that support
physical activity, education, and life-skill development.
• Digital Inclusion: Digital inclusion is a priority for Rogers and one
of the best ways we can contribute to society. Our Connected for
Success program offers subsidized broadband Internet
for
families with low incomes currently living in Toronto Community
Housing.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 67
MANAGEMENT’S DISCUSSION AND ANALYSIS
Economy and society
• Economic Performance: We strive to offer innovative solutions for
customers, create diverse and well-paying jobs, support small
businesses, pay our fair share of
taxes, and deliver robust
dividends to shareholders. Beyond these direct economic
impacts, our performance produces indirect economic benefits
as well,
including significant charitable donations and locally
procured goods and services.
tax laws and reporting requirements,
are compliant with all
including filing and making all requisite income and sales tax
returns and payments on a timely basis. As a part of this process,
we maintain open and cooperative relationships with revenue
authorities to minimize audit effort and reduce tax uncertainty while
engaging with government policy makers on taxation matters that
affect Rogers and its shareholders, employees, customers, and
other stakeholders.
• Supply Chain Management: Suppliers play a huge role in our
success, which is why we ensure that we have strong supplier
selection processes, and management, and that we conduct
business with
responsible
companies who share our values. Our Supplier Code of Conduct
sets out high standards for supplier performance in the areas of
rights, health and safety, environment, and
labour
ethics,
management systems.
and environmentally
socially
• Public Policy: We participate actively in public policy discussions
that are relevant to our operations and are fully transparent
about our positions and activities. We are heavily involved with
level through our
governments and regulators at the federal
Regulatory and Government Relations offices and teams in both
Toronto and Ottawa. The majority of our interactions take place
with two groups that regulate our activities: the CRTC and ISED
Canada.
See our annual Corporate Social Responsibility report on our
website (rogers.com/csr) for more about our social, environmental,
and community contributions and performance.
INCOME TAX AND OTHER GOVERNMENT PAYMENTS
We proactively manage our tax affairs to enhance Rogers’ business
decisions and optimize after-tax free cash flow available for
investment in our business and shareholder returns. We have
established comprehensive policies and procedures to ensure we
Income tax payments
Rogers total income tax expense of $466 million in 2015 is close to
the expense computed on its accounting income at the statutory
rate of 26.5%. Cash income tax payments totaled $184 million in
2015. Cash income tax payments can differ from the tax expense
shown on the financial statements for various reasons, including
timing of payments. Our cash income tax this year is lower than our
tax expense principally as a result of
loss
carryforwards from the acquisition of Mobilicity and the significant
capital investment Rogers continues to make in our wireless and
broadband telecommunications network throughout Canada.
Similar to tax systems throughout the world, Canadian tax laws
generally permit these additions to property, plant and equipment
to be deducted for tax more quickly than they are depreciated for
financial statement recognition purposes.
the utilization of
Other government payments
In addition to paying income tax on the profits we earn, we
contribute significantly to Canadians by paying taxes and fees to
federal, provincial, and municipal governments as follows:
• various taxes on the salaries and wages we pay (payroll taxes) to
approximately 26,000 employees;
• property and business taxes;
• unrecoverable sales taxes and custom duties; and
• broadcast, spectrum, and other regulatory fees.
As outlined in the table below, the total cost to Rogers of these payments in 2015 was approximately $881 million.
(In millions of dollars)
Income
taxes
Non-recoverable
sales taxes
Payroll taxes
Regulatory and
spectrum fees 1
Property and
business taxes
Total taxes and
other payments
Total payments
184
9
133
509
46
881
1 Includes an allocation of $266 million relating to the $1.0 billion, $3.3 billion, and $24 million we paid for the acquisition of spectrum licences in 2008, 2014, and 2015,
respectively.
We also collected on behalf of the government approximately
$1,735 million in sales taxes on our products and services and
$561 million in employee payroll taxes.
our business and implementing appropriate risk assessment
processes to manage these risks. It delegates certain risk oversight
and management duties to the Audit and Risk Committee.
RISK MANAGEMENT
risk
We are committed to continually
management capabilities to protect and enhance shareholder
value. The purpose of risk management is not to eliminate risk but
to optimize trade-offs between risk and return to maximize value to
the organization.
strengthening our
RISK GOVERNANCE
The Board has overall
risk governance and
responsibility for
oversees management in identifying the principal risks we face in
The Audit and Risk Committee discusses risk policies with
management and the Board and assists the Board in overseeing
our compliance with legal and regulatory requirements.
The Audit and Risk Committee also reviews:
• the adequacy of the internal controls that have been adopted to
safeguard assets from loss and unauthorized use, to prevent,
deter, and detect fraud, and to ensure the accuracy of the
financial records;
• the processes for identifying, assessing, and managing risks;
• our exposure to major risks and trends and management’s
implementation of risk policies and actions to monitor and
control these exposures;
68 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
• our business continuity and disaster recovery plans;
• any special audit steps adopted due to material weaknesses or
significant deficiencies that may be identified; and
• other risk management matters from time to time as determined
by the Audit and Risk Committee or directed by the Board.
ENTERPRISE RISK MANAGEMENT
Our Enterprise Risk Management program uses the “3 Lines of
Defence” framework to identify, assess, manage, monitor, and
communicate risks. Our business units and departments, led by the
Executive Leadership Team, are the first line of defence and are
accountable for managing or accepting the risks. Together, they
identify and assess key risks, define controls and action plans to
minimize these risks, and enhance our ability to meet our business
objectives.
Enterprise Risk Management
is the second line of defence.
Enterprise Risk Management helps management identify the top
risks to meeting our business objectives, our risk appetite, and
level,
emerging risks. At
Enterprise Risk Management works with management to provide
governance and advice in managing the key risks and associated
controls to mitigate these risks. Enterprise Risk Management works
with Internal Audit to monitor the adequacy and effectiveness of
the controls to reduce risks to an acceptable level.
the business unit and department
Enterprise Risk Management carries out an annual strategic risk
assessment to identify our principal risks to achieving our corporate
objectives by identifying business unit- and department-level risks
and aligning the business unit and department objectives to the
corporate objectives. Using an aggregate approach, Enterprise Risk
Management identifies the top risks and their potential impact on
our ability to achieve our corporate objectives. This assessment
reports, and industry
includes reviewing risk reports, audit
benchmarks and interviewing senior management with business
unit and department accountability. Enterprise Risk Management
reports the results of the annual strategic risk assessment to the
Executive Leadership Team, the Audit and Risk Committee, and the
Board.
Internal Audit is the third line of defence. Internal Audit evaluates
the design and operational effectiveness of
the governance
program, internal controls, and risk management. Risks, controls,
identified through this process are
and mitigation plans
incorporated into the annual Internal Audit plan. Annually, Internal
Audit also facilitates and monitors management’s completion of
the financial statement fraud risk assessment to identify areas of
potential fraud or misstatement in our financial statements and
disclosures and to ensure these controls are designed and
operating effectively.
The Executive Leadership Team and the Audit and Risk Committee
are responsible for approving our enterprise risk policies. Our
Enterprise Risk Management methodology and policies rely on the
expertise of our management and employees to identify risks and
opportunities and implement risk mitigation strategies as required.
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RISKS AND UNCERTAINTIES AFFECTING OUR
BUSINESS
This section describes the principal risks and uncertainties that
could have a material adverse effect on our business and financial
results. Any discussion about risks should be read in conjunction
with “About Forward-Looking Information”.
GENERAL RISKS
ECONOMIC CONDITIONS
Our businesses are affected by general economic conditions and
consumer confidence and spending. Recessions, declines in
economic activity and economic uncertainty can erode consumer
and business confidence and reduce discretionary spending. Any
these factors can negatively affect us through reduced
of
advertising,
lower demand for our products and services,
decreased revenue and profitability, and higher churn and bad
debt expense. A significant portion of our broadcasting,
publishing, and digital revenue comes from the sale of advertising.
Poor economic conditions can also have an impact on our pension
plans because there is no assurance that the plans will be able to
earn the assumed rate of return. Capital market volatility may result
in changes in the discount rates and other variables used to
calculate our pension obligations,
to make
contributions in the future that differ significantly from current
contributions and assumptions being used in the actuarial valuation
process.
requiring us
SUBSTANTIAL COMPETITION
There is no assurance that our current or future competitors will not
provide services that are superior to ours or at lower prices, adapt
more quickly to evolving industry trends or changing market
requirements, enter markets we operate in, or
introduce
competing services. Any of these factors could reduce our business
market share or revenue, or increase churn.
We may have some ongoing re-pricing of products and services
with our existing subscribers as we may need to extend lower
wireless pricing offers to attract and retain customers. As wireless
penetration of the population deepens, new wireless customers
may generate lower average monthly revenue and this could slow
revenue growth.
Wireless could face increased competition due to recent changes
to foreign ownership and control of wireless licences:
• foreign telecommunication companies
the
Canadian market by acquiring wireless licences or a holder of
wireless licences. If companies with significantly greater capital
resources enter the Canadian market,
it could reduce our
wireless market share. See “Foreign Ownership and Control” for
more information.
could enter
• ISED Canada’s policy regarding the transfer of spectrum
licences, combined with 2012 legislation that allows foreign
ownership of wireless providers with less than 10% market share,
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 69
MANAGEMENT’S DISCUSSION AND ANALYSIS
could make it harder for incumbent wireless carriers to acquire
additional spectrum. This includes the completion of our
previously announced arrangement with Videotron. The
legislation regarding foreign ownership of wireless providers
could make it less expensive for foreign wireless carriers to enter
the Canadian wireless market. This could increase the intensity of
competition in the Canadian wireless sector.
In addition, the CRTC Broadcasting Distribution Regulations do not
allow cable operators to obtain exclusive contracts in buildings where
it is technically feasible to install two or more transmission systems.
TECHNOLOGY RISKS
INFORMATION SECURITY RISK
Our industry is vulnerable to cyber risks that are growing in both
frequency and complexity. Rogers, along with our suppliers,
employs systems and network infrastructure that are subject to
cyberattacks, which may include theft of assets, unauthorized
access to sensitive information, or operational disruption. A
significant cyberattack against our – or our suppliers’ – critical
network infrastructure and supporting information systems could
result in service disruptions, litigation, loss of customers, significant
remediation costs, and reputational damage.
including personal
Management has placed value on a security program designed to
reinforce the importance of remaining a secure, vigilant, and
resilient organization. Our ongoing success depends on protecting
our sensitive data,
information about our
customers and employees. We rely on security awareness training,
policies, procedures, and information technology systems to
protect this information. Rogers continues to monitor this risk,
leveraging external
internal monitoring,
reviewing best practices, and implementing controls as required to
mitigate cybersecurity risks.
intelligence,
threat
External threats to the network are constantly changing and there is
no assurance we will be able to protect the network from all future
threats. The impact of such attacks may affect service revenue.
IMPACT OF NETWORK FAILURES ON REVENUE AND
CUSTOMER SERVICE
If our networks or key network components fail, it could, in some
circumstances, result in a loss of service for our customers for
certain periods and have an adverse effect on our results and
financial position. We rely on business partners to carry some traffic
for certain customers. If one of these carriers has a service failure, it
might also cause a service interruption for those customers that
would last until we could reroute the traffic to another carrier.
We work to protect our service from the impact of natural disasters
and major weather events such as ice storms,
flooding, or
landslides where it is necessary and feasible to do so. There are no
assurances that a future event will not cause service outages. Such
outages may affect service revenue.
DEPENDENCE ON INFORMATION TECHNOLOGY SYSTEMS
Our businesses depend on information technology systems for
day-to-day operations. If we are unable to operate our systems,
make enhancements to accommodate customer growth and new
products and services, or if our systems go down, it could have an
70 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
adverse effect on our ability to acquire new subscribers, service
customers, manage subscriber churn, produce accurate and timely
subscriber
invoices, generate revenue growth, and manage
operating expenses. This could have an adverse impact on our
results and financial position.
and
technology
information
Most of our employees and critical elements of our network
infrastructure
are
concentrated in various physical facilities. If we cannot access one
or more of these facilities because of a natural or manmade
disaster or otherwise, our operations may be significantly affected
to the extent that it may be difficult for us to recover without a
significant interruption in service or negative impact to our revenue
or customer base.
systems
UNAUTHORIZED ACCESS TO DIGITAL BOXES OR INTERNET
MODEMS
We use encryption technology developed and supported by our
vendors to protect our cable signals from unauthorized access and
to programming based on subscription
to control access
packages. We also use encryption and security technologies to
prevent unauthorized access to our Internet service.
There is no assurance that we will be able to effectively prevent
unauthorized decoding of television signals or Internet access in
the future.
If we are unable to control cable access with our
encryption technology, subscriptions to digital programming,
including premium video-on-demand and subscription video-on-
demand, and Internet service revenue may both decrease, which
could result in a decline in our Cable revenue.
NEW TECHNOLOGY
Our network plans assume the availability of new technology for
both Wireless and Wireline networks. While we work with industry
standards bodies and our vendors to ensure timely delivery of new
technology, there are no assurances these technologies will be
available as and when required.
technologies have affected the way our services are
COMPETING TECHNOLOGIES
Several
delivered, including:
• broadband;
• IP-based voice, data and video delivery services;
• increased use of optical fibre technologies to businesses and/or
residences; and
• broadband wireless access and wireless services using a radio
frequency spectrum to which we may have limited or no access.
These technologies may also lead to significantly different cost
structures for users and therefore affect the long-term viability of
some of our current technologies. Some of the new technologies
have allowed competitors to enter our markets with similar
products or services at lower costs. These competitors may also be
larger and have greater access to financial resources than Rogers.
Improvements in the quality of streaming video over the Internet,
coupled with the increasing availability of television shows and
movies online through OTT content providers, which compete for
viewership, are anticipated to increase competition for Canadian
cable television service providers. If advances in technology are
made to any alternative Canadian multi-channel broadcasting
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distribution system, our cable services may face increased
competition. In addition, wireless Internet is, in some instances,
replacing traditional wireline Internet as the technology for wireless
Internet continues to develop.
The use of PVRs has affected our ability to generate television
advertising revenue because viewers can skip advertising aired on
the television networks. The continued emergence and growth of
subscriber-based satellite and digital radio products could have
affected change AM and FM radio audience listening habits and
have a negative effect on the results of our radio stations. Certain
audiences are also migrating away from traditional broadcast
platforms to the Internet as more video and audio content
streaming becomes available.
REGULATORY RISKS
CHANGES IN GOVERNMENT REGULATIONS
Substantially all of our business activities are regulated by ISED
Canada and/or the CRTC, and any regulatory changes or decisions
could adversely affect our consolidated results of operations. See
“Regulation in Our Industry” for more information.
things,
Regulatory changes or decisions made by these regulators could
adversely impact our results on a consolidated basis. This regulation
relates to, among other
licencing and related fees,
competition, the cable television programming services that we must
distribute, wireless and wireline interconnection agreements, the
rates we may charge to provide access to our network by third
parties, the resale of our networks and roaming on our networks, our
operation and ownership of communications systems, and our ability
to acquire an interest in other communications systems. In addition,
the costs of providing services may be increased from time to time as
a result of compliance with industry or legislative initiatives to address
consumer protection concerns or such Internet-related issues as
copyright infringement, unsolicited commercial e-mail, cybercrime,
and lawful access.
Generally, our licences are granted for a specified term and are
subject to conditions on the maintenance of these licences. These
licencing conditions and related fees may be modified at any time
by the regulators. The regulators may decide not to renew a licence
when it expires, and any failure by us to comply with the conditions
on the maintenance of a licence could result in a revocation or
forfeiture of any of our licences or the imposition of fines. Our
cable, wireless, and broadcasting licences generally may not be
transferred without regulatory approval.
The licences include conditions requiring us to comply with
Canadian ownership restrictions of the applicable legislation. We
are currently in compliance with all of these Canadian ownership
and control requirements. However, if these requirements were
to various penalties, possibly
violated, we would be subject
including, in the extreme case, the loss of a licence.
SPECTRUM
Radio spectrum is one of the fundamental assets required to carry
on our Wireless business. Our ability to continue to offer and
improve current services and to offer new services depends on,
among other factors, continued access to, and deployment of,
adequate spectrum, including both the ability to renew current
spectrum licences and acquire new spectrum licences.
If we cannot acquire and retain needed spectrum, we may not be
able to continue to offer and improve our current services and
deploy new services on a timely basis,
including providing
competitive data speeds that customers want. As a result, our ability
to attract and retain customers could be adversely affected.
In
addition, an inability to acquire and retain needed spectrum could
affect network quality and result in higher additions to property,
plant and equipment.
Changes to government spectrum fees could significantly increase
our payments and therefore materially reduce our net income.
HIGHER HANDSET SUBSIDIES
Our wireless business model is based substantially on subsidizing
the cost of subscriber handsets, similar to other North American
wireless carriers. This model attracts customers and in exchange,
they commit to a term contract with us. We also commit to a
minimum subsidy per unit with the supplier of certain smartphone
devices. If we are unable to recover the costs of the subsidies over
the term of the customer contract, this could have an adverse effect
on our business, results of operations and financial condition.
THE WIRELESS CODE
The CRTC’s decision to implement its Wireless Code, among other
things, effectively required Canadian wireless carriers to move away
from offering three-year service contracts and instead offer two-year
contracts, and this affects our customer acquisition and retention
costs and subscriber churn. The code was applied to all contracts
renewed after
(excluding enterprise plans) entered into or
December 2, 2013 and applied to contracts (excluding enterprise
plans), as of June 3, 2015, no matter when they were originally
entered into. See “Regulation in Our
for more
information.
Industry”
Our Wireless business could be adversely affected if
laws,
regulation, or customer behaviour make it difficult for us to impose
term commitments or early cancellation fees on customers or
receive the service revenue we anticipate from the term
commitments.
NATIONAL WIRELESS TOWER POLICY
The policy affects all parties that plan to install or modify an antenna
system, including PCS, cellular, and broadcasting service providers.
The policy requires, among other things, that antenna proponents
consider using existing antenna structures before proposing new
structures and those owners of existing systems respond to
requests to share antenna systems. Antenna proponents must
follow a defined process for notifying the public and addressing
local
requirements and concerns. Certain types of antenna
installations are excluded from the consultation requirements with
local authorities and the public. The policy could prevent us from
installing certain new antenna systems and/or expanding our
network, which would ultimately affect our ability to serve our
customers.
RADIO FREQUENCY EMISSIONS
From time to time, the media and other reports have highlighted
alleged links between radio frequency emissions from wireless
handsets and various health concerns,
including cancer, and
interference with various medical devices, including hearing aids
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 71
MANAGEMENT’S DISCUSSION AND ANALYSIS
and pacemakers. This may discourage the use of wireless handsets
or expose us to potential
litigation even though there are no
definitive reports or studies stating that these health issues are
directly attributable to radio frequency emissions. Future regulatory
actions may result in more restrictive standards on radio frequency
emissions from low-powered devices like wireless handsets. We
cannot predict the nature or extent of any restrictions.
OBTAINING ACCESS TO SUPPORT STRUCTURES AND
MUNICIPAL RIGHTS OF WAY
We must have access to support structures and municipal rights of
way for our cable facilities. We can apply to the CRTC to obtain a
right of access under the Telecommunications Act in areas where
we cannot secure access to municipal rights of way. Failure to
obtain access could increase Cable costs and adversely affect our
business.
The Supreme Court of Canada ruled in 2003, however, that the
CRTC does not have the jurisdiction to establish the terms and
conditions of accessing the poles of hydroelectric companies. As a
result, we normally obtain access under terms established by the
provincial utility boards.
DEPENDENCE ON FACILITIES AND SERVICES OF ILECS
Certain business telephony operations outside of our cable territory
depend significantly on the availability of facilities and services
acquired from incumbent telecommunication operators, according
to CRTC rules. Changes to these rules could significantly affect the
cost of operating these businesses.
COPYRIGHT TARIFFS
Pressures on copyright tariffs continue to affect our services. Any
increase in fees could negatively affect our results of operations.
BUSINESS RISKS
REVENUE EXPECTATIONS FROM NEW AND ADVANCED
SERVICES
We expect that a substantial portion of our future revenue growth
may come from new and advanced services, and we continue to
invest significant capital resources to develop our networks so we
can offer these services. It is possible, however, that there may not
be sufficient consumer demand, or that we may not anticipate or
satisfy demand for certain products and services or be able to offer
or market
these new products and services successfully to
subscribers. If we do not attract subscribers to new products and
services profitably or keep pace with changing consumer
preferences, we could experience slower revenue growth and
increased churn. This could have a materially adverse effect on our
business, results of operations, and financial condition.
STRATEGY AND BUSINESS PLANS
Our strategy is vital to our long-term success. Changing strategic
priorities or adding new strategic priorities could compromise
existing initiatives and could have a materially adverse effect on our
business, results of operations, and financial condition.
We develop business plans, execute projects, and launch new
ventures to grow our business. If the expected benefits from these
do not materialize, this could have a materially adverse effect on
our business, results of operations, and financial condition.
RELIANCE ON THIRD-PARTY SERVICE PROVIDERS
We have outsourcing and managed service arrangements with
third parties to provide certain essential components of our
business operations to our employees and customers, including
payroll, certain facilities or property management functions, call
centre support, certain installation and service technicians, certain
information
printing.
functions,
Interruptions in these services could adversely affect our ability to
service our customers.
technology
invoice
and
and
businesses
complementary
ACQUISITIONS, DIVESTITURES, OR INVESTMENTS
Acquiring
technologies,
developing strategic alliances, and divesting portions of our
business are often required to optimally execute our business
strategy. Some areas of our operations (and adjacent businesses)
are subject to rapidly evolving technologies and consumer usage
and demand trends.
It is possible that we may not effectively
forecast the value of consumer demand or risk of competing
technologies resulting in higher valuations for acquisitions.
Services, technologies, key personnel, or businesses of companies
we acquire may not be effectively integrated into our business or
service offerings, or our alliances may not be successful. We also
may not be able to successfully complete certain divestitures on
satisfactory terms, if at all.
ORGANIZATIONAL STRUCTURE AND TALENT
The industry is competitive in attracting and retaining a skilled
workforce. Losing certain employees or changes in morale due to a
restructuring or other event could affect our
revenue and
profitability in certain circumstances.
DEPENDENCE ON CERTAIN KEY INFRASTRUCTURE AND
HANDSET VENDORS
Our wireless business has relationships with a relatively small
number of essential network infrastructure and handset vendors.
We do not have operational or financial control over them and only
have limited influence on how they conduct their business with us.
Handset vendor market share has recently shifted towards fewer
top suppliers which will augment this dependency.
COMPLEXITY OF OUR BUSINESS
Our businesses,
technologies, processes, and systems are
operationally complex and increasingly interconnected. If we do
not execute properly, or if manmade or natural disasters affect
them, customers may have a negative experience, resulting in
increased churn and lower revenue.
If one of our network infrastructure suppliers fails, it could delay
adding network capacity or new capabilities and services. Handsets
and network infrastructure suppliers can extend delivery times, raise
prices, and limit supply due to their own shortages and business
requirements, among other things.
these suppliers do not
develop handsets that satisfy customer demands, or deliver
If
72 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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products and services on a timely basis, it could have a material
adverse effect on our business, financial condition, and results of
operations. Any interruption in the supply of equipment for our
networks could also affect the quality of our service or impede
network development and expansion.
Apple has introduced soft SIM technology to its latest iPads
launched in the US, allowing customers of certain carriers to switch
between carriers without the use of a carrier-provided SIM card. If
Apple or other major handset vendors introduce soft SIM to their
mobile products in Canada, this could have an adverse effect on
our business, churn, and results of operations as many customers
without subsidized devices are under no contractual obligation to
remain with Rogers. We expect that soft SIM will be coming to the
Canadian market in the next few years.
INCREASE IN BRING YOUR OWN DEVICE (BYOD)
CUSTOMERS
With the CRTC’s Wireless Code limiting wireless term contracts to
two years from three years, the number of BYOD customers with
no-term contracts has increased. These customers are under no
contractual obligation to remain with Rogers, which could have a
material adverse effect on our churn.
INVENTORY OBSOLESCENCE
Our inventory balance mainly consists of wireless handset devices,
which generally have relatively short product lifecycles due to
frequent wireless handset introductions. If we cannot effectively
manage inventory levels based on product demand, this may
increase the risk of inventory obsolescence.
INCREASING PROGRAMMING COSTS
Acquiring programming is the single most significant purchasing
commitment in our Cable television business and is a material cost
for Media television properties. Programming costs have increased
significantly over the past few years, particularly with the recent
growth in subscriptions to digital specialty channels.
Increased
competition for programming rights to popular properties from
both traditional
television broadcasters and digital
competitors continue to increase the cost of programming rights.
Higher programming costs could adversely affect the operating
results of our business if we are unable to recover programming
investments through subscription fee increases that reflect the
market.
linear
CHANNEL UNBUNDLING
CRTC-mandated programming package unbundling and the
required implementation of flexible channel packaging by BDUs
could negatively affect the tier status, subscription levels, and
results of certain of Media’s channels, including TSC, Sportsnet,
Sportsnet 360, Sportsnet ONE, Sportsnet World, and our specialty
channels,
including Outdoor Life Network, FX (Canada), FXX
(Canada), and G4 Canada. Certain channels are currently included
in favourable channel packaging with BDUs. This could adversely
affect our results and some industry specialty networks may not
survive in such an environment. See “Television Services
Distribution” for more information.
MIGRATING FROM CONVENTIONAL TO DIGITAL MEDIA
Our Media business operates in many industries that can be
affected by customers migrating from conventional
to digital
media, which is driving shifts in the quality and accessibility of data
and mobile alternatives to conventional media. We have been
shifting our focus towards the digital market to limit this risk.
Increasing competition for advertising revenue from digital content
providers such as search engines, social networks, and Internet
video content alternatives have resulted in advertising dollars
television broadcasters to digital
migrating from conventional
platforms. The impact
is greater on conventional over-the-air
broadcast networks such as CityTV and OMNI that do not have a
second revenue stream from subscription revenue. Our Media
results could be adversely affected if we are unsuccessful
in
anticipating the shift in advertising dollars from conventional to
digital platforms.
OUR MARKET POSITION IN RADIO, TELEVISION, OR
MAGAZINE READERSHIP
Advertising dollars typically migrate to media properties that are
leaders in their respective markets and categories, particularly when
advertising budgets are tight. Although most of our
radio,
television, and magazine properties currently perform well in their
respective markets, this may not continue in the future. Advertisers
base a substantial part of their purchasing decisions on ratings and
readership data generated by industry associations and agencies. If
our radio and television ratings or magazine readership levels
decrease substantially, our advertising sales volumes and the rates
that we charge advertisers could be adversely affected.
FINANCIAL RISKS
CAPITAL COMMITMENTS, LIQUIDITY, DEBT, AND INTEREST
PAYMENTS
Our capital commitments and financing obligations could have
important consequences including:
• requiring us to dedicate a substantial portion of cash provided
by operating activities to pay interest, principal, and dividends,
which reduces funds available for other business purposes
including other financial operations;
• making us more vulnerable to adverse economic and industry
conditions;
• limiting our flexibility in planning for, and/or reacting to, changes
in our business and/or industry;
• putting us at a competitive disadvantage compared to
competitors who may have more financial resources and/or less
financial leverage; or
• restricting our ability to obtain additional
financing to fund
working capital and additions to property, plant and equipment
and for other general corporate purposes.
Our ability to satisfy our financial obligations depends on our future
operating performance and economic, financial, competitive, and
other factors, many of which are beyond our control. Our business
may not generate sufficient cash flow in the future and financings
may not be available to provide sufficient net proceeds to meet
these obligations or to successfully execute our business strategy.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 73
MANAGEMENT’S DISCUSSION AND ANALYSIS
CREDIT RATINGS
Credit ratings provide an independent measure of credit quality of
an issuer of securities and can affect our ability to obtain short- and
long-term financing and the terms of the financing.
If rating
agencies lower the credit ratings on our debt, particularly a
downgrade below investment grade, it could adversely affect our
cost of financing and access to liquidity and capital.
INCOME TAXES AND OTHER TAXES
We collect, pay, and accrue significant amounts of income and
other taxes such as federal and provincial sales, employment, and
property taxes.
We have recorded significant amounts of deferred income tax
liabilities and current income tax expense, and calculated these
amounts based on substantively enacted income tax rates in effect
at the relevant time. A legislative change in these rates could have a
material effect on the amounts recorded and payable in the future.
We provide for income and indirect taxes based on all currently
available information and believe that we have adequately
provided for these items. The calculation of applicable taxes in
many cases, however, requires significant judgment in interpreting
tax rules and regulations. Our tax filings are subject to audits, which
could materially change the amount of current and deferred
income tax assets, liabilities, and provisions, and could, in certain
circumstances, result in the assessment of interest and penalties.
While we believe we have paid and provided for adequate
amounts of tax, our business is complex and significant judgment is
required in interpreting how tax legislation and regulations apply to
us.
LITIGATION RISKS
SYSTEM ACCESS FEE – SASKATCHEWAN
In 2004, a class action was commenced against providers of
wireless communications in Canada under the Class Actions Act
(Saskatchewan). The class action relates to the system access fee
wireless carriers charge to some of their customers. The plaintiffs
are seeking unspecified damages and punitive damages, which
would effectively be a reimbursement of all system access fees
collected.
In 2007, the Saskatchewan Court granted the plaintiffs’ application
to have the proceeding certified as a national, “opt-in” class action
where affected customers outside Saskatchewan must take specific
steps to participate in the proceeding. In 2008, our motion to stay
the proceeding based on the arbitration clause in our wireless
service agreements was granted. The Saskatchewan Court directed
that its order, in respect of the certification of the action, would
exclude customers who are bound by an arbitration clause from
the class of plaintiffs.
In 2009, counsel for the plaintiffs began a second proceeding
under the Class Actions Act (Saskatchewan) asserting the same
claims as the original proceeding. If successful, this second class
action would be an “opt-out” class proceeding. This second
proceeding was ordered conditionally stayed in 2009 on the basis
that it was an abuse of process.
74 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
In 2013, the plaintiffs applied for an order to be allowed to proceed
with the second system access fee class action. However, the court
denied this application and the second action remains
conditionally stayed.
At the time the Saskatchewan class action was commenced in
2004, corresponding claims were filed in multiple jurisdictions
across Canada, although no active steps were taken by the
plaintiffs. In 2014, the Nova Scotia Supreme Court declined to stay
or dismiss the corresponding claim brought by the plaintiffs in
Nova Scotia as an abuse of process. In April 2015, the Nova Scotia
Court of Appeal permanently stayed the Nova Scotia claim. The
plaintiffs are seeking leave to appeal to the Supreme Court of
Canada. The Manitoba Court of Queen’s Bench unconditionally
stayed the corresponding claim brought in Manitoba as an abuse
is
of process. A decision from the Manitoba Court of Appeal
pending. A similar decision has been issued by the British
Columbia Court of Appeal. In 2015, the Court of Queen’s Bench of
Alberta declined to dismiss the corresponding claim in Alberta. In
October 2015, the Alberta Court of Appeal granted our appeal
and dismissed the claim in Alberta. We have not recognized a
liability for this contingency.
SYSTEM ACCESS FEE – BRITISH COLUMBIA
In December 2011, a class action was launched in British Columbia
against providers of wireless communications in Canada in
response to the system access fee wireless carriers charge to some
their customers. The class action related to allegations of
of
to the Business Practices and
misrepresentations contrary
Consumer Protection Act (British Columbia), among other things.
The plaintiffs sought unspecified damages and restitution. In June
2014,
the court denied the plaintiffs’ certification application,
concluding that there is nothing in the term “system access fee” to
suggest it is a fee to be remitted to the government. An appeal by
the plaintiffs was dismissed by the British Columbia Court of
Appeal in 2015, finding that the conclusion of the trial judge was
unassailable. The plaintiffs are seeking leave to appeal to the
Supreme Court of Canada. We have not recognized a liability for
this contingency.
911 FEE
In June 2008, a class action was launched in Saskatchewan against
providers of wireless communications services in Canada. It involves
allegations of breach of contract, misrepresentation, and false
advertising, among other things, in relation to the 911 fee that had
been charged by us and the other wireless telecommunication
providers in Canada. The plaintiffs are seeking unspecified
damages and restitution. The plaintiffs intend to seek an order
class action in
certifying the proceeding as a national
Saskatchewan. We have not
this
contingency.
recognized a liability for
CELLULAR DEVICES
In July 2013, a class action was launched in British Columbia against
providers
and
manufacturers of wireless devices. The class action relates to the
alleged adverse health effects incurred by long-term users of
cellular devices. The plaintiffs are seeking unspecified damages
communications
of wireless
in Canada
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and punitive damages, effectively equal to the reimbursement of
the portion of revenue the defendants have received that can
reasonably be attributed to the sale of cellular phones in Canada.
We have not recognized a liability for this contingency.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
Management
adequate internal controls over financial reporting.
is responsible for establishing and maintaining
OTHER CLAIMS
There are certain other claims and potential claims against us. We
do not expect any of these to have a material adverse effect on our
financial results.
is subject
OUTCOME OF PROCEEDINGS
the proceedings and claims against us,
The outcome of all
to future
including the matters described above,
resolution that includes the uncertainties of litigation.
It is not
possible for us to predict the result or magnitude of the claims due
to the various factors and uncertainties involved in the legal
process. Based on information currently known to us, we believe it
is not probable that
these
proceedings and claims, individually or in total, will have a material
adverse effect on our business or financial results or financial
condition. If it becomes probable that we will be held liable for
claims against us, we will recognize a provision during the period in
which the change in probability occurs, which could be material to
Income or Consolidated
our Consolidated Statements of
Statements of Financial Position.
the ultimate resolution of any of
OWNERSHIP RISK
CONTROLLING SHAREHOLDER
Rogers is a family-founded,
family-controlled company. Voting
control of Rogers Communications is held by Rogers Control Trust,
whose beneficiaries are a small group of
individuals that are
members of the Rogers family, several of whom are also directors
voting control of Rogers
of our Board. The trust holds
Communications Inc. and its subsidiaries for
the benefit of
successive generations of the Rogers family. The trustee is the trust
company subsidiary of a Canadian chartered bank.
As of December 31, 2015, private, Rogers family holding
companies controlled by the trust owned approximately 91% of
our outstanding Class A Voting shares (2014 – 91%) and
approximately 10% of our Class B Non-Voting shares (2014 – 10%),
or in total approximately 28% of the total shares outstanding (2014
– 28%). Only Class A Voting shares carry the right to vote in most
circumstances. As a result, the trust is able to elect all members of
our Board and to control the vote on most matters submitted to a
shareholder vote.
CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
We conducted an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures as of
December 31, 2015, under
the supervision and with the
participation of our management, including the Chief Executive
to Rule 13a-15
Officer and Chief Financial Officer, pursuant
promulgated under the US Securities Exchange Act of 1934, as
amended. Based on this evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and
procedures were effective at that date.
Our internal control system is designed to give management and
the Board reasonable assurance that our financial statements are
prepared and fairly presented in accordance with International
Financial Reporting Standards as issued by the International
Accounting Standards Board. The system is intended to provide
reasonable assurance that transactions are authorized, assets are
safeguarded and financial records are reliable. Management also
takes steps to assure the flow of information and communication is
effective, and monitors performance and our internal control
procedures.
Management assessed the effectiveness of our internal control over
financial reporting as of December 31, 2015, based on the criteria
set out in the Internal Control – Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and concluded that it was effective at that
date. Our independent auditors, KPMG LLP, have issued an audit
report on management’s assessment of
internal control over
financial reporting as of December 31, 2015, and provided an
unqualified opinion on the effectiveness of the Company’s internal
control over financial reporting as of that date. This report is
included in our 2015 audited consolidated financial statements
filed on SEDAR (sedar.com).
All internal control systems, however, no matter how well designed,
have inherent
limitations, and even systems that have been
determined to be effective can only provide reasonable assurance
about the preparation and presentation of financial statements.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL
REPORTING AND DISCLOSURE CONTROLS AND
PROCEDURES
There were no changes in 2015 that materially affected, or are
reasonably likely to materially affect, our internal controls over
financial reporting.
Regulation In Our Industry
Our business, except
Media, is regulated by two groups:
• the Canadian Federal Department of Innovation, Science and
Economic Development on behalf of the Minister of Innovation,
Science and Economic Development; and
for the non-broadcasting operations of
• the CRTC, under
(Canada)
(Telecommunications Act) and the Broadcasting Act (Canada)
(Broadcasting Act).
the Telecommunications Act
Regulation relates to the following, among other things:
• wireless spectrum and broadcasting licensing;
• competition;
• the cable television programming services we must, and can,
distribute;
• wireless and wireline interconnection agreements;
• rates we can charge third parties for access to our network;
• the resale of our networks;
• roaming on our networks and the networks of others;
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 75
MANAGEMENT’S DISCUSSION AND ANALYSIS
• ownership and operation of our communications systems; and
• our ability to acquire an interest in other communications systems.
Regulatory changes or decisions can adversely affect our
consolidated results of operations.
Our costs of providing services may increase from time to time as
legislative initiatives to address
we comply with industry or
consumer protection concerns or
Internet-related issues like
copyright infringement, unsolicited commercial e-mail, cybercrime,
and lawful access.
Generally, our spectrum and broadcast licences are granted for a
specified term and are subject to conditions for maintaining these
licences. Regulators can modify these licensing conditions at any
time, and they can decide not to renew a licence when it expires. If
we do not comply with the conditions, a licence may be forfeited or
revoked, or we may be fined.
The licences have conditions that require us, amongst other things,
to comply with Canadian ownership restrictions of the applicable
legislation. We are currently in compliance with these conditions. If
we violate the requirements, we would be subject to various
penalties and it could include losing a licence in extreme cases.
Cable, wireless, and broadcasting licences generally cannot be
transferred without regulatory approval.
CANADIAN BROADCASTING AND
TELECOMMUNICATIONS OPERATIONS
Our Canadian broadcasting and telecommunications operations –
including our cable television systems, radio and television stations,
and specialty services – are licenced (or operated under an
exemption order) and regulated by the CRTC under
the
Broadcasting Act.
The CRTC is responsible for regulating and supervising all aspects
of the Canadian broadcasting and telecommunications system. It is
also responsible under
the
regulation of telecommunications carriers, including:
• Wireless’ mobile voice and data operations; and
• Cable’s Internet and telephone services.
the Telecommunications Act
for
Our cable and telecommunications retail services are not subject to
than an entry-level small basic cable
price regulation, other
television package ordered by the CRTC for introduction on
March 1, 2016, because the CRTC believes there is enough
competition for these services provided by other carriers to protect
the interests of users, so has forborne from regulating them.
Regulations can and do, however, affect the terms and conditions
under which we offer these services.
SPECTRUM LICENCES
ISED Canada sets technical standards for telecommunications under
the Radiocommunication Act (Canada) (Radiocommunication Act)
and the Telecommunications Act. It licences and oversees:
• the technical aspects of the operation of radio and television
stations;
• the frequency-related operations of cable television networks;
and
• awarding and supervising spectrum for wireless communications
systems in Canada.
76 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
ROYALTIES
The Copyright Board of Canada (Copyright Board) oversees the
administration of copyright royalties in Canada and establishes the
royalties to be paid for the use of certain copyrighted works. It sets
that Canadian broadcasting
the copyright
television, and specialty
undertakings,
services, pay to copyright collectives.
royalties
including cable,
radio,
tariff
BILLING AND CONTRACTS
Manitoba, Newfoundland and Labrador, Nova Scotia, Ontario, and
Quebec have enacted consumer protection legislation for wireless,
wireline, and Internet service contracts. This legislation addresses
the content of such contracts, the determination of the early
cancellation fees that can be charged to customers, the use of
the
security deposits,
consumers, the sale of prepaid cards, and the disclosure of related
costs. Rogers is also currently subject to the CRTC Wireless Code
and will come under the forthcoming CRTC Television Service
Provider Code of Conduct to become effective in 2016.
the cancellation and renewal
rights of
The provincial laws are generally consistent with the CRTC Wireless
Code. See “CRTC Wireless Code” for more information.
FOREIGN OWNERSHIP AND CONTROL
Non-Canadians can own and control, directly or indirectly:
• up to 33.3% of the voting shares and the related votes of a
holding company that has a subsidiary operating company
licenced under the Broadcasting Act, and
• up to 20% of the voting shares and the related votes of the
operating licensee company may be owned and controlled
directly or indirectly by non-Canadians.
Combined, these limits can enable effective foreign control of up
to 46.7%.
The chief executive officer and 80% of the members of the Board of
Directors of the operating licensee must be resident Canadians.
There are no restrictions on the number of non-voting shares that
may be held by non-Canadians at either the holding company or
the licensee company level. Neither the Canadian carrier nor its
parent may be otherwise controlled in fact by non-Canadians.
Subject to appeal to the federal Cabinet, the CRTC has the
jurisdiction to determine as a question of fact whether a given
licensee is controlled by non-Canadians.
the
same
to the Telecommunications Act and associated
Pursuant
regulations,
to Canadian
also
telecommunications carriers such as Wireless, except that there is
no requirement that the chief executive officer be a resident
Canadian. We believe we are in compliance with the foregoing
foreign ownership and control requirements.
apply
rules
less
On June 29, 2012, Bill C-38 amending the Telecommunications Act
passed into law. The amendments exempt telecommunications
companies with
total Canadian
telecommunications market measured by revenue from foreign
investment restrictions. Companies that are successful in growing
total Canadian
their market
telecommunications market revenue other than by way of merger
or acquisitions will continue to be exempt from the restrictions.
in excess of 10% of
10% of
shares
than
CRTC REVIEW OF BASIC TELECOMMUNICATIONS SERVICES
On April 9, 2015, the CRTC issued Telecom Notice of Consultation
2015-134. The CRTC will examine which telecommunications
services Canadians require to participate meaningfully in the digital
economy and the CRTC’s role in ensuring the availability of
affordable basic telecommunications services to all Canadians.
Rogers is participating in the proceeding in which a public hearing
will commence on April 11, 2016.
CANADIAN ANTI-SPAM LEGISLATION
Canada’s anti-spam legislation was passed into law on
December 15, 2010 and came into force on July 1, 2014, with the
exception of those sections of the Act related to the unsolicited
installation of computer programs or software, which came into
force on January 15, 2015. We believe we are in compliance with
this legislation.
BILL C-43
On October 23, 2014, Bill C-43 was introduced by the federal
government. Amongst other items, it makes amendments to the
Broadcasting Act and the Telecommunications Act to prohibit
charging subscribers for paper bills. Bill C-43 also provides the
CRTC with the authority to assess Administrative Monetary Penalties
for any contraventions of the Telecommunications Act, regulations,
or CRTC decisions. The Bill was passed into law on December 16,
2014 and these amendments became effective immediately. We
believe we are in compliance with this legislation.
WIRELESS
600 MHZ SPECTRUM LICENCE BAND
On August 14, 2015, ISED Canada released a decision regarding
the reallocation of spectrum licences in the 600 MHz band for
mobile services. Canada will
reallocate the same amount of
spectrum licences as the US, following the US incentive auction
scheduled to begin in March 2016. TV channels currently using the
600 MHz band spectrum that will be auctioned for mobile services
will be given a new channel in the new allotment plan and will be
provided with a minimum of 18 months to complete the transition.
Certain Rogers over-the-air TV channels will need to be
transitioned. No decision has been made regarding transition
funding of affected TV channels or whether ISED Canada will use
an incentive auction format. Additional consultations are expected
before the Canadian auction of this spectrum, which is expected to
occur in the next two to three years.
LEGISLATION REGARDING WHOLESALE DOMESTIC
WIRELESS ROAMING RATES
On June 19, 2014, the federal government enacted legislation to
cap wholesale domestic wireless roaming rates carriers can charge
to one another at amounts no higher than the average rates carriers
charge their own retail customers. The legislation also provided the
CRTC with the power to set domestic roaming rates between
carriers, regardless of the formula. The CRTC conducted a review
into wireless roaming rates and the state of wireless wholesale
competition with a public hearing, which concluded in early
October 2014.
On May 5, 2015, the CRTC released its decision on the regulatory
framework for wholesale mobile wireless services (Telecom
Regulatory Policy 2015-177). The CRTC determined it is necessary
to regulate the rates that Rogers Communications and two of its
competitors (Bell Mobility and Telus Communications) charge
other Canadian wireless carriers
for domestic GSM-based
wholesale roaming. The CRTC directed Rogers, Bell, and Telus to
each file proposed cost-based tariffs for wholesale roaming on
November 4, 2015. Pending its final determination on the
the CRTC approved, on an interim basis, a
proposed tariffs,
maximum rate for each of GSM-based voice,
text, and data
wholesale roaming provided by Bell, Rogers, and Telus across their
respective networks to other Canadian wireless carriers. This rate is
equal to the highest rate charged by each of Rogers, Bell, and Telus
to any other Canadian wireless carrier for each of GSM-based
voice, text, and data wholesale roaming as of the date of the
decision. These rates were replaced when the CRTC gave interim
approval to the proposed cost-based tariffs filed by the carriers on
December 3, 2015 and made these interim rates effective
November 23, 2015.
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the Canadian government
In Telecom Regulatory Policy 2015-177 the CRTC recommended
that
the
Telecommunications Act, which came into effect in June 2014 to
cap domestic wholesale mobile wireless roaming rates at average
retail rates, to allow the return to market forces for the provision of
all other wholesale roaming as soon as possible. On July 1, 2015,
section 27.1 was repealed by the government.
repeal section 27.1 of
The CRTC further determined that it is not appropriate to mandate
wholesale Mobile Virtual Network Operator (MVNO) access.
the CRTC determined that
Finally,
the regulatory measures
established in the decision would remain in place for a minimum of
five years, during which time the CRTC will monitor competitive
conditions in the mobile wireless market.
reviews
spectrum licence transfers,
TRANSFERS, DIVISIONS, AND SUBORDINATE LICENSING
OF SPECTRUM LICENCES
In June 2013,
ISED Canada released Framework Relating to
Transfers, Divisions and Subordinate Licensing of Spectrum
Licences for Commercial Mobile Spectrum. The Framework lays
out the criteria ISED Canada will consider and the processes it will
use when it
including
prospective transfers that could arise from purchase or sale options
and other agreements. Key items to note are that:
• ISED Canada will review all spectrum transfer requests, and will
not allow any that result in “undue spectrum concentration” and
reduced competition. Decisions will be made on a case-by-case
basis and will be issued publicly to increase transparency; and
• licensees must ask for a review within 15 days of entering into
any agreement that could lead to a prospective transfer. ISED
Canada will review the agreement as though the licence transfer
that could arise from it has been made. This timing did not apply
to agreements such as Rogers’ AWS agreements with Shaw and
Quebecor made before the Framework was released.
On June 24, 2015, Rogers received ISED Canada approval for a
number of spectrum licence transfers and subordinate licences
related to our acquisition of Shaw’s AWS-1 spectrum licences and
our acquisition of Mobilicity.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 77
MANAGEMENT’S DISCUSSION AND ANALYSIS
We obtained AWS-1 spectrum licences from Shaw after exercising
a previously acquired option and paying the final $100 million
installment. The total paid for the spectrum was $350 million.
Subsequent
to exercising the option, certain non-contiguous
spectrum licences acquired from Shaw were transferred to WIND
for nominal cash proceeds.
Subsequent to the acquisition of Mobilicity, Rogers and WIND
undertook an AWS-1 spectrum licence asset exchange in Southern
Ontario to create an additional 10 MHz of paired AWS-1 spectrum
that is contiguous to AWS-1 spectrum licences we acquired in the
2008 auction.
In addition, Rogers transferred certain non-
contiguous AWS-1 spectrum licences previously held by Mobilicity
in British Columbia, Alberta, and various regions in Ontario to
WIND for nominal cash proceeds.
CRTC WIRELESS CODE
In June 2013, the CRTC issued its Wireless Code. The code
imposes
including
several obligations on wireless carriers,
maximum contract term length, roaming bill caps, device unlocking
requirements, and contract summaries. It also lays out the rules for
device subsidies and early cancellation fees. Under the code, if a
customer cancels a contract early, carriers can only charge the
outstanding balance of the device subsidy they received, which
decreases by an equal amount every month over no more than 24
months. This effectively makes the maximum contract length two
years. The code was applied to contracts (excluding enterprise
plans) entered into or renewed after December 2, 2013.
As of June 3, 2015, the code applied to all contracts (excluding
enterprise plans), no matter when they were entered into, which
means it retroactively captured three-year contracts entered into
between June 3, 2012 and December 2, 2013. Anyone who
entered into a three-year contract between June 3, 2012 and
their
December 2, 2013 was therefore entitled to cancel
agreement without paying back the full subsidy they received. On
July 2, 2013, Rogers, Bell, Telus, MTS, and SaskTel filed a Federal
Court appeal of this retroactivity provision of the code. The Court
granted leave to appeal and the appeal was heard on
November 12, 2014. On May 19, 2015, the Federal Court of
Appeal dismissed the Rogers, Bell, Telus, MTS, and SaskTel appeal
of the CRTC decision to apply the Wireless Code to all contracts on
June 3, 2015, regardless of when the contract was signed. This
means the code retroactively captured three-year contracts entered
into between June 3, 2012 and December 2, 2013.
2500 MHZ SPECTRUM LICENCE AUCTION
On April 14, 2015, ISED Canada’s 2500 MHz commercial wireless
spectrum auction began. The auction ended on May 5, 2015.
Results were announced publicly on May 12, 2015. Rogers
acquired 41 licences consisting of 20 MHz blocks of contiguous,
paired spectrum in Canada’s major geographic markets at a cost of
$27 million. After making payment for the licences and passing the
required Canadian Ownership and Control review, Rogers took
possession of these 20-year licences on May 27, 2015 and began
to deploy the spectrum during the second quarter of 2015.
78 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
TOWER SHARING POLICY
In March 2013,
ISED Canada released Revised Frameworks for
Mandatory Roaming and Antenna Tower and Site Sharing,
concluding a consultation initiated in 2012. It sets out the current
rules for tower and site sharing, among other things. The key terms
of the tower and site sharing rules are:
• all holders of
and
broadcasting certificates must share towers and antenna sites,
where technically feasible, at commercial rates; and
spectrum licences,
radio licences,
• the timeframe for negotiating agreements is 60 days, after which
arbitration according to ISED Canada arbitration rules will begin.
In Telecom Regulatory Policy 2015-177 released May 2015, the
CRTC determined that it would not mandate or require general
wholesale tariffs for tower and site sharing. At the same time, it
determined that its existing powers and processes are sufficient to
address tower and site sharing disputes related to rates, terms, and
conditions. As a result, carriers may use the arbitration process
established by ISED Canada, or they may request the CRTC to
intervene in the event that tower and site sharing negotiations fail.
AWS-3 SPECTRUM AUCTION
In July 2014,
ISED Canada announced that Advanced Wireless
Services (AWS-3) wireless spectrum would be auctioned in 2015
and before the 2500 MHz auction. AWS-3 spectrum comprises
the 1755-1780 MHz and 2155-2180 MHz bands. 30 MHz of
the 50 MHz of paired spectrum to be auctioned was reserved
for “operating new entrants”. Wireless carriers with less than
10 percent national and 20 percent provincial/territorial wireless
subscriber market share were eligible to bid on the set-aside
spectrum in licence areas where they were then providing service.
The 20 MHz of spectrum not subject to the new entrant set-aside
was auctioned in two 5+5 MHz sub-blocks. The auction used a
sealed-bid format. The highest bid for a block would win the block
and the winner would then pay the second highest bid price for the
block. On March 6, 2015, ISED Canada announced the results of
the AWS-3 wireless spectrum licence auction of the 1755-1780
MHz and 2155-2180 MHz bands. Rogers did not acquire any
spectrum licences in this auction.
3.5 GHZ BAND POLICY CHANGES
In December 2014, ISED Canada released its policy changes to the
3.5 GHz spectrum band. Rogers has a 50% interest in the Inukshuk
Wireless Partnership (IWP) which holds (on average) between 100-
175 MHz of 3.5 GHz spectrum in most major urban markets in
Canada. The 3.5 GHz band will be reallocated for mobile services
(it is currently only licensed for fixed wireless access in Canada). The
establishment of a new band plan and licensing framework for
mobile services will be the subject of a future consultation. The
band will eventually be relicensed on a flexible-use basis whereby
licensees will be permitted to determine the extent to which they
will implement fixed and/or mobile services in the band in a given
geographic area.
Until the future consultation is completed and the related decisions
are released, all existing licences that will be renewed will be
limited to the provision of fixed services. Licences will be renewed
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where licensees have satisfied all of their conditions of licence and
renewed licences will have a 1-year term. On completion of the
consultation process and release of related decisions, renewed
licensees will have a high expectation of receiving new licences for
10 or 20 years (depending on consultation outcome). Spectrum
associated with existing licences that are not renewed by ISED
Canada will be made available on a first-come, first-served basis
using an application process.
CABLE
CRTC REVIEW OF LOCAL AND COMMUNITY
PROGRAMMING
On September 14, 2015, the CRTC announced a proceeding to
review the policy framework for local and community programming
(Broadcasting Notice of Consultation 2015-421). Comments were
due October 29, 2015 and an oral hearing concluded on February
3, 2016. A decision is anticipated by mid-2016.
CRTC REVIEW OF WHOLESALE WIRELINE
TELECOMMUNICATIONS SERVICES
In October 2013, the CRTC initiated its planned review of the
telecommunications essential services rulings it released in March
2008. The review will determine which wireline services, and under
what terms and conditions, facilities-based telecommunications
carriers must make available to other telecommunications service
providers, such as resellers. Extensive submissions were filed during
2014 leading to a two-week public hearing that concluded on
December 4, 2014.
On July 22, 2015, the CRTC released its decision on the regulatory
framework for wholesale wireline services (Telecom Regulatory
Policy 2015-326). The CRTC determined that wholesale high-speed
access services, which are used to support retail competition for
services, such as local phone, television, and Internet access, would
continue to be mandated. The provision of provincially aggregated
services, however, would no longer be mandated and would be
in conjunction with the implementation of a
phased out
disaggregated service with connections at telephone company
central offices and cable company head-ends. The requirement to
implement disaggregated wholesale high-speed access services
include making them available over fibre-access facilities.
will
Regulated rates will continue to be based on long-run increment
cost studies.
On January 29, 2015, the CRTC released decisions requiring local
stations to continue over-the-air transmission under the same
regulatory regime currently in place and maintaining simultaneous
substitution requirements. This was decided with the intent that
the rights of the popular
Canadian broadcasters can protect
their own
foreign programs they have purchased and sell
advertising during these programs, except for the NFL Super Bowl
beginning in 2017. In a related decision released the same day, the
CRTC found that it would be an undue preference under the
Telecommunications Act for a vertically integrated company that
offers a Mobile TV service to exempt this service from standard
monthly wireless data caps and usage charges generally applicable
to its wireless service.
On March 19, 2015, the CRTC released the third of its decisions
related to its Let’s Talk TV proceeding. The CRTC ordered
distributors to offer customers an option for a small basic service
consisting only of Canadian local channels (local radio is optional),
national mandatory services, community and provincial legislature
channels, and, should they wish, US 4+1 networks beginning
March 1, 2016. The retail rate for this entry-level service will be
capped at $25 per month (excluding equipment). The CRTC
adopted phased-in requirements for selling channels to customers
“à la carte” and as part of “pick-packs”. All channels above the basic
tier must be offered on an à la carte basis or in smaller, reasonably
priced packages by March 1, 2016. By December 1, 2016, they
must be offered in both forms. As a BDU, we will be permitted to
continue to offer our existing basic service and programming
packages. The CRTC will also revise its existing “preponderance”
rule so that consumers will have to be offered, but will not have to
receive, a majority of Canadian services.
The CRTC also proposed several changes to the Wholesale Code
(formerly the Vertical Integration (VI) Code) addressing, amongst
other matters, penetration-based rate cards and minimum
guarantees. All licensed programmers and BDUs will be required
to comply with the Wholesale Code, which came into effect on
January 22, 2016.
The March 19 decision also addressed rules for distribution of
foreign services authorized for distribution in Canada, including
requirements that foreign services make their channels available “à
la carte” and “in pick-packs” or in smaller pre-assembled packages
and abide by the Wholesale Code. Access rules for VI-owned
services and independent services, channel packaging, and buy-
through rules for multicultural services were also addressed.
TELEVISION SERVICES DISTRIBUTION
On October 24, 2013, the CRTC launched a broad-based public
consultation (“Let’s Talk TV”) on the subject of television. The
consultation covered three broad themes, asking what consumers
think about:
• the television programming available to them;
• the reception of television programming from service providers
and other sources; and
• whether
they have enough information to make informed
choices and seek solutions if they are not satisfied.
to govern certain aspects of
On March 26, 2015, in the final decision related to Let’s Talk TV, the
CRTC announced plans to establish a Television Service Provider
(TVSP) Code of Conduct
the
relationship between TVSPs and their customers as well as to allow
consumers to complain to the CCTS about their providers. On
January 8, 2016, the CRTC issued the final version of the TVSP
Code, which will come into effect on September 1, 2017. This
decision also introduced new requirements related to the provision
of service to persons with disabilities for both BDUs and
broadcasters.
In November 2014, the CRTC released its first decision arising from
the Let’s Talk TV hearing ordering the elimination of the 30-day
cancellation provision for cable,
Internet, and phone services,
effective January 23, 2015.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 79
MANAGEMENT’S DISCUSSION AND ANALYSIS
ROGERS NHL GAMECENTRE LIVE GAMEPLUS
On November 20, 2014, we responded to a CRTC complaint by
certain companies claiming that Rogers NHL GameCentre LIVE
Plus, the exclusive content tier of Rogers NHL GameCentre LIVE,
violates CRTC regulations on the basis that it was not content
designed primarily for Internet use by individual customers. On
March 16, 2015, the CRTC denied the complaint.
MEDIA
COPYRIGHT RETRANSMISSION OF DISTANT SIGNALS
Pursuant to section 31(2) of the Copyright Act, television service
providers are permitted to retransmit programming within distant
over-the-air television signals as part of a compulsory licensing
the programming are
regime. Rates for
established through negotiation or set by the Copyright Board.
Distributors and content providers were unable to agree on a new
rate for the distribution of distant signals after the expiration of the
current agreement in 2013. A proceeding was initiated by the
Copyright Board, which began on November 23, 2015. The
proceeding will continue into 2016 with a decision expected in 2017.
the distribution of
The Collectives (content providers) have proposed a royalty rate
that is approximately double the current rate, which, if certified,
would have a significant financial impact on Rogers with additional
costs of approximately $30 million per year.
LICENCE RENEWALS
The CRTC considers group-based (conventional and discretionary
specialty) licence renewal applications for major media companies.
The Rogers group includes the City conventional television stations
and specialty channels Sportsnet 360, The Biography Channel,
G4Tech, and Outdoor Life.
On July 31, 2014, the CRTC renewed our licences for a two-year
period as we had requested. In addition, the decision placed no
restrictions on the amount of sports programming expenditures
that can be used to meet Canadian program expenditure
obligations and deleted the previous condition of licence requiring
specific expenditures of local programming outside of Toronto.
These conditions were replaced with a requirement to produce
original hours of
include
professional sports programming. Consistent with the requirement
for other large broadcast groups, pursuant to the decision the
Rogers group is now required to achieve a Canadian program
expenditure of 30% rather than the previous 25%, 5% of which
must be directed to programs of national interest. In addition, the
CRTC determined that the imposition of the Wholesale Code as
condition of licence would be an appropriate measure to ensure a
level playing field with other entities that may have business
relationships with Rogers.
local programming which cannot
Other Information
ACCOUNTING POLICIES
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
Management makes judgments, estimates, and assumptions that
affect how accounting policies are applied, the amounts we report in
assets, liabilities, revenue, and expenses, and our related disclosure
80 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
about contingent assets and liabilities. Significant changes in our
assumptions, including those related to our future business plans
and cash flows, could materially change the amounts we record.
Actual results could be different from these estimates.
to our business operations and
These estimates are critical
understanding our results of operations. We may need to use
additional judgment because of the sensitivity of the methods and
assumptions used in determining the asset, liability, revenue, and
expense amounts.
ESTIMATES
FAIR VALUE
We use estimates to determine the fair value of assets acquired and
liabilities assumed in an acquisition, using the best available
information, including information from financial markets. These
estimates include key assumptions such as discount rates, attrition
rates, and terminal growth rates for performing discounted cash
flow analyses.
USEFUL LIVES
We depreciate the cost of property, plant and equipment over their
estimated useful lives by considering industry trends and company-
specific factors, including changing technologies and expectations
for the in-service period of certain assets at the time. We reassess our
estimates of useful lives annually, or when circumstances change, to
ensure they match the anticipated life of the technology from a
If technological change happens
revenue-producing perspective.
more quickly, or in a different way, than anticipated, we might have to
reduce the estimated life of property, plant and equipment, which
could result in a higher depreciation expense in future periods or an
impairment charge to write down the value. We monitor and review
our depreciation rates and asset useful lives at least once a year and
change them if they are different from our previous estimates. We
recognize the effect of changes in estimates in net
income
prospectively.
CAPITALIZING DIRECT LABOUR, OVERHEAD, AND
INTEREST
Certain direct labour, overhead, and interest costs associated with
the acquisition, construction, development, or improvement of our
networks are capitalized to property, plant and equipment. The
capitalized amounts are calculated based on estimated costs of
projects that are capital in nature, and are generally based on a per-
hour
interest costs are capitalized during
development and construction of certain property, plant and
equipment. Capitalized amounts increase the cost of the asset and
result in a higher depreciation expense in future periods.
In addition,
rate.
IMPAIRMENT OF ASSETS
Indefinite-life intangible assets (including goodwill and spectrum
and/or broadcast licences) are assessed for impairment on an
annual basis, or more often if events or circumstances warrant, and
finite-life assets (including property, plant and equipment and
other intangible assets) are assessed for impairment if events or
circumstances warrant. The recoverable amount of a cash
generating unit (CGU) involves significant estimates such as future
cash flows,
If key
estimates differ unfavourably in the future, we could experience
impairment charges that could decrease net income.
terminal growth rates, and discount rates.
FINANCIAL INSTRUMENTS
The fair values of our derivatives are recorded using an estimated
credit-adjusted mark-to-market valuation. If the derivatives are in an
asset position (i.e. the counterparty owes Rogers), the credit spread
for the bank counterparty is added to the risk-free discount rate to
determine the estimated credit-adjusted value. If the derivatives are
in a liability position (i.e. Rogers owes the counterparty), our credit
spread is added to the risk-free discount rate. The estimated credit-
adjusted value of derivatives requires assessment of the credit risk
of the parties to the instruments and the instruments’ discount
rates.
For all derivative instruments where hedge accounting is applied,
we are required to ensure that the hedging relationships meet
hedge effectiveness criteria both retrospectively and prospectively.
Hedge effectiveness testing requires the use of both judgments
and estimates.
PENSION BENEFITS
When we account for defined benefit pension plans, assumptions
are made in determining the valuation of benefit obligations.
Assumptions and estimates include the discount rate, the rate of
future compensation increase, and the mortality rate. Changes to
these primary assumptions and estimates would affect the pension
expense, pension asset and liability, and other comprehensive
income. Changes in economic conditions,
including financial
markets and interest rates, may also have an impact on our pension
plan because there is no assurance that the plan will be able to
earn the assumed rate of return. Market-driven changes may also
result in changes in the discount rates and other variables that
could require us to make contributions in the future that differ
significantly from the current contributions and assumptions
incorporated into the actuarial valuation process.
The table below shows what the impact of an increase or decrease
in the primary assumptions and estimates on our accrued benefit
obligation and pension expense for 2015 would be:
(In millions of dollars)
Discount rate
Impact of 0.5% increase
Impact of 0.5% decrease
Rate of future compensation
increase
Impact of 0.25% increase
Impact of 0.25% decrease
Mortality rate
Impact of 1 year increase
Impact of 1 year decrease
Increase (decrease)
in accrued
benefit obligation
Increase (decrease)
in pension
expense
(146)
167
18
(18)
39
(41)
(18)
19
3
(3)
4
(4)
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options. The SAR feature allows the option holder to elect to
receive a cash payment equal to the intrinsic value of the option,
instead of exercising the option and acquiring Class B Non-Voting
shares.
We measure stock-based compensation to employees at fair value.
We determine the fair value of options using our Class B Non-
Voting share price and option pricing models, and record all
outstanding stock options as liabilities. The liability is marked to
market each period and is amortized to expense using a graded
vesting approach over the period during which employee services
are rendered, or over the period to the date an employee is
eligible to retire, whichever is shorter. The expense in each period
is affected by the change in the price of our Class B Non-Voting
shares during the period.
Restricted share unit (RSU) and deferred share unit (DSU) plans
We recognize outstanding RSUs and DSUs as liabilities, measuring
the liabilities and compensation costs based on the awards’ fair
values, which are based on the market price of the Class B Non-
Voting shares, and recognizing them as charges to operating costs
over the vesting period of the awards.
If an award’s fair value
changes after it has been granted and before the exercise date, we
recognize the resulting changes in the liability as a charge to
operating costs in the year the change occurs. For RSUs, the
payment amount is established as of the vesting date. For DSUs,
the payment amount is established as of the exercise date.
JUDGMENTS
USEFUL LIVES AND DEPRECIATION AND AMORTIZATION
METHODS
We make significant
for
depreciating our property, plant and equipment that we believe
most accurately represent the consumption of benefits derived
from those assets and are most representative of the economic
substance of the intended use of the underlying assets.
in choosing methods
judgments
We amortize the cost of intangible assets with finite lives over their
estimated useful lives. We review their useful lives, residual values,
and the amortization methods at least once a year.
We do not amortize intangible assets with indefinite lives (spectrum
and broadcast licences) because there is no foreseeable limit to the
period over which these assets are expected to generate net cash
inflows for us. We make judgments to determine that these assets
have indefinite lives, analyzing all relevant factors, including the
expected usage of the asset, the typical lifecycle of the asset, and
anticipated changes in the market demand for the products and
services the asset helps generate. After review of the competitive,
legal, regulatory, and other factors, it is our view that these factors
do not limit the useful lives of our spectrum and broadcast licences.
Judgment is also applied in choosing methods for amortizing our
intangible assets and program rights that we believe most
accurately represent the consumption of those assets and are most
representative of the economic substance of the intended use of
the underlying assets.
STOCK-BASED COMPENSATION
Stock Option Plans
Our employee stock option plans attach cash-settled share
to all new and previously granted
appreciation rights (SARs)
IMPAIRMENT OF ASSETS
We make judgments in determining CGUs and the allocation of
the purpose of
goodwill
to CGUs or groups of CGUs for
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 81
MANAGEMENT’S DISCUSSION AND ANALYSIS
The
testing.
allocation of goodwill
involves
impairment
considerable management judgment in determining the CGUs (or
groups of CGUs) that are expected to benefit from the synergies of
a business combination. A CGU is the smallest identifiable group
of assets that generates cash inflows that are largely independent
of the cash inflows from other assets or groups of assets. Goodwill
and indefinite-life intangible assets are allocated to CGUs (or
groups of CGUs) based on the level at which management
monitors goodwill, which is not higher than an operating segment.
SEGMENTS
We make significant judgments in determining our operating
segments. These are components that engage in business activities
from which they may earn revenue and incur expenses, for which
operating results are regularly reviewed by our chief operating
decision makers to make decisions about resources to be allocated
and to assess component performance, and for which discrete
financial information is available.
HEDGE ACCOUNTING
We make significant
financial
assumptions for effectiveness valuation models.
instruments qualify for hedge accounting,
judgments in determining whether our
including
INCOME AND OTHER TAXES
We accrue income and other tax provisions based on information
currently available in each of the jurisdictions in which we operate.
While we believe we have paid and provided for adequate
amounts of tax, our business is complex and significant judgment is
required in interpreting how tax legislation and regulations apply to
us. Our tax filings are subject to audit by the relevant government
revenue authorities and the results of the government audit could
materially change the amount of our actual income tax expense,
income taxes payable or
taxes payable or
receivable, and deferred income tax assets and liabilities and could,
in certain circumstances, result in the assessment of interest and
penalties.
receivable, other
liabilities. Our
CONTINGENCIES
is involved in the determination of
Considerable judgment
contingent
is based on information
judgment
currently known to us, and the probability of the ultimate resolution
of the contingencies. If it becomes probable that a contingent
liability will result in an outflow of economic resources, we will
record a provision in the period the change in probability occurs.
The amount of the loss involves judgment based on information
available at that time. Any provision recognized for a contingent
liability could be material to our consolidated financial position and
results of operations.
TRANSACTIONS WITH RELATED PARTIES
We have entered into certain transactions in the normal course of
business with related parties in which we have an equity interest.
The amounts received from or paid to these parties were as follows:
(In millions of dollars)
Revenue
Purchases
Years ended December 31
2015
2014
% Chg
115
170
15
88
n/m
93
5.
82 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
We have entered into business transactions with companies whose
partners or senior officers are Directors of RCI, which include:
• the non-executive chairman of a law firm that provides a portion
of the Company’s legal services;
• the chairman of a company that provides printing services to the
Company; and
• the chairman and chief executive officer of a firm to which the
Company pays commissions for insurance coverage (ceased as a
related party effective April 2015).
(In millions of dollars)
Years ended December 31
2015
2014
Printing, legal services, and commission paid on
premiums for insurance coverage
31
38
We have also entered into certain transactions with our controlling
shareholder and companies it controls. These transactions are
subject to formal agreements approved by the Audit and Risk
Committee. Total amounts paid to these related parties generally
reflect the charges to Rogers for occasional business use of aircraft,
net of other administrative services, and were less than $1 million
for 2015 and 2014 combined.
These transactions are measured at the amount agreed to by the
related parties, which are also reviewed by the Audit and Risk
Committee. The amounts owing are unsecured, interest-free, and due
for payment in cash within one month from the date of the transaction.
NEW ACCOUNTING STANDARDS
adopt
We did not
amended accounting
any new or
pronouncements that had a material impact on our 2015 annual
consolidated financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
The IASB has issued the following new standards and amendments
to existing standards that will become effective in a future year and
will or could have an impact on our consolidated financial
statements in future periods.
• IFRS 15, Revenue from Contracts with Customers (IFRS 15) - In
May 2014, the IASB issued IFRS 15 which will supersede all
existing standards and interpretations in IFRS relating to revenue,
including IAS 18, Revenue and IFRIC 13, Customer Loyalty
Programmes.
IFRS 15 introduces a single model for recognizing revenue from
contracts with customers. This standard applies to all contracts with
customers, with only some exceptions, including certain contracts
accounted for under other IFRSs. The standard requires revenue to
be recognized in a manner that depicts the transfer of promised
goods or services to a customer and at an amount that reflects the
consideration expected to be received in exchange for transferring
those goods or services. This is achieved by applying the following five
steps:
Identify the contract with a customer;
Identify the performance obligations in the contract;
1.
2.
3. Determine the transaction price;
4. Allocate the transaction price to the performance
obligations in the contract; and
Recognize revenue when (or as)
performance obligation.
the entity satisfies a
IFRS 15 also provides guidance relating to the treatment of
contract acquisition and contract fulfillment costs.
the application of
this new standard will have
We expect
significant
impacts on our reported results, specifically with
regards to the timing of recognition and classification of revenue,
and the treatment of costs incurred in acquiring customer
contracts. The timing of recognition and classification of revenue
will be affected because IFRS 15 requires the estimation of total
consideration over the contract term at contract inception and
allocation of consideration to all performance obligations in the
contract based on their relative standalone selling prices. We
anticipate this will most
significantly affect our Wireless
arrangements that bundle equipment and service together into
monthly service fees, which will
in an increase to
equipment revenue recognized at contract inception and a
decrease to network revenue recognized over the course of the
contracts.
result
The treatment of costs incurred in acquiring customer contracts
will be impacted as IFRS 15 requires certain contract acquisition
costs (such as sales commissions) to be recognized as an asset
and amortized into operating expenses over time. Currently,
such costs are expensed as incurred.
In addition, certain new assets and liabilities will be recognized
Financial Position.
on our Consolidated Statements of
Specifically, a contract asset or contract
liability will be
recognized to account for any timing differences between the
revenue recognized and the amounts billed to the customer.
Also, certain costs related to acquiring contracts (e.g. sales
commissions) will be recorded as assets and expensed over a
period consistent with the transfer of goods and services to
which the asset relates, instead of as incurred.
The standard is effective for annual periods beginning on or after
January 1, 2018 (as amended in September 2015). We are
required to retrospectively apply IFRS 15 to all contracts that are
not complete on the date of initial application and have the
option to either:
• restate each prior period and recognize the cumulative effect
of initially applying IFRS 15 as an adjustment to the opening
balance of equity at the beginning of the earliest period
presented; or
• retain prior period figures as reported under the previous
standards and recognize the cumulative effect of
initially
applying IFRS 15 as an adjustment to the opening balance of
equity as at the date of initial application. This approach will
initial
also require additional disclosures in the year of
application to explain how the relevant financial statement line
items would be affected by the application of IFRS 15 as
compared to previous standards.
We are assessing the impact of this standard on our consolidated
financial statements.
• IFRS 9, Financial Instruments (IFRS 9) - In July 2014, the IASB
issued the final publication of the IFRS 9 standard, which will
recognition and
supersede IAS 39, Financial
measurement (IAS 39). IFRS 9 includes revised guidance on the
classification and measurement of
instruments,
including a new expected credit loss model for calculating
impairment on financial assets, and the new hedge accounting
Instruments:
financial
guidance. It also carries forward the guidance on recognition
instruments from IAS 39. The
and derecognition of financial
standard is effective for annual periods beginning on or after
January 1, 2018, with early adoption permitted. We are assessing
the impact of
this standard on our consolidated financial
statements.
• IFRS 16, Leases (IFRS 16) – In January 2016, the IASB issued the
final publication of the IFRS 16 standard, which will supersede
the current IAS 17, Leases (IAS 17) standard. IFRS 16 introduces a
single accounting model for lessees and for all leases with a term
of more than 12 months, unless the underlying asset is of low
value. A lessee will be required to recognize a right-of-use asset,
representing its right to use the underlying asset, and a lease
liability, representing its obligation to make lease payments. The
accounting treatment for lessors will remain largely the same as
under IAS 17.
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The standard is effective for annual periods beginning on or after
January 1, 2019, with early adoption permitted, but only if the
entity is also applying IFRS 15. We have the option to either:
• apply IFRS 16 with full retrospective effect; or
• recognize the cumulative effect of initially applying IFRS 16 as
initial
to opening equity at
the date of
an adjustment
application.
We are assessing the impact of
consolidated financial statements.
this
standard on our
Intangible Assets – In May 2014,
• Amendments to IAS 16, Property, Plant and Equipment and
the IASB issued
IAS 38,
amendments to these standards to introduce a rebuttable
presumption that
revenue-based amortization
methods for intangible assets is inappropriate. The amendment
is effective prospectively for annual periods beginning on or after
January 1, 2016. The amended standard will not have a material
impact on our consolidated financial statements.
the use of
• Amendments to IFRS 11, Joint Arrangements – In May 2014, the
IASB issued an amendment to this standard requiring business
combination accounting to be applied to acquisitions of
interests in a joint operation that constitute a business. The
amendment
is effective prospectively for annual periods
beginning on or after January 1, 2016. We will account for any
from January 1, 2016 prospectively in
such transactions
accordance with the amended standard.
KEY PERFORMANCE INDICATORS
We measure the success of our strategy using a number of key
performance indicators, which are outlined below. We believe
these key performance indicators allow us to appropriately
measure our performance against our operating strategy as well as
against the results of our peers and competitors. The following key
performance indicators are not measurements in accordance with
IFRS and should not be considered as an alternative to net income
or any other measure of performance under IFRS.
SUBSCRIBER COUNT
We determine the number of subscribers to our services based on
active subscribers. When subscribers are deactivated, either
voluntarily or involuntarily for non-payment, they are considered
deactivations in the period the services are discontinued.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 83
MANAGEMENT’S DISCUSSION AND ANALYSIS
Wireless
• A wireless subscriber
telephone number.
is represented by each identifiable
• We report wireless subscribers in two categories: postpaid and
prepaid. Postpaid and prepaid include voice-only subscribers,
data-only subscribers, and subscribers with service plans
integrating both voice and data.
• Wireless prepaid subscribers are considered active for a period
of 180 days from the date of their last revenue-generating usage.
Cable
• Cable Television and Internet subscribers are represented by a
dwelling unit; Cable Phone subscribers are represented by line
counts.
• When there is more than one unit in one dwelling, such as an
apartment building, each tenant with cable service is counted as
an individual subscriber, whether
the service is invoiced
separately or included in the tenant’s rent. Institutional units, like
hospitals or hotels, are each considered one subscriber.
• Cable Television, Internet, and Phone subscribers include only
those subscribers who have service installed and operating, and
who are being billed accordingly.
SUBSCRIBER CHURN
Subscriber churn is a measure of the number of subscribers that
deactivated during a period as a percentage of the total subscriber
base, usually calculated on a monthly basis. Subscriber churn
measures our success in retaining our subscribers. We calculate it
by dividing the number of Wireless subscribers that deactivated
(usually in a month) by the aggregate numbers of subscribers at
the beginning of the period. When used or reported for a period
greater than one month, subscriber churn represents the sum of
the number of subscribers deactivating for each period incurred
divided by the sum of the aggregate number of subscribers at the
beginning of each period incurred.
POSTPAID AVERAGE REVENUE PER ACCOUNT
Commencing in the first quarter of 2015, we began disclosing
postpaid average revenue per account (ARPA) as one of our key
performance indicators. Postpaid ARPA helps us identify trends
and measure our success in attracting and retaining multiple-
typically
device accounts. A single Wireless postpaid account
provides subscribers with the advantage of allowing for the pooling
of plan attributes across multiple devices and on a single bill. Each
typically
represented by an
is
Wireless postpaid account
identifiable billing account number. A single Wireless postpaid
account may include more than one identifiable telephone
number and receive monthly Wireless services for a variety of
connected devices including smartphones, basic phones, tablets,
and other devices. Wireless postpaid accounts under our various
brand names are considered separate accounts. We calculate
Wireless postpaid ARPA by dividing total Wireless postpaid
network revenue (monthly) by the average number of Wireless
postpaid accounts for the same time period.
BLENDED AVERAGE REVENUE PER USER
Blended average revenue per user (ARPU) helps us identify trends
and measure our success in attracting and retaining higher value
subscribers. We calculate blended ARPU by dividing network
revenue (monthly) by the average total number of Wireless
subscribers for the same time period.
CAPITAL INTENSITY
Capital intensity allows us to compare the level of our additions to
property, plant and equipment to that of other companies within
the same industry. Our additions to property, plant and equipment
do not include expenditures on spectrum licences. We calculate
intensity by dividing additions to property, plant and
capital
equipment by operating revenue. For Wireless, capital intensity is
calculated using total network revenue. We use it to evaluate the
performance of our assets and when making decisions about
additions to property, plant and equipment. We believe that
certain investors and analysts use capital intensity to measure the
performance of asset purchases and construction in relation to
revenue.
DIVIDEND PAYOUT RATIOS
We calculate the dividend payout ratio by dividing dividends
declared for the year by net income or free cash flow for the year.
We use dividends as a percentage of net income and free cash
flow to conduct analysis and assist with determining the dividends
we should pay.
RETURN ON ASSETS
We use return on assets to measure our efficiency in using our
assets to generate net income. We calculate return on assets by
dividing net income for the year by total assets as at year-end.
84 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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NON-GAAP MEASURES
We use the following non-GAAP measures. These are reviewed regularly by management and our Board in assessing our performance
and making decisions regarding the ongoing operations of our business and its ability to generate cash flows. Some or all of these
measures may also be used by investors, lending institutions, and credit rating agencies as indicators of our operating performance, of our
ability to incur and service debt, and as measurements to value companies in the telecommunications sector. These are not recognized
measures under GAAP and do not have standard meanings under IFRS, so may not be a reliable way to compare us to other companies.
Non-GAAP measure Why we use it
Adjusted operating
profit
Adjusted operating
profit margin
• To evaluate the performance of our businesses, and when making
decisions about the ongoing operations of the business and our
ability to generate cash flows.
• We believe that certain investors and analysts use adjusted operating
profit to measure our ability to service debt and to meet other
payment obligations.
• We also use it as one component in determining short-term incentive
compensation for all management employees.
Adjusted net income
Adjusted basic and
diluted earnings per
share
• To assess the performance of our businesses before the effects of the
noted items, because they affect the comparability of our financial
results and could potentially distort the analysis of trends in business
performance. Excluding these items does not imply they are non-
recurring.
Free cash flow
• To show how much cash we have available to repay debt and reinvest
in our company, which is an important indicator of our financial
strength and performance.
• We believe that some investors and analysts use free cash flow to
value a business and its underlying assets.
Adjusted net debt
• To conduct valuation-related analysis and make decisions about
capital structure.
• We believe this helps investors and analysts analyze our enterprise
and equity value and assess our leverage.
Adjusted net debt /
adjusted operating
profit
• To conduct valuation-related analysis and make decisions about
capital structure.
• We believe this helps investors and analysts analyze our enterprise
and equity value and assess our leverage.
Most
comparable
IFRS financial
measure
Net income
Net income
Basic and diluted
earnings per share
Cash provided by
operating activities
Long-term debt
Long-term debt
divided by net income
How we calculate it
Adjusted operating profit:
Net income
add (deduct)
income taxes, other expense
(income), finance costs,
restructuring, acquisition and other,
depreciation and amortization,
stock-based compensation, and
impairment of assets.
Adjusted operating profit margin:
Adjusted operating profit
divided by
Operating revenue (network
revenue for Wireless)
Adjusted net income:
Net income
add (deduct)
stock-based compensation,
restructuring, acquisition and other,
impairment of assets, (gain) on sale
of investments, (gain) on
acquisitions, loss on non-controlling
interest purchase obligations, loss
on repayment of long-term debt,
and income tax adjustments on
these items, including adjustments
as a result of legislative changes.
Adjusted basic and diluted earnings
per share:
Adjusted net income
divided by
basic and diluted weighted average
shares outstanding.
Adjusted operating profit
deduct
additions to property, plant and
equipment, interest on borrowings
net of capitalized interest, and cash
income taxes.
Total long-term debt
add (deduct)
current portion of long-term debt,
deferred transaction costs and
discounts, net debt derivative
(assets) liabilities, credit risk
adjustment related to net debt
derivatives, bank advances (cash
and cash equivalents) and short-
term borrowings.
Adjusted net debt (defined above)
divided by
12 months trailing adjusted
operating profit (defined above).
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 85
MANAGEMENT’S DISCUSSION AND ANALYSIS
RECONCILIATION OF ADJUSTED OPERATING PROFIT AND
ADJUSTED OPERATING PROFIT MARGIN
RECONCILIATION OF ADJUSTED NET DEBT AND ADJUSTED
NET DEBT / ADJUSTED OPERATING PROFIT 1
Years ended December 31
As at December 31
(In millions of dollars)
Net income
Add (deduct):
Income taxes
Other (income) expense
Finance costs
Restructuring, acquisition and other
Depreciation and amortization
Stock-based compensation
Adjusted operating profit
2015
1,381
466
(32)
774
111
2,277
55
5,032
2014
(In millions of dollars)
1,341
506
1
817
173
2,144
37
5,019
Current portion of long-term debt
Long-term debt
Deferred transaction costs and discounts
Add (deduct):
Net debt derivative assets
Credit risk adjustment related to net debt
derivatives
Short-term borrowings
Cash and cash equivalents
Years ended December 31
Adjusted net debt
2015
1,000
15,870
111
16,981
(2,028)
(152)
800
(11)
2014
963
13,824
108
14,895
(846)
(39)
842
(176)
15,590
14,676
As at December 31
(In millions of dollars, except percentages)
2015
2014
Adjusted operating profit margin:
Adjusted operating profit
Divided by: total operating revenue
Adjusted operating profit margin
5,032
13,414
37.5%
5,019
12,850
39.1%
RECONCILIATION OF ADJUSTED NET INCOME
(In millions of dollars)
Net income
Add (deduct):
Stock-based compensation
Restructuring, acquisition and other
Gain on acquisition of Mobilicity
Loss on non-controlling interest purchase
obligation
Loss on repayment of long-term debt
Income tax impact of above items
Income tax adjustment, legislative tax change
Years ended December 31
2015
1,381
55
111
(102)
72
7
(40)
6
2014
1,341
37
173
–
–
29
(62)
14
RECONCILIATION OF FREE CASH FLOW
(In millions of dollars)
Cash provided by operating activities
Add (deduct):
Additions to property, plant and equipment
Interest on borrowings, net of capitalized
interest
Restructuring, acquisition and other
Interest paid
Change in non-cash working capital
Other adjustments
Years ended December 31
2015
3,747
2014
3,698
(2,440)
(2,366)
(732)
111
771
302
(83)
(756)
173
778
(11)
(79)
Free cash flow
1,676
1,437
RECONCILIATION OF DIVIDEND PAYOUT RATIO OF FREE
CASH FLOW
Years ended December 31
(In millions of dollars, except percentages)
2015
2014
Dividend payout ratio of free cash flow:
Dividends declared during the year
Divided by: free cash flow
Dividend payout ratio of free cash flow
988
1,676
59%
942
1,437
66%
86 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
(In millions of dollars, except ratios)
2015
2014
Adjusted net debt / adjusted operating profit
Adjusted net debt
Divided by: trailing 12 months adjusted
operating profit
Adjusted net debt / adjusted operating profit
15,590
14,676
5,032
3.1
5,019
2.9
1 Effective September 30, 2015, we have retrospectively amended our calculation of
adjusted net debt to value the net debt derivatives without adjustment for credit risk.
For accounting purposes in accordance with IFRS, we recognize the fair values of our
debt derivatives using an estimated credit-adjusted mark-to-market valuation by
discounting cash flows to the measurement date. For purposes of calculating
adjusted net debt and adjusted net debt / adjusted operating profit, we believe
including debt derivatives valued without adjustment for credit risk is commonly used
to evaluate debt leverage and for market valuation and transactional purposes.
RECONCILIATION OF ADJUSTED EARNINGS PER SHARE
Years ended December 31
2015
2014
1,490
1,532
515
515
$ 2.89
$ 2.97
Adjusted basic earnings per share:
Adjusted net income
Divided by: weighted average number of
shares outstanding
Adjusted basic earnings per share
Adjusted diluted earnings per share:
Adjusted net income
Divided by: diluted weighted average number
of shares outstanding
1,490
1,532
517
517
Adjusted diluted earnings per share
$ 2.88
$ 2.96
Basic earnings per share:
Net income
Divided by: weighted average number of
shares outstanding
Basic earnings per share
Diluted earnings per share:
1,381
1,341
515
515
$ 2.68
$ 2.60
Net income
Effect on net income of dilutive securities
Diluted net income
Divided by: diluted weighted average number
of shares outstanding
1,381
–
1,381
517
1,341
(15)
1,326
517
Diluted earnings per share
$ 2.67
$ 2.56
Adjusted net income
1,490
1,532
(In millions of dollars, except per share amounts;
number of shares outstanding in millions)
SUMMARY OF FINANCIAL RESULTS OF LONG-TERM DEBT GUARANTOR
Our outstanding public debt, $3.6 billion bank credit and letter of credit facilities, and derivatives are unsecured obligations of RCI, as
obligor, and RCCI, as either co-obligor or guarantor, as applicable.
The following table sets forth the selected unaudited consolidating summary financial information for RCI for the periods identified below,
presented with a separate column for: (i) RCI, (ii) RCCI, (iii) our non-guarantor subsidiaries on a combined basis, (iv) consolidating
adjustments, and (v) the total consolidated amounts.
Years ended December 31
RCI 1, 2
RCCI 1, 2, 3, 4
Non-guarantor
subsidiaries 1, 2, 4
Consolidating
adjustments 1, 2
Total
(In millions of dollars, unaudited)
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Selected Statements of Income data measure:
Revenue
Net income (loss)
24
1,381
19
1,341
11,489
1,478
11,096
1,453
2,099
1,104
1,881
964
(198)
(2,582)
(146) 13,414
1,381
(2,417)
12,850
1,341
As at December 31
RCI 1, 2
RCCI 1, 2, 3, 4
Non-guarantor
subsidiaries 1, 2, 4
Consolidating
adjustments 1, 2
Total
(In millions of dollars, unaudited)
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Selected Statements of Financial Position data measure:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
23,891
27,270
24,024
17,928
18,530
23,760
17,701
15,619
19,322
36,862
25,951
1,655
13,473
33,183
20,255
1,483
8,331
8,236
5,609
259
3,280
7,776
1,545
180
(48,922)
(45,815)
(50,567)
(1,429)
2,622
(32,938)
(40,542) 26,553
5,017
(34,581)
(1,161) 18,413
2,345
24,177
4,920
16,121
1 For the purposes of this table, investments in subsidiary companies are accounted for by the equity method.
2 Amounts recorded in current liabilities and non-current liabilities for RCCI do not include any obligations arising as a result of being a guarantor or co-obligor, as the case may be,
under any of RCI’s long-term debt.
3 On January 1, 2016, Fido Solutions Inc., a subsidiary of RCI, transferred its partnership interest in RCP to Rogers Cable and Data Centres Inc. (RCDCI), a subsidiary of RCI, leaving
RCDCI as the sole partner of RCP, thereby causing RCP to cease to exist (the dissolution). RCDCI became the owner of all the assets and assumed all the liabilities previously held
by RCP. Subsequent to the reorganization, RCDCI changed its name to Rogers Communications Canada Inc. (RCCI).
4 The financial information for RCCI and our non-guarantors subsidiaries is presented on a pro-forma basis as if the dissolution of RCP had occurred on January 1, 2014.
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2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 87
MANAGEMENT’S DISCUSSION AND ANALYSIS
FIVE-YEAR SUMMARY OF CONSOLIDATED FINANCIAL RESULTS
(In millions of dollars, except per share amounts, subscriber count
results, ARPA, ARPU, churn, percentages, and ratios)
2015
2014
2013
2012
2011
As at or years ended December 31
Income and cash flow:
Operating revenue
Wireless
Cable
Business Solutions
Media
Corporate items and intercompany eliminations
Total operating revenue
Adjusted operating profit 1
Wireless
Cable
Business Solutions
Media
Corporate items and intercompany eliminations
Total adjusted operating profit
Net income from continuing operations
Net income
Adjusted net income from continuing operations 1
Cash provided by operating activities
Free cash flow 1
Additions to property, plant and equipment
Earnings per share from continuing operations
Basic
Diluted
Earnings per share
Basic
Diluted
Adjusted earnings per share 1
Basic
Diluted
Statements of Financial Position:
Assets
Property, plant and equipment, net
Goodwill
Intangible assets
Investments
Other assets
Total assets
Liabilities and Shareholders’ Equity
Long-term liabilities
Current liabilities
Total liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
Subscriber count results (000s): 2
Wireless subscribers
Internet subscribers
Television subscribers
Phone subscribers
Additional Wireless metrics: 2
Postpaid churn (monthly)
Postpaid ARPA (monthly) 3
Blended ARPU (monthly)
Ratios:
Revenue growth
Adjusted operating profit growth
Dividends declared per share
Dividend payout ratio of net income 2
Dividend payout ratio of free cash flow 1,2
Return on assets 2
Adjusted net debt / adjusted operating profit 1
7,651
3,465
377
2,079
(158)
7,305
3,467
382
1,826
(130)
7,270
3,475
374
1,704
(117)
7,280
3,358
351
1,620
(123)
7,138
3,309
405
1,611
(117)
13,414
12,850
12,706
12,486
12,346
3,239
1,658
116
172
(153)
5,032
1,381
1,381
1,490
3,747
1,676
2,440
$ 2.68
$ 2.67
$ 2.68
$ 2.67
$ 2.89
$ 2.88
10,997
3,891
7,243
2,271
4,773
29,175
18,413
5,017
23,430
5,745
29,175
9,877
2,048
1,896
1,090
1.27%
$110.74
$ 59.71
4%
0%
$ 1.92
72%
59%
4.7%
3.1
3,246
1,665
122
131
(145)
5,019
1,341
1,341
1,532
3,698
1,437
2,366
$ 2.60
$ 2.56
$ 2.60
$ 2.56
$ 2.97
$ 2.96
10,655
3,883
6,588
1,898
3,498
26,522
16,121
4,920
21,041
5,481
26,522
9,450
2,011
2,024
1,150
1.27%
$106.41
$ 59.41
1%
1%
$ 1.83
70%
66%
5.1%
2.9
3,157
1,718
106
161
(149)
4,993
1,669
1,669
1,769
3,990
1,548
2,240
$ 3.24
$ 3.22
$ 3.24
$ 3.22
$ 3.43
$ 3.42
10,255
3,751
3,211
1,487
4,897
23,601
14,326
4,606
18,932
4,669
23,601
9,503
1,961
2,127
1,153
3,063
1,605
89
190
(113)
4,834
1,725
1,693
1,781
3,421
1,649
2,142
$ 3.32
$ 3.30
$ 3.26
$ 3.24
$ 3.43
$ 3.41
9,576
3,215
2,951
1,484
2,392
3,036
1,549
86
180
(112)
4,739
1,590
1,563
1,736
3,791
1,874
2,127
$ 2.93
$ 2.91
$ 2.88
$ 2.86
$ 3.20
$ 3.17
9,114
3,280
2,721
1,107
2,140
19,618
18,362
12,848
3,002
15,850
3,768
19,618
9,437
1,864
2,214
1,074
12,241
2,549
14,790
3,572
18,362
9,335
1,793
2,297
1,052
1.24%
1.29%
1.32%
$ 59.58
$ 59.79
$ 60.20
2%
3%
$ 1.74
54%
58%
7.1%
2.3
1%
2%
$ 1.58
48%
50%
8.6%
2.3
3%
2%
$ 1.42
49%
41%
8.5%
2.2
1 Adjusted operating profit, adjusted net income, adjusted basic and diluted earnings per share, free cash flow, adjusted net debt, adjusted net debt / adjusted operating profit,
and dividend payout ratio of free cash flow are non-GAAP measures and should not be considered as a substitute or alternative for GAAP measures. These are not defined terms
under IFRS, and do not have standard meanings, so may not be a reliable way to compare us to other companies. See “Non-GAAP Measures” for information about these
measures, including how we calculate them.
2 As defined. See “Key Performance Indicators”.
3 Postpaid ARPA has not been presented for periods prior to 2014. We commenced reporting postpaid ARPA as a key performance indicator in the first quarter of 2015. See “Key
Performance Indicators”.
88 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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Management’s Responsibility for Financial Reporting
December 31, 2015
The accompanying consolidated financial statements of Rogers
Communications Inc. and its subsidiaries and all the information in
Management’s Discussion and Analysis
are the
responsibility of management and have been approved by the
Board of Directors.
(MD&A)
Management has prepared the consolidated financial statements
in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board. The
consolidated financial statements include certain amounts that are
based on management’s best estimates and judgments and, in
their opinion, present
respects, Rogers
Communications Inc.’s financial position, results of operations, and
cash flows. Management has prepared the financial information
presented elsewhere in MD&A and has ensured that it is consistent
with the consolidated financial statements.
in all material
fairly,
Management has developed and maintains a system of internal
controls that further enhances the integrity of the consolidated
financial statements. The system of internal controls is supported by
and includes management
the
communication to employees about its policies on ethical business
conduct.
function
internal
audit
Management believes these internal controls provide reasonable
assurance that:
• transactions are properly authorized and recorded;
• financial records are reliable and form a proper basis for the
preparation of consolidated financial statements; and
• the assets of Rogers Communications Inc. and its subsidiaries are
properly accounted for and safeguarded.
The Board of Directors is responsible for overseeing management’s
responsibility for financial reporting and is ultimately responsible for
reviewing and approving the consolidated financial statements. The
Board of Directors carries out this responsibility through its Audit
and Risk Committee.
responsibilities; and to review MD&A,
The Audit and Risk Committee meets regularly with management,
as well as the internal and external auditors, to discuss internal
controls over the financial reporting process, auditing matters, and
financial reporting issues; to satisfy itself that each party is properly
discharging its
the
consolidated financial statements, and the external auditors’ report.
The Audit and Risk Committee reports its findings to the Board of
Directors for its consideration when approving the consolidated
financial statements for issuance to the shareholders. The Audit and
Risk Committee also considers the engagement or re-appointment
of the external auditors before submitting its recommendation to
the Board of Directors for review and for shareholder approval.
The consolidated financial statements have been audited by KPMG
LLP, the external auditors, in accordance with Canadian generally
accepted auditing standards and the standards of the Public
Company Accounting Oversight Board (United States) on behalf of
the shareholders. KPMG LLP has full and free access to the Audit
and Risk Committee.
February 11, 2016
Guy Laurence
President and Chief Executive Officer
Anthony Staffieri, FCPA, FCA
Chief Financial Officer
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 89
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Shareholders of Rogers Communications Inc.
We have audited the accompanying consolidated financial
statements of Rogers Communications Inc., which comprise the
consolidated statements of financial position as at December 31,
2015 and December 31, 2014, the consolidated statements of
income, comprehensive income, changes in shareholders’ equity
and cash flows for the years then ended, and notes, comprising a
summary of significant accounting policies and other explanatory
information.
includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained in our audits
is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements present fairly,
in all material respects, the consolidated financial position of
Rogers Communications Inc. as at December 31, 2015 and
December 31, 2014, and its consolidated financial performance
and its consolidated cash flows for the years then ended in
accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
Other Matter
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
financial
Rogers Communications Inc.’s internal control over
reporting as of December 31, 2015, based on the criteria
established in
Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO), and our
report dated
February 11, 2016 expressed an unmodified (unqualified) opinion
on the effectiveness of Rogers Communications Inc.’s internal
control over financial reporting.
Internal Control
–
Chartered Professional Accountants, Licensed Public Accountants
February 11, 2016
Toronto, Canada
Management’s Responsibility for the Consolidated Financial
Statements
the preparation and fair
responsible for
Management
is
in
these consolidated financial
presentation of
accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board, and for
such internal control as management determines is necessary to
enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
statements
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We conducted our audits
in accordance with Canadian generally accepted auditing
standards and the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
comply with ethical requirements and plan and perform the audit
to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on our judgment,
including the assessment of the risks of material misstatement of
the consolidated financial statements, whether due to fraud or
error.
In making those risk assessments, we consider internal
control relevant to the entity’s preparation and fair presentation of
the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances. An audit also
90 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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Report of Independent Registered Public Accounting Firm
To the Board of Directors of Rogers Communications Inc.
–
Internal Control
We have audited Rogers Communications Inc.’s internal control
over financial reporting as of December 31, 2015, based on criteria
established in
Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Rogers Communications Inc.’s
management
is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in
Management’s Report on Internal Control over Financial Reporting
included in Management’s Discussion and Analysis for the year
ended December 31, 2015. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material
respects. Our audit
included obtaining an understanding of
internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design
and operating effectiveness of
internal control based on the
assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes
in accordance with generally accepted
accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions
financial
are recorded as necessary to permit preparation of
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are
being made only
in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, Rogers Communications Inc. maintained,
in all
material respects, effective internal control over financial reporting
as of December 31, 2015, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited,
in accordance with Canadian generally
accepted auditing standards and the standards of the Public
the
Company Accounting Oversight Board (United States),
consolidated statements of
financial position of Rogers
Communications Inc. as of December 31, 2015 and December 31,
2014, and the related consolidated statements of
income,
comprehensive income, changes in shareholders’ equity, and cash
flows for the years ended December 31, 2015 and December 31,
2014, and our report dated February 11, 2016 expressed an
unqualified opinion on those consolidated financial statements.
Chartered Professional Accountants, Licensed Public Accountants
February 11, 2016
Toronto, Canada
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 91
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Income
(In millions of Canadian dollars, except per share amounts)
Years ended December 31
Operating revenue
Operating expenses:
Operating costs
Depreciation and amortization
Restructuring, acquisition and other
Finance costs
Other (income) expense
Income before income taxes
Income taxes
Net income for the year
Earnings per share:
Basic
Diluted
The accompanying notes are an integral part of the consolidated financial statements.
Note
5
2015
13,414
2014
12,850
6
7, 8
9
10
11
12
8,437
2,277
111
774
(32)
1,847
466
1,381
7,868
2,144
173
817
1
1,847
506
1,341
13
13
$ 2.68
$ 2.67
$ 2.60
$ 2.56
92 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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Consolidated Statements of Comprehensive Income
(In millions of Canadian dollars)
Years ended December 31
Net income for the year
Other comprehensive (loss) income:
Items that will not be reclassified to income:
Defined benefit pension plans:
Remeasurements
Related income tax (expense) recovery
Items that will not be reclassified to net income
Items that may subsequently be reclassified to income:
Change in fair value of available-for-sale investments:
(Decrease) increase in fair value
Related income tax recovery (expense)
Cash flow hedging derivative instruments:
Unrealized gain in fair value of derivative instruments
Reclassification to net income of gain on debt derivatives
Reclassification to net income for loss on repayment of long-term debt
Reclassification to net income or property, plant and equipment of gain on
expenditure derivatives
Reclassification to net income for accrued interest
Related income tax expense
Share of other comprehensive income of equity-accounted investments, net of tax
Items that may subsequently be reclassified to net income
Other comprehensive (loss) income for the year
Comprehensive income for the year
The accompanying notes are an integral part of the consolidated financial statements.
Note
2015
1,381
2014
1,341
23
16
24
(6)
18
(143)
20
(123)
1,524
(1,307)
7
(148)
(58)
(65)
(47)
23
(147)
(129)
(168)
45
(123)
369
(49)
320
925
(599)
29
(69)
(1)
(80)
205
10
535
412
1,252
1,753
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 93
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Financial Position
(In millions of Canadian dollars)
As at December 31
Assets
Current assets:
Cash and cash equivalents
Accounts receivable
Inventories
Other current assets
Current portion of derivative instruments
Total current assets
Property, plant and equipment
Intangible assets
Investments
Derivative instruments
Other long-term assets
Deferred tax assets
Goodwill
Total assets
Liabilities and shareholders’ equity
Current liabilities:
Short-term borrowings
Accounts payable and accrued liabilities
Income tax payable
Current portion of provisions
Unearned revenue
Current portion of long-term debt
Current portion of derivative instruments
Total current liabilities
Provisions
Long-term debt
Derivative instruments
Other long-term liabilities
Deferred tax liabilities
Total liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
Guarantees
Commitments and contingent liabilities
Subsequent events
The accompanying notes are an integral part of the consolidated financial statements.
On behalf of the Board of Directors:
Alan D. Horn, CPA, CA
Director
John H. Clappison, FCPA, FCA
Director
94 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
Note
2015
2014
11
1,792
318
303
198
2,622
10,997
7,243
2,271
1,992
150
9
3,891
29,175
800
2,708
96
10
388
1,000
15
5,017
50
15,870
95
455
1,943
23,430
5,745
29,175
176
1,591
251
191
136
2,345
10,655
6,588
1,898
788
356
9
3,883
26,522
842
2,578
47
7
443
963
40
4,920
55
13,824
11
462
1,769
21,041
5,481
26,522
14
15
16
7
8
17
16
18
12
8
19
20
21
16
20
21
16
22
12
24
28
29
1, 21, 24
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Consolidated Statements of Changes in Shareholders’ Equity
(In millions of Canadian dollars, except number of shares)
Class A
Voting shares
Class B
Non-Voting shares
Year ended December 31, 2015
Amount
(000s) Amount
Number
of shares
Number
of shares
(000s)
Balances, January 1, 2015
Net income for the year
Other comprehensive income (loss):
Defined benefit pension plans, net of tax
Available-for-sale investments, net of tax
Derivative instruments accounted for as
hedges, net of tax
Share of equity-accounted investments,
net of tax
Other comprehensive (loss) income
Comprehensive income for the year
Transactions with shareholders recorded
directly in equity:
Dividends declared
Share class exchange
Shares issued on exercise of stock options
Total transactions with shareholders
72 112,448
402 402,298
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(9)
–
(9)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9
1
10
Retained
earnings
4,172
1,381
18
–
–
–
18
1,399
(988)
–
–
(988)
Available-for-
sale financial
assets reserve
Hedging
reserve
Equity
investment
hedging
reserve
Total
shareholders’
equity
721
–
–
(123)
–
–
(123)
(123)
–
–
–
–
104
10
–
–
–
(47)
–
(47)
(47)
–
–
–
–
–
–
–
–
23
23
23
–
–
–
–
5,481
1,381
18
(123)
(47)
23
(129)
1,252
(988)
–
–
(988)
Balances, December 31, 2015
72 112,439
402 402,308
4,583
598
57
33
5,745
Class A
Voting shares
Class B
Non-Voting shares
Year ended December 31, 2014
Amount
(000s) Amount
Number
of shares
Number
of shares
(000s)
Balances, January 1, 2014
Net income for the year
Other comprehensive income:
Defined benefit pension plans, net of tax
Available-for-sale investments, net of tax
Derivative instruments accounted for as
hedges, net of tax
Share of equity-accounted investments,
net of tax
Other comprehensive income
Comprehensive income for the year
Transactions with shareholders recorded
directly in equity:
Dividends declared
Share class exchange
Shares issued on exercise of stock options
Total transactions with shareholders
72 112,462
401 402,281
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(14)
–
(14)
–
–
–
–
–
–
–
–
–
1
1
–
–
–
–
–
–
–
–
14
3
17
Retained
earnings
3,896
1,341
(123)
–
–
–
(123)
1,218
(942)
–
–
(942)
Available-for-
sale financial
assets reserve
Hedging
reserve
401
(101)
–
–
320
–
–
320
320
–
–
–
–
–
–
–
205
–
205
205
–
–
–
–
Equity
investment
hedging
reserve
Total
shareholders’
equity
–
–
–
–
–
10
10
10
–
–
–
–
4,669
1,341
(123)
320
205
10
412
1,753
(942)
–
1
(941)
Balances, December 31, 2014
72 112,448
402 402,298
4,172
721
104
10
5,481
The accompanying notes are an integral part of the consolidated financial statements.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 95
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows
(In millions of Canadian dollars)
Years ended December 31
Operating activities:
Net income for the year
Adjustments to reconcile net income to cash provided by operating activities:
Note
2015
2014
1,381
1,341
Depreciation and amortization
Program rights amortization
Finance costs
Income taxes
Stock-based compensation
Post-employment benefits contributions, net of expense
Gain on acquisition of Mobilicity
Other
Cash provided by operating activities before changes in non-cash working capital,
income taxes paid, and interest paid
Change in non-cash operating working capital items
Cash provided by operating activities before income taxes paid and interest paid
Income taxes paid
Interest paid
Cash provided by operating activities
Investing activities:
Additions to property, plant and equipment
Additions to program rights
Changes in non-cash working capital related to property, plant and equipment and
intangible assets
Acquisitions and other strategic transactions, net of cash acquired
Other
Cash used in investing activities
Financing activities:
Proceeds received on short-term borrowings
Repayment of short-term borrowings
Issuance of long-term debt
Repayment of long-term debt
Proceeds on settlement of debt derivatives and forward contracts
Payments on settlement of debt derivatives, forward contracts, and bond forwards
Transaction costs incurred
Dividends paid
Cash (used in) provided by financing activities
Change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
7, 8
8
10
12
25
23
26
30
7
8
8, 17, 26
19
19
30
30
30
30
2,277
87
774
466
55
(16)
(102)
82
5,004
(302)
4,702
(184)
(771)
3,747
(2,440)
(64)
(116)
(1,077)
(70)
(3,767)
294
(336)
7,338
(6,584)
1,059
(930)
(9)
(977)
(145)
(165)
176
11
2,144
66
817
506
37
(34)
–
48
4,925
11
4,936
(460)
(778)
3,698
(2,366)
(231)
153
(3,456)
(51)
(5,951)
276
(84)
3,412
(2,551)
2,150
(2,115)
(30)
(930)
128
(2,125)
2,301
176
Cash and cash equivalents are defined as cash and short-term deposits which have an original maturity of less than 90 days, less bank
advances. As at December 31, 2015 and 2014, the balance of cash and cash equivalents was comprised of cash and demand deposits.
The accompanying notes are an integral part of the consolidated financial statements.
96 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
Notes to Consolidated Financial Statements
We, us, our, Rogers, Rogers Communications, and the Company refer to Rogers Communications Inc. and its subsidiaries. RCI refers to the
legal entity Rogers Communications Inc., not including its subsidiaries. RCI also holds interests in various investments and ventures.
Page Note
Page Note
97
98
100
100
102
103
104
106
109
109
109
110
112
112
113
113
Nature of the Business
Note 1
Significant Accounting Policies
Note 2
Capital Risk Management
Note 3
Segmented Information
Note 4
Operating Revenue
Note 5
Operating Costs
Note 6
Property, Plant and Equipment
Note 7
Intangible Assets and Goodwill
Note 8
Restructuring, Acquisition and Other
Note 9
Note 10
Finance Costs
Note 11 Other (Income) Expense
Income Taxes
Note 12
Note 13
Earnings Per Share
Note 14 Accounts Receivable
Inventories
Note 15
Financial Risk Management and Financial
Note 16
Instruments
NOTE 1: NATURE OF THE BUSINESS
121
122
122
122
123
126
126
129
130
133
134
136
136
138
Note 17
Investments
Note 18 Other Long-Term Assets
Short-Term Borrowings
Note 19
Provisions
Note 20
Note 21
Long-Term Debt
Note 22 Other Long-Term Liabilities
Post-Employment Benefits
Note 23
Shareholders’ Equity
Note 24
Stock-Based Compensation
Note 25
Note 26
Business Combinations
Note 27 Related Party Transactions
Note 28 Guarantees
Note 29 Commitments and Contingent Liabilities
Note 30
Supplemental Cash Flow Information
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is
Inc.
Rogers Communications
a diversified Canadian
communications and media company. Substantially all of our
operations and sales are in Canada. RCI is incorporated in Canada
and its registered office is located at 333 Bloor Street East, Toronto,
Ontario, M4W 1G9. RCI’s shares are publicly traded on the Toronto
Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock
Exchange (NYSE: RCI).
We report our results of operations in four segments. Each
segment and the nature of its business are as follows:
Segment
Wireless
Cable
Principal activities
Wireless telecommunications operations
for Canadian consumers and businesses
Cable telecommunications operations,
including Internet, television, and
telephony (phone) services for Canadian
consumers and businesses
Business Solutions Network connectivity through our fibre
network and data centre assets to support
a range of voice, data, networking,
hosting, and cloud-based services for
small, medium, and large Canadian
businesses, governments, and on a
wholesale basis to other
telecommunications providers
A diversified portfolio of media properties,
including television and radio
broadcasting, specialty channels, multi-
platform shopping, publishing, sports
media and entertainment, and digital
media
Media
During the year, Wireless, Cable, and Business Solutions were
operated by our wholly-owned subsidiary, Rogers Communications
Partnership (RCP), and certain other wholly-owned subsidiaries.
Media is operated by our wholly-owned subsidiary, Rogers Media
Inc., and its subsidiaries.
See note 4 for more information about our reportable operating
segments.
On January 1, 2016, Fido Solutions Inc., a subsidiary of RCI,
transferred its partnership interest in RCP to Rogers Cable and Data
Centres Inc. (RCDCI), a subsidiary of RCI, leaving RCDCI as the sole
partner of RCP, thereby causing RCP to cease to exist. RCDCI
became the owner of all the assets and assumed all the liabilities
previously held by RCP. Subsequent to the reorganization, RCDCI
changed its name to Rogers Communications Canada Inc. (RCCI).
STATEMENT OF COMPLIANCE
We prepared our consolidated financial statements in accordance
with International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board (IASB). Our Board of
Directors authorized these consolidated financial statements for
issue on February 11, 2016.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
All amounts are in Canadian dollars unless otherwise noted. Our
functional currency is the Canadian dollar. We prepare the
consolidated financial statements on a historical cost basis, except
for:
• certain financial instruments as disclosed in note 16, which are
measured at fair value;
• liabilities for stock-based compensation, which are measured at
fair value; and
• the net deferred pension liability, which is measured as
described in note 23.
(b) BASIS OF CONSOLIDATION
Subsidiaries are entities we control. We include the financial
statements of our subsidiaries in our consolidated financial
statements from the date we gain control of them until our control
ceases. We eliminate all intercompany transactions and balances
between our subsidiaries on consolidation.
(c) FOREIGN CURRENCY TRANSLATION
We translate amounts denominated in foreign currencies into
Canadian dollars as follows:
• monetary assets and monetary liabilities – at the exchange rate in
effect as at the date of the Consolidated Statements of Financial
Position;
• non-monetary assets, non-monetary liabilities, and related
the historical
depreciation and amortization expenses – at
exchange rates; and
• revenue and expenses other than depreciation and amortization
– at the average rate for the month in which the transaction was
recognized.
(d) NEW ACCOUNTING PRONOUNCEMENTS ADOPTED IN
2015
We did not
amended accounting
any new or
pronouncements that had a material impact on our 2015 annual
consolidated financial statements.
adopt
our
financial
preparing
consolidated
(e) ADDITIONAL SIGNIFICANT ACCOUNTING POLICIES,
ESTIMATES, AND JUDGMENTS
When
statements,
management makes judgments, estimates, and assumptions that
affect how accounting policies are applied and the amounts we
report as assets, liabilities, revenue, and expenses. Our significant
accounting policies, estimates, and judgments are identified in this
note. Furthermore,
the following information is disclosed
throughout the notes as identified in the table below:
• information about assumptions and estimation uncertainties that
have a significant risk of resulting in a material adjustment to the
amounts recognized in the consolidated financial statements;
• information about judgments made in applying accounting
policies that have the most significant effect on the amounts
recognized in the consolidated financial statements; and
• information on our significant accounting policies.
Note
Topic
Page Accounting Policy Use of Estimates Use of Judgments
4
5
7
8
12
13
14
15
16
17
20
23
25
26
29
Reportable Segments
Revenue Recognition
Property, Plant and Equipment
Intangible Assets and Goodwill
Income Taxes
Earnings Per Share
Accounts Receivable
Inventories
Financial Instruments
Investments
Provisions
Post-Employment Benefits
Stock-Based Compensation
Business Combinations
Commitments and Contingent Liabilities
100
102
104
106
110
112
112
113
113
121
122
126
130
133
136
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
98 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
(f) RECENT ACCOUNTING PRONOUNCEMENTS NOT YET
ADOPTED
The IASB has issued the following new standards and amendments
to existing standards that will become effective in a future year and
will or could have an impact on our consolidated financial
statements in future periods:
• IFRS 15, Revenue from Contracts with Customers (IFRS 15) – In
May 2014, the IASB issued IFRS 15 which will supersede all
existing standards and interpretations in IFRS relating to revenue,
including IAS 18, Revenue and IFRIC 13, Customer Loyalty
Programmes.
IFRS 15 introduces a single model for recognizing revenue from
contracts with customers. This standard applies to all contracts
including certain
with customers, with only some exceptions,
contracts accounted for under other IFRSs. The standard requires
revenue to be recognized in a manner that depicts the transfer of
promised goods or services to a customer and at an amount that
reflects the consideration expected to be received in exchange
for transferring those goods or services. This is achieved by
applying the following five steps:
Identify the contract with a customer;
Identify the performance obligations in the contract;
1.
2.
3. Determine the transaction price;
4. Allocate the transaction price to the performance
5.
obligations in the contract; and
Recognize revenue when (or as) the entity satisfies a
performance obligation.
IFRS 15 also provides guidance relating to the treatment of
contract acquisition and contract fulfillment costs.
the application of
this new standard will have
We expect
significant
impacts on our reported results, specifically with
regards to the timing of recognition and classification of revenue,
and the treatment of costs incurred in acquiring customer
contracts. The timing of recognition and classification of revenue
will be affected because IFRS 15 requires the estimation of total
consideration over the contract term at contract inception and
allocation of consideration to all performance obligations in the
contract based on their relative standalone selling prices. We
anticipate this will most
significantly affect our Wireless
arrangements that bundle equipment and service together into
in an increase to
monthly service fees, which will
equipment revenue recognized at contract inception and a
decrease to network revenue recognized over the course of the
contracts.
result
The treatment of costs incurred in acquiring customer contracts
will be impacted as IFRS 15 requires certain contract acquisition
costs (such as sales commissions) to be recognized as an asset
and amortized into operating expenses over time. Currently,
such costs are expensed as incurred.
In addition, certain new assets and liabilities will be recognized
Financial Position.
on our Consolidated Statements of
Specifically, a contract asset or contract
liability will be
recognized to account for any timing differences between the
revenue recognized and the amounts billed to the customer.
Also, certain costs related to acquiring contracts (e.g. sales
commissions) will be recorded as assets and expensed over a
period consistent with the transfer of goods and services to
which the asset relates, instead of as incurred.
The standard is effective for annual periods beginning on or after
January 1, 2018 (as amended in September 2015). We are
required to retrospectively apply IFRS 15 to all contracts that are
not complete on the date of initial application and have the
option to either:
• restate each prior period and recognize the cumulative effect
of initially applying IFRS 15 as an adjustment to the opening
balance of equity at the beginning of the earliest period
presented; or
• retain prior period figures as reported under the previous
initially
standards and recognize the cumulative effect of
applying IFRS 15 as an adjustment to the opening balance of
equity as at the date of initial application. This approach will
also require additional disclosures in the year of
initial
application to explain how the relevant financial statement line
items would be affected by the application of IFRS 15 as
compared to previous standards.
We are assessing the impact of
consolidated financial statements.
this
standard on our
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Instruments:
• IFRS 9, Financial Instruments (IFRS 9) – In July 2014, the IASB
issued the final publication of the IFRS 9 standard, which will
supersede IAS 39, Financial
recognition and
measurement (IAS 39). IFRS 9 includes revised guidance on the
classification and measurement of
instruments,
including a new expected credit loss model for calculating
impairment on financial assets, and the new hedge accounting
guidance. It also carries forward the guidance on recognition
instruments from IAS 39. The
and derecognition of financial
standard is effective for annual periods beginning on or after
January 1, 2018, with early adoption permitted. We are assessing
the impact of
this standard on our consolidated financial
statements.
financial
• IFRS 16, Leases (IFRS 16) – In January 2016, the IASB issued the
final publication of the IFRS 16 standard, which will supersede
the current IAS 17, Leases (IAS 17) standard. IFRS 16 introduces a
single accounting model for lessees and for all leases with a term
of more than 12 months, unless the underlying asset is of low
value. A lessee will be required to recognize a right-of-use asset,
representing its right to use the underlying asset, and a lease
liability, representing its obligation to make lease payments. The
accounting treatment for lessors will remain largely the same as
under IAS 17.
The standard is effective for annual periods beginning on or after
January 1, 2019, with early adoption permitted, but only if the
entity is also applying IFRS 15. We have the option to either:
• apply IFRS 16 with full retrospective effect; or
• recognize the cumulative effect of initially applying IFRS 16 as
initial
to opening equity at
the date of
an adjustment
application.
We are assessing the impact of
consolidated financial statements.
this
standard on our
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intangible Assets – In May 2014,
• Amendments to IAS 16, Property, Plant and Equipment and
IAS 38,
the IASB issued
amendments to these standards to introduce a rebuttable
presumption that
revenue-based amortization
methods for intangible assets is inappropriate. The amendment
is effective prospectively for annual periods beginning on or after
January 1, 2016. The amended standard will not have a material
impact on our consolidated financial statements.
the use of
NOTE 3: CAPITAL RISK MANAGEMENT
Our objectives in managing capital are to ensure we have sufficient
liquidity to meet all of our commitments and to execute our
business plan. We define capital that we manage as shareholders’
equity and indebtedness (including current portion of our long-
term debt, long-term debt, and short-term borrowings).
repay debt and/or short-term borrowings,
We manage our capital structure, commitments, and maturities
and make adjustments based on general economic conditions,
financial markets, operating risks, our investment priorities, and
working capital requirements. To maintain or adjust our capital
structure, we may, with approval from our Board of Directors, issue
or
issue shares,
repurchase shares, pay dividends, or undertake other activities as
deemed appropriate under
the circumstances. The Board of
Directors reviews and approves the annual capital and operating
budgets, as well as any material transactions that are not part of the
ordinary course of business, including proposals for acquisitions or
other major financing transactions, investments, or divestitures.
NOTE 4: SEGMENTED INFORMATION
ACCOUNTING POLICY
Reportable segments
We determine our reportable segments based on, among other
things, how our chief operating decision makers,
the Chief
Executive Officer and Chief Financial Officer of RCI, regularly review
our operations and performance. They review adjusted operating
profit as the key measure of profit for the purpose of assessing
performance for each segment and to make decisions about the
allocation of resources. Adjusted operating profit is defined as
income before stock-based compensation, depreciation and
amortization, restructuring, acquisition and other, finance costs,
other (income) expense, and income taxes.
We follow the same accounting policies for our segments as those
described in the notes to our consolidated financial statements.
We account for transactions between reportable segments in the
same way we account for transactions with external parties and
eliminate them on consolidation.
100 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
• Amendments to IFRS 11, Joint Arrangements – In May 2014, the
IASB issued an amendment to this standard requiring business
combination accounting to be applied to acquisitions of
interests in a joint operation that constitute a business. The
amendment
is effective prospectively for annual periods
beginning on or after January 1, 2016. We will account for any
such transactions
from January 1, 2016 prospectively in
accordance with the amended standard.
We monitor debt leverage ratios as part of the management of
liquidity and shareholders’ return to sustain future development of
the business, conduct valuation-related analyses, and make
decisions about capital.
the Superintendent of Financial
The Rogers Platinum MasterCard program, as well as the wholly-
owned subsidiary through which it is operated, is regulated by the
Office of
Institutions, which
requires that a minimum level of regulatory capital be maintained.
Rogers was
requirement as at
December 31, 2015 and 2014. The capital requirements are not
material
to the Company as at December 31, 2015 or
December 31, 2014.
in compliance with that
With the exception of the Rogers Platinum MasterCard program
and the subsidiary through which it is operated, we are not subject
to externally imposed capital requirements. Our overall strategy for
capital risk management has not changed since December 31,
2014.
USE OF ESTIMATES AND JUDGMENTS
JUDGMENTS
We make significant judgments in determining our operating
segments. These are components that engage in business activities
from which they may earn revenue and incur expenses, for which
operating results are regularly reviewed by our chief operating
decision makers to make decisions about resources to be allocated
and assess component performance, and for which discrete
financial information is available.
EXPLANATORY INFORMATION
Our reportable segments are Wireless, Cable, Business Solutions,
and Media (note 1). All four segments operate substantially in
Canada. Corporate items and eliminations include our interests in
businesses that are not reportable operating segments, corporate
administrative functions, and eliminations of inter-segment revenue
and costs. Segment results include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
INFORMATION BY SEGMENT
Year ended December 31, 2015
(In millions of dollars)
Operating revenue
Operating costs 1
Adjusted operating profit
Stock-based compensation 1
Depreciation and amortization
Restructuring, acquisition and other
Finance costs
Other income
Income before income taxes
Business
Solutions
377
261
116
Media
2,079
1,907
172
Note Wireless
Cable
7,651
4,412
3,239
3,465
1,807
1,658
5
25
7, 8
9
10
11
Additions to property, plant and equipment
Goodwill
Total assets
866
1,160
14,543
1,030
1,379
6,007
187
429
60
923
297
–
1,338
2,565
4,722
29,175
Year ended December 31, 2014
(In millions of dollars)
Operating revenue
Operating costs 1
Adjusted operating profit
Stock-based compensation 1
Depreciation and amortization
Restructuring, acquisition and other
Finance costs
Other expense
Income before income taxes
Business
Solutions
382
260
122
Media
1,826
1,695
131
Note Wireless
Cable
7,305
4,059
3,246
3,467
1,802
1,665
5
25
7, 8
9
10
11
Additions to property, plant and equipment
Goodwill
Total assets
978
1,155
12,935
1,055
1,379
6,019
1 Included in Operating costs on the Consolidated Statements of Income.
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items and
eliminations
Consolidated
totals
(158)
(5)
(153)
(130)
15
(145)
13,414
8,382
5,032
55
2,277
111
774
(32)
1,847
2,440
3,891
12,850
7,831
5,019
37
2,144
173
817
1
1,847
2,366
3,883
Corporate
items and
eliminations
Consolidated
totals
146
426
94
923
93
–
1,219
2,466
3,883
26,522
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: OPERATING REVENUE
ACCOUNTING POLICY
Revenue recognition
We recognize revenue when we can estimate its amount, have delivered on our obligations within the revenue-generating arrangements,
and are reasonably assured that we can collect it. Revenue is recognized net of discounts.
Source of revenue
Monthly subscriber fees for:
• wireless airtime and data services;
• cable, telephony, and Internet services;
• network services;
• media subscriptions; and
• rental of equipment
How we recognize revenue
• As the service is provided
Revenue from roaming, long distance, pay per use, and other
optional or non-subscription services and other sales of products
Revenue from the sale of wireless and cable equipment
Equipment subsidies related to providing equipment to new
and existing subscribers
• As the service is provided or product is delivered
• When the equipment is delivered and accepted by the
independent dealer or subscriber in a direct sales channel
• As a reduction of equipment revenue when the equipment is
activated
Activation fees charged to subscribers in Wireless
• As part of equipment
revenue upon activation of
the
Advertising revenue
Monthly subscription revenue received by television stations for
subscriptions from cable and satellite providers
Toronto Blue Jays revenue from home game admission and
concessions
Toronto Blue Jays revenue from the Major League Baseball
Revenue Sharing Agreement which redistributes funds between
member clubs based on each club’s relative revenue
Revenue from Toronto Blue Jays, radio, and television broadcast
agreements
equipment
• These fees do not meet the criteria as a separate unit of
accounting
• When the advertising airs on our radio or television stations, is
featured in our publications, or displayed on our digital
properties
• When the services are delivered to cable and satellite
providers’ subscribers
• When the related games are played during the baseball
season and when goods are sold
• When the amount can be determined
• At the time the related games are aired
Revenue from sublicensing of program rights
• Over the course of the applicable season
Awards granted to customers
loyalty
programs, which are considered a separately identifiable
component of the sales transactions
through customer
• Estimate the portion of the original sale to allocate to the
award credit based on the fair value of the future goods and
services that can be obtained when the credit is redeemed
• Defer the allocated amount as unearned revenue until the
awards are redeemed by the customer and we provide the
goods or services
• Recognize revenue based on the redemption of award
credits relative to the award credits that we expect to be
redeemed
Interest income on credit card receivables
• As it is earned (i.e. upon the passage of time) using the
effective interest method
102 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
Multiple deliverable arrangements
We offer some products and services as part of multiple deliverable
arrangements. We recognize these as follows:
• divide the products and services into separate units of
accounting, as long as the delivered elements have stand-alone
value to customers and we can determine the fair value of any
undelivered elements objectively and reliably; then
• measure and allocate the arrangement consideration among the
accounting units based on their relative fair values and recognize
revenue related to each unit when the relevant criteria are met
for each unit individually; however
• when an amount allocated to a delivered item is contingent
upon the delivery of additional
items or meeting specified
performance conditions, the amount allocated to the delivered
item is limited to the non-contingent amount, as applicable.
Unearned revenue
We recognize payments we receive in advance of providing goods
and services as unearned revenue. Advance payments include
subscriber deposits, cable installation fees, ticket deposits related
to Toronto Blue Jays ticket sales, and amounts subscribers pay for
services and subscriptions that will be provided in future periods.
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EXPLANATORY INFORMATION
(In millions of dollars)
2015
2014
Years ended December 31
Wireless:
Network revenue
Equipment sales
Total Wireless
Cable:
Internet
Television
Phone
Service revenue
Equipment sales
Total Cable
Business Solutions:
Next generation
Legacy
Service revenue
Equipment sales
Total Business Solutions
Media:
Advertising
Subscription
Retail
Other
6,902
749
7,651
1,343
1,669
445
3,457
8
3,465
288
85
373
4
377
866
440
308
465
6,743
562
7,305
1,245
1,734
478
3,457
10
3,467
271
106
377
5
382
775
382
314
355
Total Media
2,079
1,826
Corporate items and intercompany
eliminations
(158)
(130)
Total operating revenue
13,414
12,850
NOTE 6: OPERATING COSTS
(In millions of dollars)
2015
2014
Years ended December 31
Cost of equipment sales and direct
channel subsidies
Merchandise for resale
Other external purchases
Employee salaries and benefits and
stock-based compensation
Total operating costs
1,849
202
4,411
1,975
8,437
1,493
206
4,229
1,940
7,868
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 103
useful lives once they are available for use. We expense research
expenditures, maintenance costs, and training costs as incurred.
Impairment testing
We test non-financial assets with finite useful lives for impairment
whenever an event or change in circumstances indicates that their
carrying amounts may not be recoverable. The asset is impaired if
the recoverable amount is less than the carrying amount. If we
cannot estimate the recoverable amount of an individual asset
because it does not generate independent cash inflows, we test
the entire cash generating unit (CGU) for impairment.
A CGU is the smallest identifiable group of assets that generates
cash inflows largely independent of the cash inflows from other
assets or groups of assets.
Recognition and measurement of impairment charge
Please see “recognition and measurement of impairment charge”
in note 8.
USE OF ESTIMATES AND JUDGMENTS
ESTIMATES
Components of an item of property, plant and equipment may
have different useful
lives. We make significant estimates when
determining depreciation rates and asset useful lives, which require
taking into account company-specific factors, such as our past
experience and expected use, and industry trends, such as
technological advancements. We monitor and review our
depreciation rates and asset useful lives at least once a year and
change them if they are different from our previous estimates. We
recognize the effect of changes in estimates in net
income
prospectively.
We use estimates to determine certain costs that are directly
attributable to self-constructed assets. These estimates primarily
include certain internal and external direct labour, overhead, and
interest costs associated with the acquisition, construction,
development, or betterment of our networks.
judgments
JUDGMENTS
We make significant
for
depreciating our property, plant and equipment that we believe
most accurately represent the consumption of benefits derived
from those assets and are most representative of the economic
substance of the intended use of the underlying assets.
in choosing methods
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7: PROPERTY, PLANT AND EQUIPMENT
ACCOUNTING POLICY
Recognition and measurement, including depreciation
We measure property, plant and equipment upon initial
recognition at cost and begin recognizing depreciation when the
asset is ready for its intended use. Subsequently, property, plant
and equipment is carried at cost less accumulated depreciation
and accumulated impairment losses.
Cost includes expenditures that are directly attributable to the
acquisition of the asset. The cost of self-constructed assets includes:
• the cost of materials and direct labour;
• costs directly associated with bringing the assets to a working
condition for their intended use;
• costs of dismantling and removing the items and restoring the
site on which they are located (see note 20); and
• borrowing costs on qualifying assets.
We depreciate property, plant and equipment over its estimated
useful
life by charging depreciation expense to net income as
follows:
Asset
Basis
Estimated
useful life
Buildings
Cable and wireless network
Computer equipment and
Diminishing balance 5 to 40 years
3 to 30 years
Straight-line
4 to 10 years
Straight-line
software
Customer premise equipment Straight-line
Straight-line
Leasehold improvements
3 to 5 years
Over shorter of
estimated useful
life or lease term
Equipment and vehicles
Diminishing balance 3 to 20 years
We recognize all costs related to subscriber acquisition and
retention in net
income as incurred, except connection and
installation costs that relate to the cable network, which are
capitalized and depreciated over the expected life of the Cable
customer.
We calculate gains and losses on the disposal of property, plant
and equipment by comparing the proceeds from the disposal with
the item’s carrying amount and recognize the gain or loss in net
income.
We capitalize development expenditures if they meet the criteria
for recognition as an asset and amortize them over their expected
104 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
EXPLANATORY INFORMATION
(In millions of dollars)
December 31, 2015
December 31, 2014
December 31, 2013
Land and buildings
Cable and wireless networks
Computer equipment and software
Customer premise equipment
Leasehold improvements
Equipment and vehicles
Total property, plant and equipment
Accumulated
depreciation
Net
carrying
amount
Accumulated
depreciation
Cost
(347)
(13,579)
(3,421)
(1,197)
(175)
(868)
651
942
7,321 19,588
1,873
4,960
461
1,543
248
383
443
1,236
(319)
(12,387)
(3,353)
(988)
(151)
(799)
Net
carrying
amount
623
7,201
1,607
555
232
437
Cost
923
18,197
4,553
2,009
492
1,124
Accumulated
depreciation
(291)
(11,287)
(3,031)
(1,415)
(271)
(748)
Net
carrying
amount
632
6,910
1,522
594
221
376
(19,587) 10,997 28,652
(17,997) 10,655
27,298
(17,043) 10,255
Cost
998
20,900
5,294
1,658
423
1,311
30,584
The tables below summarize the changes in the net carrying amounts of property, plant and equipment during 2015 and 2014.
(In millions of dollars)
December 31, 2014
December 31, 2015
N
O
T
E
S
T
O
C
O
N
S
O
L
I
D
A
T
E
D
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
Land and buildings
Cable and wireless networks
Computer equipment and software
Customer premise equipment
Leasehold improvements
Equipment and vehicles
Total property, plant and equipment
Net carrying
amount
Additions
Acquisitions
from business
combinations Depreciation
Other 1
Net carrying
amount
623
7,201
1,607
555
232
437
10,655
57
1,322
691
245
37
88
2,440
–
15
1
–
1
–
17
(29)
(1,217)
(426)
(339)
(25)
(81)
(2,117)
–
–
–
–
3
(1)
2
651
7,321
1,873
461
248
443
10,997
1 Includes disposals, write-downs, reclassifications, and other adjustments.
(In millions of dollars)
December 31, 2013
December 31, 2014
Land and buildings
Cable and wireless network
Computer equipment and software
Customer premise equipment
Leasehold improvements
Equipment and vehicles
Total property, plant and equipment
Net carrying
amount
Additions
Acquisitions
from business
combinations Depreciation
Other 1
Net carrying
amount
632
6,910
1,522
594
221
376
10,255
19
1,453
465
269
43
117
2,366
–
6
–
–
3
–
9
(28)
(1,179)
(371)
(303)
(27)
(71)
(1,979)
–
11
(9)
(5)
(8)
15
4
623
7,201
1,607
555
232
437
10,655
1 Includes disposals, write-downs, reclassifications, and other adjustments.
Property, plant and equipment not yet in service and therefore not depreciated as at December 31, 2015 was $1,017 million
(2014 – $1,048 million). During 2015, capitalized interest pertaining to property, plant and equipment was recognized at a weighted
average rate of approximately 4.0% (2014 – 4.6%).
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8: INTANGIBLE ASSETS AND GOODWILL
ACCOUNTING POLICY
RECOGNITION AND MEASUREMENT, INCLUDING
AMORTIZATION
We measure intangible assets upon initial recognition at cost
unless they are acquired through a business combination, in which
case they are measured upon initial recognition at fair value. We
begin recognizing amortization for intangible assets with finite
lives when the asset is ready for its intended use. Upon
useful
commencement of amortization, the asset is carried at cost less
accumulated amortization and accumulated impairment losses.
Cost includes expenditures that are directly attributable to the
the asset. The cost of a separately-acquired
acquisition of
intangible asset comprises:
• its purchase price, including import duties and non-refundable
purchase taxes, after deducting trade discounts and rebates;
and
• any directly attributable cost of preparing the asset
for its
intended use.
Indefinite useful lives
We do not amortize intangible assets with indefinite lives (spectrum
and broadcast licences).
Finite useful lives
lives into
We amortize intangible assets with finite useful
depreciation and amortization on the Consolidated Statements of
Income, except programming rights which are amortized into
operating costs on the Consolidated Statements of Income, on a
straight-line basis over their estimated useful lives as noted in the
table below. We review their useful lives, residual values, and the
amortization methods at least once a year.
Intangible asset
Estimated useful life
Brand names
Customer relationships
Roaming agreements
Marketing agreements
7 to 20 years
3 to 10 years
12 years
3 years
Acquired program rights
Program rights are contractual rights we acquire from third parties
to broadcast television and sports programs. We recognize them at
cost less accumulated amortization and accumulated impairment
losses. We capitalize program rights on the Consolidated
Statements of Financial Position when the licence period begins
and the program is available for use and amortize them to other
external purchases in operating costs on the Consolidated
If
Statements of
programs are not scheduled, we consider the related program
rights to be impaired and write them off. Otherwise, we test them
for impairment as intangible assets with finite useful lives.
Income over the expected exhibition period.
The costs for multi-year sports and television broadcast rights
agreements are recognized in operating expenses during the
106 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
applicable seasons based on the pattern in which the rights are
aired or are expected to be consumed. To the extent
that
prepayments are made at the commencement of a multi-year
contract towards future years’ rights fees, these prepayments are
recognized as intangible assets and amortized to operating
expenses over the contract term. To the extent that prepayments
are made for annual contractual fees within a season, they are
included in other current assets — prepaid expenses on our
Consolidated Statement of Financial Position as the rights will be
consumed within the next twelve months.
Goodwill
We recognize goodwill arising from business combinations when
the fair value of the separately identifiable assets we acquired and
liabilities we assumed is lower than the consideration we paid
(including the recognized amount of the non-controlling interest, if
any). If the fair value of the consideration transferred is lower than
that of
the separately identified assets and liabilities, we
immediately recognize the difference as a gain in net income.
IMPAIRMENT TESTING
lives for impairment
We test intangible assets with finite useful
whenever an event or change in circumstances indicates that their
carrying amounts may not be recoverable. We test indefinite-life
intangible assets and goodwill for impairment once per year as at
October 1, or more frequently if we identify indicators of
impairment.
If we cannot estimate the recoverable amount of an individual
intangible asset because it does not generate independent cash
inflows, we test the entire CGU for impairment.
Goodwill is allocated to CGUs (or groups of CGUs) based on the
level at which management monitors goodwill, which cannot be
higher than an operating segment. The allocation of goodwill is
made to CGUs (or groups of CGUs) that are expected to benefit
from the synergies of the business combination from which the
goodwill arose.
Recognition and measurement of an impairment charge
is impaired if the recoverable
An intangible asset or goodwill
amount is less than the carrying amount. The recoverable amount
of a CGU or asset is the higher of its:
• fair value less costs to sell; and
• value in use.
We reverse a previously recognized impairment loss, except in
respect of goodwill, if our estimate of the recoverable amount of a
previously impaired asset or CGU has increased such that the
impairment recognized in a previous year has reversed. The
reversal is recognized by increasing the asset’s or CGU’s carrying
amount to our new estimate of
its recoverable amount. The
carrying amount of the asset or CGU subsequent to the reversal
cannot be greater
if we had not
than its carrying amount
recognized an impairment loss in previous years.
USE OF ESTIMATES AND JUDGMENTS
ESTIMATES
We use estimates in determining the recoverable amount of
intangible assets and goodwill.
The determination of the recoverable amount for the purpose of
impairment testing requires the use of significant estimates, such
as:
• future cash flows;
• terminal growth rates; and
• discount rates.
We estimate value in use for impairment tests by discounting
estimated future cash flows to their present value. We estimate the
discounted future cash flows for periods of up to five years,
depending on the CGU, and a terminal value. The future cash flows
are based on our estimates and expected future operating results
of the CGU after considering economic conditions and a general
outlook for the CGU’s industry. Our discount rates consider market
rates of return, debt to equity ratios and certain risk premiums,
among other things. The terminal value is the value attributed to
the CGU’s operations beyond the projected time period of the
cash flows using a perpetuity rate based on expected economic
conditions and a general outlook for the industry.
We determine fair value less costs to sell in one of the following two
ways:
• Analyzing discounted cash flows – we estimate the discounted
future cash flows for periods of five to ten years, depending on
the CGU, and a terminal value, similar to the value in use
methodology described above, while applying assumptions
consistent with those a market participant would make. Future
cash flows are based on our estimates of expected future
operating results of the CGU. Our estimates of future cash flows,
terminal values and discount rates consider similar factors to
those described above for value in use estimates.
• Using a market approach – we estimate the recoverable amount
the CGU using multiples of operating performance of
of
comparable entities and precedent transactions in that industry.
EXPLANATORY INFORMATION
N
O
T
E
S
T
O
C
O
N
S
O
L
I
D
A
T
E
D
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
We make certain assumptions for the discount and terminal growth
rates to reflect variations in expected future cash flows. These
assumptions may differ or change quickly depending on economic
conditions or other events.
It is therefore possible that future
changes in assumptions may negatively affect future valuations of
CGUs and goodwill, which could result in impairment losses.
If our estimate of the asset’s or CGU’s recoverable amount is less
than its carrying amount, we reduce its carrying amount to the
recoverable amount and recognize the loss in net
income
immediately.
JUDGMENTS
We make significant judgments that affect the measurement of our
intangible assets and goodwill.
Judgment is applied when deciding to designate our spectrum
and broadcast licences as assets with indefinite useful lives since we
believe the licences are likely to be renewed for the foreseeable
future such that there is no limit to the period that these assets are
expected to generate net cash inflows. We make judgments to
determine that these assets have indefinite lives, analyzing all
relevant factors, including the expected usage of the asset, the
typical life cycle of the asset, and anticipated changes in the market
demand for the products and services the asset helps generate.
After review of the competitive, legal, regulatory, and other factors,
it is our view that these factors do not limit the useful lives of our
spectrum and broadcast licences.
Judgment is also applied in choosing methods for amortizing our
intangible assets and program rights that we believe most
accurately represent the consumption of those assets and are most
representative of the economic substance of the intended use of
the underlying assets.
Finally, we make judgments in determining CGUs and the
allocation of goodwill to CGUs or groups of CGUs for the purpose
of impairment testing.
(In millions of dollars)
December 31, 2015
December 31, 2014
December 31, 2013
Cost prior to
impairment
losses
Accumulated
amortization
Accumulated
impairment
losses
Net
carrying
amount
Cost prior to
impairment
losses
Accumulated
amortization
Accumulated
impairment
losses
Net
carrying
amount
Cost prior to
impairment
losses
Accumulated
amortization
Accumulated
impairment
losses
Net
carrying
amount
Indefinite-life intangible assets:
Spectrum licences
Broadcast licences
Finite-life intangible assets:
Brand names
Customer relationships
Roaming agreements
Marketing agreements
Acquired program rights
Total intangible assets
Goodwill
Total intangible assets and
6,416
324
420
1,609
523
10
332
9,634
4,112
–
–
–
(99)
6,416
225
(270)
(1,414)
(488)
(10)
(91)
(2,273)
–
(14)
–
–
–
(5)
136
195
35
–
236
(118) 7,243
(221) 3,891
5,576
324
420
1,620
523
10
343
8,816
4,104
–
–
–
(99)
5,576
225
(255)
(1,339)
(444)
(10)
(62)
(2,110)
–
(14)
–
–
–
(5)
151
281
79
–
276
(118) 6,588
(221) 3,883
2,275
324
438
1,543
523
9
168
5,280
3,972
–
–
– 2,275
225
(99)
(257)
(1,234)
(400)
(8)
(52)
(1,951)
–
(14)
–
–
–
(5)
167
309
123
1
111
(118) 3,211
(221) 3,751
goodwill
13,746
(2,273)
(339) 11,134
12,920
(2,110)
(339) 10,471
9,252
(1,951)
(339) 6,962
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tables below summarize the changes in the net carrying amounts of intangible assets and goodwill in 2015 and 2014.
(In millions of dollars)
December 31, 2014
December 31, 2015
Net carrying
amount
Acquisitions
from business
combinations
Net additions
Amortization 1
Other 2
Net carrying
amount
Spectrum licences
Broadcast licences
Brand names
Customer relationships
Roaming agreements
Acquired program rights
Total intangible assets
Goodwill
5,576
225
151
281
79
6,312
276
6,588
3,883
Total intangible assets and goodwill
10,471
458
–
–
19
–
477
–
477
8
485
381
–
–
–
–
381
64
445
–
445
–
–
(15)
(101)
(44)
(160)
(87)
(247)
–
(247)
1
–
–
(4)
–
(3)
(17)
(20)
–
(20)
6,416
225
136
195
35
7,007
236
7,243
3,891
11,134
1 Of the $247 million of total amortization, $87 million related to acquired program rights is included in Other external purchases in Operating costs (see note 6), and $160 million
in depreciation and amortization on the Consolidated Statements of Income.
2 Includes disposals, write-downs, reclassifications, and other adjustments including a write-off of certain programming rights following a reorganization of the OMNI television
stations (see note 9).
(In millions of dollars)
December 31, 2013
December 31, 2014
Spectrum licences
Broadcast licences
Brand names
Customer relationships
Roaming agreements
Marketing agreements
Acquired program rights
Total intangible assets
Goodwill
Total intangible assets and goodwill
Net carrying
amount
Acquisitions
from business
combinations
Net additions
Amortization 1
Other 2
Net carrying
amount
2,275
225
167
309
123
1
3,100
111
3,211
3,751
6,962
–
–
–
73
–
–
73
–
73
132
205
3,301
–
–
–
–
–
3,301
231
3,532
–
3,532
–
–
(16)
(104)
(44)
(1)
(165)
(66)
(231)
–
(231)
–
–
–
3
–
–
3
–
3
–
3
5,576
225
151
281
79
–
6,312
276
6,588
3,883
10,471
1 Of the $231 million of total amortization, $66 million related to acquired program rights is included in Other external purchases in Operating costs (see note 6), and $165 million
in depreciation and amortization on the Consolidated Statements of Income.
2 Includes disposals, write-downs, reclassifications, and other adjustments.
2015 SPECTRUM LICENCE ACQUISITIONS
2500 MHz spectrum licence auction
We participated in the 2500 MHz spectrum licence auction in
Canada. We were awarded 41 spectrum licences consisting of
20 MHz blocks of contiguous, paired spectrum in major
geographic markets in Canada. Upon acquisition, we recognized
the spectrum licences as intangible assets of $27 million, which
included $3 million of directly attributable costs.
Shaw spectrum licences
We obtained 20 MHz of contiguous, paired AWS-1 spectrum
licences from Shaw Communications Inc. (Shaw) after exercising a
previously acquired option and paying the final $100 million
installment ($250 million was previously paid in 2013). Upon
acquisition, we recognized the spectrum licences as intangible
assets of $352 million, which included $2 million of directly
108 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
attributable costs. Subsequent to exercising the option, certain
non-contiguous spectrum licences acquired from Shaw were
for nominal cash
transferred to WIND Mobile Corp.
proceeds.
(WIND)
Data & Audio-Visual Enterprises Wireless Inc. (Mobilicity) spectrum
licences
We obtained $458 million of AWS-1 spectrum licences through
our Mobilicity acquisition as described in note 26, and recognized
the licences of $458 million as intangible assets upon acquisition.
2014 SPECTRUM LICENCE ACQUISITIONS
700 MHz spectrum licence auction
We participated in the 700 MHz spectrum licence auction in
Canada, and were awarded spectrum licences consisting of two
12 MHz blocks of contiguous, paired lower 700 MHz band
spectrum covering most of the Canadian population. We paid a
total of $3,301 million to Innovation, Science and Economic
Development Canada (formerly Industry Canada) for the licences,
which included $9 million of costs directly attributable to the
acquisition of the spectrum licences, and recognized the spectrum
licences of $3,301 million as intangible assets.
ANNUAL IMPAIRMENT TESTING
For purposes of testing goodwill for impairment, our CGUs, or groups of CGUs, correspond to our operating segments as disclosed in
note 4.
The table below is an overview of the methods and key assumptions we used in 2015 to determine recoverable amounts for CGUs or
groups of CGUs, with indefinite-life intangible assets or goodwill that we consider significant.
(In millions of dollars, except periods used and rates)
Carrying value
of goodwill
Carrying value
of indefinite-life
intangible assets
Recoverable
amount method
Period of
projected cash
flows (years)
Terminal growth
rates (%)
Pre-tax discount
rates (%)
Wireless
Cable
Media
1,160
1,379
923
6,416 Value in use
– Value in use
–
Fair value less cost to sell
5
5
5
0.5
2.0
2.0
7.9
8.5
10.4
Our fair value measurement for Media is classified as Level 3 in the
fair value hierarchy.
We did not recognize an impairment charge in 2015 or 2014
because the recoverable amounts of the CGUs exceeded their
carrying values.
NOTE 9: RESTRUCTURING, ACQUISITION AND OTHER
We incurred $111 million (2014 – $173 million) in restructuring,
acquisition and other expenses, comprised of:
• $75 million (2014 – $131 million) of restructuring expenses,
mainly for costs associated with the targeted restructuring of our
employee base and the write-off of certain programming rights
that are no longer usable following a reorganization of the OMNI
television stations. In 2014, restructuring expenses were mainly
related to the reorganization associated with the implementation
of the Rogers 3.0 plan to structure teams around our customers
and remove management layers to ensure senior leadership is
closer to frontline employees and customers; and
• $36 million (2014 – $42 million) of acquisition-related transaction
costs, contract termination costs, legal claims and other costs.
N
O
T
E
S
T
O
C
O
N
S
O
L
I
D
A
T
E
D
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
NOTE 10: FINANCE COSTS
Years ended December 31
(In millions of dollars)
Note
2015
2014
Interest on borrowings
Interest on post-employment benefits
liability
Loss on repayment of long-term debt
Loss on foreign exchange
Capitalized interest
Other
Total finance costs
23
16
21
761
782
11
7
11
(29)
13
7
29
11
(26)
14
774
817
NOTE 11: OTHER (INCOME) EXPENSE
(In millions of dollars)
Note
2015
2014
Years ended December 31
Losses from associates and joint
ventures
Gain on acquisition of Mobilicity
Other investment income
Total other (income) expense
26
99
(102)
(29)
(32)
23
–
(22)
1
A $72 million loss related to our share of the change in the fair
value of an obligation relating to one of our joint ventures has been
recognized in losses from associates and joint ventures for the year
ended December 31, 2015 (2014 – nil).
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: INCOME TAXES
ACCOUNTING POLICY
Income tax expense includes both current and deferred taxes. We
recognize income tax expense in net income unless it relates to an
item recognized directly in equity or other comprehensive income.
We provide for income taxes based on all of the information that is
currently available.
Current tax expense is tax we expect to pay or receive based on
our taxable income or loss during the year. We calculate the
current
tax expense using tax rates enacted or substantively
enacted as at the reporting date, including any adjustment to taxes
payable or receivable related to previous years.
Deferred tax assets and liabilities arise from temporary differences
between the carrying amounts of the assets and liabilities we
recognize on our Consolidated Statements of Financial Position
and their respective tax bases. We calculate deferred tax assets and
liabilities using enacted or substantively enacted tax rates that will
apply in the years in which the temporary differences are expected
to reverse.
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax assets and liabilities and they
relate to income taxes levied by the same authority on:
• the same taxable entity; or
• different taxable entities where these entities intend to settle
current tax assets and liabilities on a net basis or the tax assets
and liabilities will be realized and settled simultaneously.
We recognize a deferred tax asset for unused losses, tax credits,
and deductible temporary differences to the extent it is probable
that future taxable income will be available to use the asset.
USE OF ESTIMATES AND JUDGMENTS
JUDGMENTS
We make significant
judgments in interpreting tax rules and
regulations when we calculate income taxes. We make judgments
to evaluate whether we can recover a deferred tax asset based on
our assessment of existing tax laws, estimates of future profitability,
and tax planning strategies.
EXPLANATORY INFORMATION
(In millions of dollars)
2015
2014
Years ended December 31
Current tax expense:
For current year
Adjustments from reassessment
Total current taxes
Deferred tax expense (recovery):
Origination (reversal) of temporary
differences
Revaluation of deferred tax balances
due to legislative changes
Total deferred taxes
Total income taxes
234
–
234
226
6
232
466
497
14
511
(5)
–
(5)
506
The table below shows the difference between income tax
expense computed by applying the statutory income tax rate to
income before income taxes and the income tax expense for the
year.
(In millions of dollars, except rates)
Statutory income tax rate
Income before income taxes
Computed income tax expense
Increase (decrease) in income taxes
resulting from:
Non-deductible (non-taxable) stock-
based compensation
Revaluation of deferred tax balances
due to legislative changes
Adjustments from reassessments
Non-taxable gain on acquisition
Other
Years ended December 31
2015
26.5%
1,847
489
2014
26.5%
1,847
489
5
6
–
(27)
(7)
(2)
–
14
–
5
Total income taxes
Effective income tax rate
466
25.2%
506
27.4%
DEFERRED TAX ASSETS AND LIABILITIES
(In millions of dollars)
Deferred tax assets
Deferred tax liabilities
Net deferred tax liability
As at December 31
2015
9
(1,943)
(1,934)
2014
9
(1,769)
(1,760)
110 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
The table below summarizes the movement of net deferred tax assets and liabilities during 2015 and 2014.
Deferred tax assets (liabilities)
(In millions of dollars)
January 1, 2015
(Expense) recovery in net income
Expense in other comprehensive income
Acquisitions
December 31, 2015
Deferred tax assets (liabilities)
(In millions of dollars)
January 1, 2014
(Expense) recovery in net income
Expense in other comprehensive income
Acquisitions
December 31, 2014
Property,
plant and
equipment
and inventory
Goodwill
and other
intangibles
Stub period
income and
partnership
reserve Investments
Non-capital
loss
carryforwards
(889)
(32)
–
–
(921)
(548)
(105)
–
(68)
(721)
(313)
135
–
–
(178)
(80)
–
19
–
(61)
54
(197)
–
175
32
Property,
plant and
equipment
and inventory
Goodwill
and other
intangibles
Stub period
income and
partnership
reserve Investments
Non-capital
loss
carryforwards
(752)
(137)
–
–
(889)
(429)
(110)
–
(9)
(548)
(594)
281
–
–
(313)
(27)
(4)
(49)
–
(80)
46
8
–
–
54
Other
Total
16
(33)
(70)
2
(85)
(1,760)
(232)
(51)
109
(1,934)
Other
Total
85
(33)
(35)
(1)
16
(1,671)
5
(84)
(10)
(1,760)
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We had not recognized deferred tax assets for the following items:
(In millions of dollars)
Capital losses in Canada that can be applied
against future capital gains
Tax losses in foreign jurisdictions that expire
between 2023 and 2033
Deductible temporary differences in foreign
jurisdictions
As at December 31
2015
2014
31
34
49
56
20
37
Total unrecognized deferred tax assets
114
113
There are taxable temporary differences associated with our
investments in Canadian domestic subsidiaries. We do not
recognize deferred tax liabilities for temporary differences when we
are able to control the timing of the reversal and the reversal is not
probable in the foreseeable future. Reversing these temporary
differences would not result in any significant tax implications.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 111
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13: EARNINGS PER SHARE
ACCOUNTING POLICY
We calculate basic earnings per share by dividing the net income
or loss attributable to our Class A and Class B shareholders by the
weighted average number of Class A and Class B shares
outstanding during the year.
We calculate diluted earnings per share by adjusting the net
income or loss attributable to Class A and Class B shareholders and
the weighted average number of Class A and Class B shares
outstanding for the effect of all dilutive potential common shares.
We use the treasury stock method for calculating diluted earnings
per share, which considers the impact of employee stock options
and other potentially dilutive instruments.
Options with tandem stock appreciation rights or cash payment
alternatives are accounted for as cash-settled awards. As these
awards can be exchanged for common shares of the Company,
they are considered potentially dilutive and are included in the
calculation of the Company’s diluted net earnings per share if they
have a dilutive impact in the period.
EXPLANATORY INFORMATION
(In millions of dollars, except per share
amounts)
Numerator (basic) – Net income for
Years ended December 31
2015
2014
the year
1,381
1,341
Denominator – Number of shares (in
millions):
Weighted average number of
shares outstanding – basic
Effect of dilutive securities (in millions):
Employee stock options and
515
515
restricted share units
2
2
Weighted average number of shares
outstanding – diluted
517
517
Earnings per share:
Basic
Diluted
$ 2.68
$ 2.67
$ 2.60
$ 2.56
NOTE 14: ACCOUNTS RECEIVABLE
ACCOUNTING POLICY
We initially recognize accounts receivable on the date they
originate. We measure accounts receivable initially at fair value, and
subsequently at amortized cost, with changes recognized in net
income. We measure an impairment loss for accounts receivable as
the excess of the carrying amount over the present value of future
cash flows we expect to derive from it, if any. The difference is
allocated to an allowance for doubtful accounts and recognized as
a loss in net income.
112 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
In 2014, the accounting for stock-based compensation using the
equity-settled method was determined to be more dilutive than
using the cash-settled method. As a result, net income for 2014
was reduced by $15 million in the diluted earnings per share
calculation to account for these awards as if they were equity-
settled. There was no such impact in 2015.
A total of 1,107,344 options were out of the money for 2015
(2014 – 1,257,117). These options were excluded from the
calculation of the effect of dilutive securities because they were
anti-dilutive.
EXPLANATORY INFORMATION
(In millions of dollars)
Customer accounts receivable
Other accounts receivable
Allowance for doubtful accounts
Total accounts receivable
As at December 31
2015
2014
1,329
549
(86)
1,307
382
(98)
1,792
1,591
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NOTE 15: INVENTORIES
ACCOUNTING POLICY
We measure inventories, including handsets and merchandise for
resale, at the lower of cost (determined on a first-in, first-out basis)
and net realizable value. We will reverse a previous write down to
net realizable value, not to exceed the original recognized cost, if
the inventories later increase in value.
EXPLANATORY INFORMATION
(In millions of dollars)
Wireless handsets and accessories
Other finished goods and merchandise
Total inventories
As at December 31
2015
2014
238
80
318
189
62
251
Cost of equipment sales and merchandise for resale includes
$1,966 million (2014 - $1,615 million) of inventory costs.
NOTE 16: FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
ACCOUNTING POLICY
Recognition
We initially recognize cash and cash equivalents, accounts receivable, debt securities, and accounts payable and accrued liabilities on the
date they originate. All other financial assets and financial liabilities are initially recognized on the trade date when we become a party to
the contractual provisions of the instrument.
Classification and measurement
We measure financial instruments by grouping them into classes upon initial recognition, based on the purpose of the individual
instruments. We classify our financial assets and financial liabilities as follows:
Financial instrument
Financial assets
Cash and cash equivalents 1
Accounts receivable 1
Investments, available-for-sale
Financial liabilities
Short-term borrowings
Accounts payable 1
Accrued liabilities
Long-term debt
Derivatives 4
Debt derivatives
Bond forwards
Expenditure derivatives
Equity derivatives
Categorization
Measurement method
Loans and receivable
Loans and receivable
Available-for-sale 2
Other financial liabilities 3
Other financial liabilities
Other financial liabilities
Other financial liabilities 3
Held-for-trading 2,5
Held-for-trading 2,5
Held-for-trading 2,5
Held-for-trading 6
Amortized cost
Amortized cost
Fair value
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Fair value
Fair value
Fair value
Fair value
1 Initially and subsequently measured at fair value with subsequent changes recognized in net income.
2 Initially and subsequently measured at fair value with subsequent changes in fair value recognized in other comprehensive income. The net change subsequent to initial
recognition, in the case of investments, is reclassified into net income upon disposal of the investment or when the investment becomes impaired, or in the case of derivatives
designated as hedges, when the hedged item affects net income.
3 Initially measured at fair value plus transaction costs and subsequently measured at amortized cost using the effective interest method.
4 The derivatives can be in an asset or liability position at a point in time historically or in the future.
5 The derivatives are designated as cash flow hedges with the ineffective portion of the hedge recognized immediately into net income.
6 Initially measured at fair value with subsequent changes offset against stock-based compensation expense or recovery in operating costs.
Offsetting financial assets and financial liabilities
We offset financial assets and financial liabilities and present the net amount on the Consolidated Statements of Financial Position when
we have a legal right to offset them and intend to settle on a net basis or realize the asset and liability simultaneously.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 113
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Derivative instruments
We use derivative instruments to manage risks related to certain activities in which we are involved. They include:
Derivative
The risk they manage
Types of derivative instruments
Debt derivatives
Bond forwards
Expenditure derivatives
• Impact of fluctuations in foreign exchange rates on
principal and interest payments for US dollar-
denominated long-term debt
• Impact of fluctuations in market interest rates on
forecasted interest payments for expected long-
term debt
• Impact of fluctuations in foreign exchange rates on
forecasted US dollar-denominated expenditures
• Cross-currency interest rate exchange agreements
• Forward foreign exchange agreements (from time
to time as necessary)
• Forward interest rate agreements
• Forward foreign exchange agreements
Equity derivatives
• Impact of fluctuations in share price on stock-based
• Total return swap agreements
compensation expense
estimated future cash flows and the effect can be reliably
estimated. Financial assets that are significant in value are tested for
impairment individually. All other financial assets are assessed
collectively based on the nature of each asset.
We measure impairment for financial assets as follows:
• loans and receivables – we measure an impairment loss for loans
and receivables as the excess of the carrying amount of the asset
over the present value of future cash flows we expect to derive
from it, if any. The difference is allocated to an allowance for
doubtful accounts and recognized as a loss in net income.
• available-for-sale financial assets – we measure an impairment
loss of available-for-sale financial assets as the excess of the cost
to acquire the asset (less any impairment loss we have previously
recognized) over its current fair value, if any. The difference is
reclassified from the available-for-sale reserve in equity to net
income.
USE OF ESTIMATES AND JUDGMENTS
ESTIMATES
Fair value estimates related to our derivatives are made at a specific
point in time based on relevant market information and information
about the underlying financial instruments. These estimates require
assessment of the credit risk of the parties to the instruments and
the instruments’ discount rates. These fair values and underlying
estimates are also used in the tests of effectiveness of our hedging
relationships.
instruments qualify
JUDGMENTS
We make significant
judgments in determining whether our
for hedge accounting. These
financial
judgments include assessing whether the forecasted transactions
designated as hedged items in hedging relationships will
materialize as forecasted, whether
the hedging relationships
designated as effective hedges for accounting purposes continue
to qualitatively be effective, and determining the methodology to
determine the fair values used in testing the effectiveness of
hedging relationships.
We use derivatives only to manage risk, and not for speculative
purposes.
When we designate a derivative instrument as a hedging
instrument for accounting purposes, we first determine that the
hedging instrument will be highly effective in offsetting the
changes in fair value or cash flows of the item it is hedging. We
then formally document the relationship between the hedging
instrument and hedged item,
including the risk management
objectives and strategy and the methods we will use to assess the
ongoing effectiveness of the hedging relationship.
We assess, on a quarterly basis, whether each hedging instrument
continues to be highly effective in offsetting the changes in the fair
value or cash flows of the item it is hedging.
We assess host contracts in order to identify embedded derivatives
requiring separation from the host contracts and account for these
embedded derivatives as separate derivatives when we first
become a party to a contract.
Hedging reserve
The hedging reserve represents the accumulated change in fair
value of the derivative instruments to the extent they were effective
hedges for accounting purposes,
less accumulated amounts
reclassified into net income.
Deferred transaction costs
We defer transaction costs associated with issuing long-term debt
and direct costs we pay to lenders to obtain revolving credit
facilities and amortize them using the effective interest method
over the life of the related instrument.
Available-for-sale financial assets reserve
The available-for-sale financial assets reserve represents the
the available-for-sale
accumulated change in fair
investments, less accumulated impairment losses related to the
investments and accumulated amounts reclassified into net income
upon disposal of investments.
value of
Impairment testing
We consider a financial asset to be impaired if there is objective
evidence that one or more events have had a negative effect on its
114 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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EXPLANATORY INFORMATION
We are exposed to credit risk, liquidity risk, and market risk. Our
primary risk management objective is to protect our income, cash
flows, and ultimately, shareholder value. We design and implement
the risk management strategies discussed below to ensure our risks
and the related exposures are consistent with our business
objectives and risk tolerance. The table below shows our risk
exposure by financial instrument.
Financial instrument
Financial Risks
Financial assets
Cash and cash equivalents Credit and foreign exchange
Accounts receivable
Credit and foreign exchange
Investments, available-for-sale Market
Financial liabilities
Short-term borrowings
Accounts payable
Accrued liabilities
Long-term debt
Derivatives 1
Debt derivatives
Bond forwards
Expenditure derivatives
Equity derivatives
Liquidity
Liquidity
Liquidity
Liquidity, foreign exchange
and interest
Credit, liquidity and foreign
exchange
Credit, liquidity and interest
Credit, liquidity and foreign
exchange
Credit, liquidity and market
1 Derivatives can be in an asset or liability position at a point in time historically or in the
future.
CREDIT RISK
Credit risk represents the financial loss we could experience if a
counterparty to a financial
instrument, from whom we have an
amount owing, failed to meet its obligations under the terms and
conditions of its contracts with us.
Our credit risk exposure is primarily attributable to our accounts
receivable and to our debt and expenditure derivatives. Our broad
customer base limits the concentration of this risk. Our accounts
receivable on the Consolidated Statements of Financial Position are
net of allowances for doubtful accounts, which management
estimates based on prior experience and an assessment of the
current economic environment. We believe that our allowance for
doubtful accounts sufficiently reflects the related credit
risk
associated with our accounts receivable. As at December 31, 2015,
$461 million (2014 – $461 million) of gross accounts receivable are
considered past due, which is defined as amounts outstanding
beyond normal credit terms and conditions for the respective
customers.
The tables below provide an aging of our customer accounts
receivable and additional information related to the allowance for
doubtful accounts.
(In millions of dollars)
Customer accounts receivables (net of
allowance for doubtful accounts)
Less than 30 days past billing date
30-60 days past billing date
61-90 days past billing date
Greater than 90 days past billing date
Total
As at December 31
2015
2014
759
305
113
66
713
326
108
62
1,243
1,209
The activity related to our allowance for doubtful accounts is as
follows:
(In millions of dollars)
Balance, beginning of year
Allowance for doubtful accounts
expense
Net use
Balance, end of year
Years ended December 31
2015
98
66
(78)
86
2014
104
77
(83)
98
We use various internal controls, such as credit checks, deposits on
account, and billing in advance, to mitigate credit risk. We monitor
and take appropriate action to suspend services when customers
have fully used their approved credit limits or violated established
payment terms. While our credit controls and processes have been
effective in managing credit risk, they cannot eliminate credit risk
and there can be no assurance that these controls will continue to
be effective or that our current credit loss experience will continue.
risk related to our debt derivatives, bond forwards,
Credit
expenditure derivatives, and equity derivatives (derivatives) arises
from the possibility that the counterparties to the agreements may
default on their obligations. We assess the creditworthiness of the
counterparties to minimize the risk of counterparty default, and do
not require collateral or other security to support the credit risk
associated with these derivatives. Counterparties to the entire
portfolio of our derivatives are financial institutions with a Standard
& Poor’s rating (or the equivalent) ranging from A+ to AA-.
LIQUIDITY RISK
Liquidity risk is the risk that we will not be able to meet our financial
obligations as they fall due. We manage liquidity risk by managing
our commitments and maturities, capital structure, and financial
leverage (see note 3). We also manage liquidity risk by continually
monitoring actual and projected cash flows to ensure we will have
sufficient liquidity to meet our liabilities when due, under both
normal and stressed conditions, without incurring unacceptable
losses or risking damage to our reputation.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 115
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tables below set out the undiscounted contractual maturities of our financial liabilities and the receivable components of our
derivatives as at December 31, 2015 and 2014.
December 31, 2015
(In millions of dollars)
Carrying
amount
Contractual
cash flows
Less than
1 year
Short-term borrowings
Accounts payable and accrued liabilities
Long-term debt
Other long-term financial liabilities
Expenditure derivative instruments:
Cash outflow (Canadian dollar)
Cash inflow (Canadian dollar equivalent of US dollar)
Equity derivative instruments
Debt derivative instruments:
Cash outflow (Canadian dollar)
Cash inflow (Canadian dollar equivalent of US dollar) 1
Bond forwards:
Cash outflow
Cash inflow
Net carrying amount of derivatives (asset)
800
2,708
16,870
28
–
–
–
–
–
–
–
(2,080)
800
2,708
16,981
28
1,415
(1,578)
15
6,746
(8,581)
91
–
800
2,708
1,000
–
1,025
(1,163)
15
–
–
–
–
1 to 3
years
–
–
3,188
19
390
(415)
–
1,435
(1,938)
91
–
4 to 5
years
More than
5 years
–
–
1,800
5
–
–
10,993
4
–
–
–
–
–
–
–
–
–
–
5,311
(6,643)
–
–
18,326
18,625
4,385
2,770
1,805
9,665
1 Represents Canadian dollar equivalent amount of US dollar inflows matched to an equal amount of US dollar maturities in long-term debt for debt derivatives.
December 31, 2014
(In millions of dollars)
Carrying
amount
Contractual
cash flows
Less than
1 year
Short-term borrowings
Accounts payable and accrued liabilities
Long-term debt
Other long-term financial liabilities
Expenditure derivative instruments:
Cash outflow (Canadian dollar)
Cash inflow (Canadian dollar equivalent of US dollar)
Equity derivative instruments
Debt derivative instruments:
Cash outflow (Canadian dollar)
Cash inflow (Canadian dollar equivalent of US dollar) 1
Bond forwards:
Cash outflow
Cash inflow
Net carrying amount of derivatives (asset)
842
2,578
14,787
26
–
–
–
–
–
–
–
(873)
842
2,578
14,895
26
1,050
(1,114)
30
6,313
(6,995)
14
(1)
842
2,578
963
–
790
(835)
30
905
(963)
3
–
1 to 3
years
–
–
1,750
12
260
(279)
–
–
–
3
–
4 to 5
years
More than
5 years
–
–
2,524
9
–
–
–
–
–
9,658
5
–
–
–
1,435
(1,624)
3,973
(4,408)
8
(1)
–
–
17,360
17,638
4,313
1,746
2,351
9,228
1 Represents Canadian dollar equivalent amount of US dollar inflows matched to an equal amount of US dollar maturities in long-term debt for debt derivatives.
The tables below show net interest payments over the life of the
long-term debt,
including the impact of the associated debt
derivatives, as at December 31, 2015 and 2014.
December 31, 2015
(In millions of dollars)
Less than
1 year
1 to 3 years
4 to 5 years
More than
5 years
Net interest payments
714
1,313
1,042
6,025
December 31, 2014
(In millions of dollars)
Less than
1 year
1 to 3 years
4 to 5 years
More than
5 years
Net interest payments
757
1,343
1,143
6,022
116 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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MARKET RISK
Market risk is the risk that changes in market prices, such as
fluctuations
in the market prices of our available-for-sale
investments, our share price, foreign exchange rates, and interest
rates, will affect our income, cash flows, or the value of our financial
instruments. The derivative instruments we use to manage this risk
are described in this note.
The table below summarizes a sensitivity analysis for significant
exposures with respect to our publicly traded investments, equity
derivatives, expenditure derivatives, and senior notes as at
December 31, 2015 and 2014 with all other variables held
constant.
It shows how net income and other comprehensive
income would have been affected by changes in the relevant risk
variables.
Market price risk – publicly traded investments
We manage risk related to fluctuations in the market prices of our
investments in publicly traded companies by regularly reviewing
publicly available information related to these investments to
ensure that any risks are within our established levels of risk
tolerance. We do not engage in risk management practices such as
hedging, derivatives, or short selling with respect to our publicly
traded investments.
Market price risk – Rogers Class B shares
Our liability related to stock-based compensation is marked to
market each period. Stock-based compensation expense is
affected by the change in the price of our Class B Non-Voting
shares during the life of an award, including stock options, RSUs,
and DSUs. We use equity derivatives from time to time to manage
our exposure in our stock-based compensation liability. With
respect to our stock-based compensation, as a result of our equity
derivatives, a one dollar change in the price of a Rogers Class B
Non-Voting share would not have a material effect on net income.
Foreign exchange and interest rates
We use debt derivatives to manage risks from fluctuations in
foreign exchange rates associated with our US dollar-denominated
debt instruments, designating the debt derivatives as hedges of
instruments for accounting purposes. We use
specific debt
expenditure derivatives to manage the foreign exchange risk in our
operations, designating them as hedges for certain of our
forecasted operational
at
and capital
December 31, 2015, all of our US dollar-denominated long-term
debt was hedged against fluctuations in foreign exchange rates
using debt derivatives. With respect to our long-term debt, as a
result of our debt derivatives, a one cent change in the Canadian
dollar relative to the US dollar would have no effect on net income.
expenditures. As
A portion of our accounts receivable and accounts payable and
accrued liabilities is denominated in US dollars. Due to the short-
term nature of these receivables and payables, they carry no
significant market risk from fluctuations in foreign exchange rates as
at December 31, 2015.
We are exposed to risk of changes in market interest rates due to
the impact
this has on interest expense for our short-term
borrowings, bank credit facilities, and our $250 million floating rate
senior unsecured notes. As at December 31, 2015, 90.3% of our
outstanding long-term debt and short-term borrowings was at
fixed interest rates.
(Change in millions of dollars)
2015
2014
2015
2014
Other
comprehensive
income
Net income
Share price of publicly
traded investments
$1 change
Expenditure derivatives – change in
foreign exchange rate
$0.01 change in Cdn$ relative
to US$
Short-term borrowings
1% change in interest rates
Senior notes (floating)
1% change in interest rates
Bank credit facilities (floating)
1% change in interest rates
–
–
6
2
4
–
–
6
2
–
14
14
8
–
–
–
7
–
–
–
DERIVATIVE INSTRUMENTS
As at December 31, 2015, all of our US dollar-denominated long-
term debt instruments were hedged against fluctuations in foreign
exchange rates for accounting purposes.
The tables below show our derivatives net asset (liability) position.
As at December 31, 2015
Notional
amount
(US$)
Exchange
rate
Notional
amount
(Cdn$)
Fair
value
(Cdn$)
(In millions of dollars, except
exchange rates)
Debt derivatives accounted for
as cash flow hedges:
As assets
As liabilities
5,900
300
1.0755
1.3367
6,345
401
2,032
(4)
Net mark-to-market asset
debt derivatives
Bond forwards accounted for
as cash flow hedges:
As liabilities
Expenditure derivatives
accounted for as cash flow
hedges:
2,028
–
–
1,400
(91)
As assets
1,140
1.2410
1,415
158
Equity derivatives not accounted
for as hedges:
As liabilities
–
–
286
(15)
Net mark-to-market asset
2,080
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 117
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at December 31, 2014
Notional
amount
(US$)
Exchange
rate
Notional
amount
(Cdn$)
Fair
value
(Cdn$)
(In millions of dollars,
except exchange rates)
Debt derivatives accounted for
as cash flow hedges:
As assets
As liabilities
5,725
305
1.0396
1.1857
5,952
362
853
(7)
Debt derivatives
We entered into new debt derivatives in 2015 and 2014 to hedge
foreign currency risk associated with the principal and interest
components of the US dollar-denominated senior notes issued on
December 8, 2015 (note 21). The table below shows debt
derivatives we entered into to hedge senior notes issued during
2015 and 2014.
Net mark-to-market asset
debt derivatives
Bond forwards accounted for
as cash flow hedges:
As assets
As liabilities
Net mark-to-market liability
bond forwards
Expenditure derivatives
accounted for as cash flow
hedges:
As assets
Equity derivatives not accounted
for as hedges:
As liabilities
–
–
–
–
250
1,650
846
1
(14)
(13)
(In millions of
dollars, except for
coupon and
interest rates)
Effective date
2015 issuances
US$
Hedging effect
Principal/
notional
amount
(US$)
Maturity
date
Coupon
rate
Fixed
hedged
Cdn$
interest
rate 1
December 8, 2015
December 8, 2015
Total
700
300
1,000
2025
2044
3.625%
5.000%
3.566%
5.145%
Equivalent
Cdn$
937
401
1,338
960
1.0940
1,050
70
2014 issuances
–
–
286
(30)
1 Converting from a fixed US$ coupon rate to a weighted average Cdn$ fixed rate.
March 10, 2014
750
2044
5.000%
4.990%
832
Net mark-to-market asset
873
The table below shows derivative instruments assets and derivative
instruments liabilities reflected on our Consolidated Statements of
Financial Position.
The table below shows debt derivatives
that matured in
conjunction with the repayment or repurchase of the related senior
notes during 2015 and 2014 (see note 21).
(In millions of dollars)
Maturity date
Notional amount
(US$)
Net cash (proceeds)
settlement (Cdn$)
(In millions of dollars)
Current asset
Long-term asset
Current liability
Long-term liability
Net mark-to-market asset
As at December 31
2015
198
1,992
2,190
(15)
(95)
(110)
2,080
2014
136
788
924
(40)
(11)
(51)
873
All of our currently outstanding debt derivatives, bond forwards,
and expenditure derivatives have been designated as hedges for
In 2015, we recognized a $3 million
accounting purposes.
income related to hedge ineffectiveness
decrease to net
(2014 – $2 million decrease).
March 15, 2015
March 15, 2015
Total
March 1, 2014
March 15, 2014
Total
550
280
830
750
350
1,100
(106)
(48)
(154)
(61)
26
(35)
Upon the repayment of the related senior notes in March 2015, a
$7 million non-cash loss (2014 – $29 million non-cash loss) that was
previously deferred in the hedging reserve was recognized in net
income (see note 10). This loss relates to transactions in 2013
(2014 – transactions in 2008 and 2013) wherein contractual foreign
exchange rates on the related debt derivatives were renegotiated
to then-current rates.
118 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
Bond forwards
During 2015, we did not enter into any new bond forwards.
The table below shows the bond forwards we have entered into to hedge the underlying Government of Canada (GoC) 10-year rate for
anticipated future debt.
(In millions of dollars, except interest rates)
GoC term (years)
Effective date
Maturity date 1
Notional
amount
Hedged GoC
interest rate as at
December 31, 2015
Hedged GoC
interest rate as at
December 31, 2014 1
2015
2014
10
10
10
30
Total
December 2014
December 2014
December 2014
December 2014
December 31, 2015
January 4, 2017
April 30, 2018
December 31, 2018
500
500
500
400
1,900
–
2.34%
2.23%
2.52%
2.05%
2.04%
2.07%
2.41%
–
500
500
400
500
500
500
400
1,400
1,900
1 Bond forwards with maturity dates beyond December 31, 2015 are subject to GoC rate re-setting from time to time. The $500 million due in April 2018 was extended in October
2015 to reset in April 2016. The $500 million due in January 2017 was extended in December 2015 to reset in January 2017. The $400 million due December 2018 was extended
in December 2015 to reset in January 2017.
N
O
T
E
S
T
O
C
O
N
S
O
L
I
D
A
T
E
D
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
On December 8, 2015, we exercised the $500 million notional
bond forward due December 31, 2015 in relation to the issuance
of the US$700 million senior notes due 2025 and paid $25 million
to settle the derivative. The amount paid represents the fair value of
the bond forward at the time of settlement and will be amortized to
finance costs over the life of the US$700 million senior notes due
2025.
Expenditure derivatives
The table below shows the expenditure derivatives into which we
entered to manage foreign exchange risk related to certain
forecasted expenditures.
(In millions of dollars, except exchange rates)
Notional trade date Maturity dates
April 2015
June 2015
September 2015
October 2015
Total during 2015
February 2014
May 2014
June 2014
July 2014
Total during 2014
July 2015 to
December 2016
January 2016 to
December 2016
January 2016 to
December 2016
January 2017 to
December 2017
January 2015 to
April 2015
May 2015 to
December 2015
January 2015 to
December 2015
January 2016 to
December 2016
Notional
amount
(US$)
Exchange
rate
Converted
notional
amount
(Cdn$)
1.2933
300
990
1.2788
1,266
270
1.2222
60
1.2167
360
1.3194
200
1.1100
232
1.0948
288
1.0903
1.0833
240
960
330
73
475
388
222
254
314
260
As at December 31, 2015, we had US$1,140 million of expenditure
derivatives outstanding (2014 – US$960 million), at an average rate
of $1.24/US$ (2014 – $1.09/US$). During the year ended
US$810 million
we
December
(2014 – US$900 million) of expenditure derivatives for $902 million
(2014 – $923 million).
settled
2015,
31,
that have been granted under our
Equity derivatives
In 2013, we entered into equity derivatives to hedge market price
appreciation risk associated of 5.7 million RCI Class B Non-Voting
shares
stock-based
compensation programs for stock options, restricted share units
(RSUs) and deferred share units (DSUs) (see note 25). The equity
derivatives were entered into at a weighted average price of
$50.37 with original terms to maturity of one year, extendible for
further one year periods with the consent of
the hedge
counterparties. In 2015, we executed extension agreements for
each of our equity derivative contracts under substantially the same
committed terms and conditions with revised expiry dates of April
2016 (from April 2015). The equity derivatives have not been
designated as hedges for accounting purposes.
During 2015, we recognized a recovery, net of interest receipts, of
$22 million (2014 – $10 million expense),
in stock-based
compensation expense related to the change in fair value of our
equity derivative contracts net of
received payments. As of
December 31, 2015, the fair value of the equity derivatives was a
liability of $15 million (2014 – $30 million), which is included in the
current portion of derivative instruments liabilities.
1.0940
1,050
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 119
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, accounts
receivable, short-term borrowings, and accounts payable and
accrued liabilities approximate their fair values because of the
short-term nature of these financial instruments.
We determine the fair value of each of our publicly traded
investments using quoted market values. We determine the fair
value of our private investments by using implied valuations from
follow-on financing rounds, third party sale negotiations, or market-
based approaches. These are applied appropriately to each
investment depending on its future operating and profitability
prospects.
The fair values of each of our public debt instruments are based on
the year-end estimated market yields. We determine the fair values
of our debt derivatives and expenditure derivatives using an
estimated credit-adjusted mark-to-market valuation by discounting
cash flows to the measurement date. In the case of debt derivatives
and expenditure derivatives in an asset position, the credit spread
for the financial institution counterparty is added to the risk-free
discount rate to determine the estimated credit-adjusted value for
each derivative. For
these debt derivatives and expenditure
derivatives in a liability position, our credit spread is added to the
risk-free discount rate for each derivative.
The fair values of our equity derivatives are based on the quoted
market value of RCI’s Class B Non-Voting shares.
Our disclosure of the three-level fair value hierarchy reflects the
significance of the inputs used in measuring fair value:
• financial assets and financial liabilities in Level 1 are valued by
referring to quoted prices in active markets for identical assets
and liabilities;
• financial assets and financial liabilities in Level 2 are valued using
inputs based on observable market data, either directly or
indirectly, other than the quoted prices; and
• Level 3 valuations are based on inputs that are not based on
observable market data.
There were no material financial instruments categorized in Level 3
as at December 31, 2015 and 2014 and there were no transfers
between Level 1, Level 2, or Level 3 during the respective periods.
The table below shows the financial instruments carried at fair value.
(In millions of dollars)
Financial assets
Available-for-sale, measured at fair value:
Investments in publicly traded companies
Held-for-trading:
Debt derivatives accounted for as cash flow hedges
Bond forwards accounted for as cash flow hedges
Expenditure derivatives accounted for as cash flow hedges
Total financial assets
Financial liabilities
Held-for-trading:
Debt derivatives accounted for as cash flow hedges
Bond forwards accounted for as cash flow hedges
Equity derivatives not accounted for as cash flow hedges
Total financial liabilities
The fair value of our long-term debt is estimated as follows:
(In millions of dollars)
As at December 31
Carrying value
Level 1
Level 2
2015
2014 2015
2014
2015 2014
966 1,130
966 1,130
–
–
2,032
–
158
853
1
70
–
–
–
– 2,032
–
–
158
–
3,156 2,054
966 1,130 2,190
4
91
15
110
7
14
30
51
–
–
–
–
–
–
–
–
4
91
15
110
853
1
70
924
7
14
30
51
As at December 31
2015
2014
Carrying amount
Fair value 1 Carrying amount
Fair value 1
Long-term debt (including current portion)
16,870
18,252
14,787
16,584
1 Long-term debt (including current portion) is measured at Level 2 in the three-level fair value hierarchy, based on year-end trading values.
We did not have any non-derivative held-to-maturity financial assets during the years ended December 31, 2015 and 2014.
120 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
NOTE 17: INVESTMENTS
ACCOUNTING POLICY
Investments in publicly traded and private companies
investments in publicly traded and private
We classify our
companies where we have no control or significant influence as
available-for-sale investments and account for them as follows:
• publicly traded companies – at fair value based on publicly
quoted prices; and
• private companies – at fair value using implied valuations from
follow-on financing rounds, third party sale negotiations, or
market-based approaches.
Investments in associates and joint arrangements
An entity is an associate when we have significant influence over the
entity’s financial and operating policies but do not control it. We
are generally presumed to have significant influence over an entity
when we hold more than 20% of the voting power.
A joint arrangement exists when there is a contractual agreement
that establishes joint control over activities and requires unanimous
consent for strategic financial and operating decisions. We classify
our interests in joint arrangements into one of two categories:
• joint ventures – when we have the rights to the net assets of the
arrangement; and
• joint operations – when we have the rights to the assets and
obligations for the liabilities related to the arrangement.
We use the equity method to account for our investments in
associates and joint ventures; we recognize our proportionate
interest in the assets, liabilities, revenue, and expenses of our joint
operations.
We recognize our investments in associates and joint ventures
initially at cost and then increase or decrease the carrying amounts
based on our share of each entity’s income or loss after initial
recognition. Distributions we receive from these entities reduce the
carrying amounts of our investments.
We eliminate unrealized gains and losses from our investments in
associates or joint ventures against our investments, up to the
amount of our interest in the entities.
Impairment in associates and joint ventures
At the end of each reporting period, we assess whether there is
objective evidence that impairment exists in our investments in
associates and joint ventures.
If objective evidence exists, we
compare the carrying amount of the investment to its recoverable
amount and recognize the excess over the recoverable amount, if
any, as a loss in net income.
EXPLANATORY INFORMATION
As at December 31
N
O
T
E
S
T
O
C
O
N
S
O
L
I
D
A
T
E
D
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
INVESTMENTS, AVAILABLE-FOR-SALE
Publicly traded companies
We hold interests in a number of publicly traded companies. This
year we recognized realized losses of nil and unrealized losses of
$164 million (2014 – $3 million of realized gains and $325 million
of unrealized gains) with a corresponding decrease in net income
and other comprehensive income, respectively.
INVESTMENTS, ASSOCIATES, AND JOINT VENTURES
We have interests in a number of associates and joint ventures,
some of which include:
Maple Leaf Sports and Entertainment Limited (MLSE)
MLSE, a sports and entertainment company, owns and operates
the Air Canada Centre, the NHL’s Toronto Maple Leafs, the NBA’s
Toronto Raptors, MLS’ Toronto FC, the AHL’s Toronto Marlies, and
other assets. We, along with BCE Inc. (BCE), jointly own an indirect
net 75% equity interest in MLSE with our portion representing a
37.5% equity interest
in MLSE is
in MLSE. Our
accounted for as a joint venture using the equity method.
investment
shomi
In 2014, we entered into a joint venture equally owned by Rogers
and Shaw to develop, launch, and operate a premium subscription
video-on-demand service offering movies and television series for
viewing online and through cable set-top boxes. Our investment in
shomi is accounted for as a joint venture using the equity method.
Glentel
In 2015, we completed our purchase of 50% of the common
shares of Glentel Inc. (Glentel) from BCE for cash consideration of
$473 million such that Glentel is jointly owned by us and BCE.
Glentel is a large, multicarrier mobile phone retailer with several
hundred Canadian wireless retail distribution outlets, as well as
operations in the US and Australia. Our investment in Glentel is
accounted for as a joint venture using the equity method.
The following table provides summary financial information on all
our associates and joint ventures and our portions thereof. We
recognize our investments in joint ventures and associates using
the equity method.
As at or years ended December 31
(In millions of dollars)
Current assets
Long-term assets
Current liabilities
Long-term liabilities
(In millions of dollars)
Investments in:
Publicly traded companies
Private companies
Investments, available-for-sale
Investments, associates and joint ventures
Total investments
2015
2014
Total net assets
966
212
1,178
1,093
2,271
Our share of net assets
1,130
161
1,291
607
Revenue
Expenses
Total net loss
1,898
Our share of net loss
2015
1,024
3,295
(935)
(1,221)
2,163
1,086
1,958
(2,178)
(220)
(99)
2014
261
2,577
(432)
(1,247)
1,159
580
714
(736)
(22)
(11)
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 121
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
One of our joint ventures has a non-controlling interest that has a
right to require our joint venture to purchase that non-controlling
interest at a future date at fair value. During 2015, we recognized a
$72 million loss (2014 – nil) relating to our share of the change in
the fair value of this obligation (see note 11).
NOTE 18: OTHER LONG-TERM ASSETS
(In millions of dollars)
Spectrum licence deposits
Other
Total other long-term assets
As at December 31
2015
2014
–
150
150
250
106
356
As at December 31, 2014, we had total deposits of $250 million for
the option to purchase Shaw’s Advanced Wireless Services (AWS)
spectrum licences. In 2015, we received regulatory approval for this
transaction to proceed and we acquired the related spectrum
licences (see note 8).
NOTE 19: SHORT-TERM BORROWINGS
We participate in an accounts receivable securitization program
with a Canadian financial institution that allows us to sell certain
trade receivables into the program. As at December 31, 2015, the
proceeds of the sales were committed up to a maximum of
$1,050 million (2014 – $900 million). Effective January 1, 2015, we
the accounts receivable securitization
amended the terms of
program, increasing the maximum potential proceeds under the
program from $900 million to $1,050 million and extending the
term of the program from December 31, 2015 to January 1, 2018.
We received funding of $294 million and repaid $336 million
(2014 – received funding of $276 million and repaid $84 million),
under the program in 2015. We continue to service and retain
substantially all of the risks and rewards relating to the accounts
receivables we sold, and therefore,
the receivables remain
recognized on our Consolidated Statements of Financial Position
and the funding received is recognized as short-term borrowings.
NOTE 20: PROVISIONS
ACCOUNTING POLICY
We recognize a provision when a past event creates a legal or
constructive obligation that can be reasonably estimated and is
likely to result in an outflow of economic resources. We recognize a
provision even when the timing or amount of the obligation may
be uncertain.
Decommissioning and restoration costs
We use network and other assets on leased premises in some of
our business activities. We expect to exit these premises in the
future and therefore make provisions for the costs associated with
decommissioning the assets and restoring the locations to their
original standards when we have a legal or constructive obligation
to do so. We calculate these costs based on a current estimate of
the costs that will be incurred, project those costs into the future
based on management’s best estimates of future trends in prices,
inflation, and other factors, and discount them to their present
forecasts when business conditions or
value. We revise our
technological requirements change.
When we recognize a decommissioning liability, we recognize a
corresponding asset
in property, plant and equipment and
depreciate the asset based on the corresponding asset’s useful life
122 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
The buyer’s interest in these trade receivables ranks ahead of our
interest. The program restricts us from using the receivables as
collateral for any other purpose. The buyer of our trade receivables
has no claim on any of our other assets.
(In millions of dollars)
Trade accounts receivable sold to buyer as
security
Short-term borrowings from buyer
Overcollateralization
As at December 31
2015
2014
1,359
(800)
1,135
(842)
559
293
We incurred interest costs of $15 million in 2015 (2014 –
$14 million) which we recognized in finance costs.
following our depreciation policies for property, plant and
equipment. We recognize the accretion of the liability as a charge
to finance costs on the Consolidated Statements of Income.
Restructuring
We make provisions for restructuring when we have approved a
detailed and formal restructuring plan and either the restructuring
has started or management has announced the plan’s main
features to the employees affected by it. Restructuring obligations
that have uncertain timing or amounts are recognized as
provisions; otherwise they are recognized as accrued liabilities. All
charges are recognized in restructuring, acquisition and other on
the Consolidated Statements of Income (see note 9).
Onerous contracts
We make provisions for onerous contracts when the unavoidable
costs of meeting our obligation under a contract exceed the
benefits we expect to realize from it. We measure these provisions
at
the expected cost of
terminating the contract or the expected cost of continuing with
the contract. We recognize any impairment loss on the assets
associated with the contract before we make the provision.
the present value of
the lower of
EXPLANATORY INFORMATION
(In millions of dollars)
Liabilities Other Total
Decommissioning
December 31, 2014
Additions
Adjustments to existing provisions
Reversals
Amounts used
December 31, 2015
Current
Long-term
NOTE 21: LONG-TERM DEBT
33
8
2
–
(3)
40
10
30
29
–
–
(5)
(4)
20
–
20
62
8
2
(5)
(7)
60
10
50
(In millions of dollars, except interest rates)
Bank credit facilities
Senior notes 1
Senior notes 2
Senior notes
Senior notes
Senior notes
Senior notes
Senior notes
Senior notes
Senior notes
Senior notes
Senior notes
Senior notes
Senior notes
Senior notes
Senior notes
Senior debentures 2
Senior notes
Senior notes
Senior notes
Senior notes
Senior notes
Senior notes
Senior notes
Deferred transaction costs and discounts
Less current portion
Total long-term debt
Cash outflows associated with our decommissioning liabilities are
generally expected to occur at the decommissioning dates of the
assets to which they relate, which are long-term in nature. The
timing and extent of restoration work that will be ultimately
required for these sites is uncertain.
Other provisions include various legal claims, which are expected
to be settled within five years.
N
O
T
E
S
T
O
C
O
N
S
O
L
I
D
A
T
E
D
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
Due
date
2015
2015
2016
2017
2017
2018
2019
2019
2020
2021
2022
2023
2023
2024
2025
2032
2038
2039
2040
2041
2043
2043
2044
Principal
amount
US
US
550
280
1,000
500
250
US 1,400
400
500
900
1,450
600
500
850
600
700
200
350
500
800
400
500
US
US
650
US 1,050
US
US
US
US
US
Interest
rate
Floating
7.500%
6.750%
5.800%
3.000%
Floating
6.800%
2.800%
5.380%
4.700%
5.340%
4.000%
3.000%
4.100%
4.000%
3.625%
8.750%
7.500%
6.680%
6.110%
6.560%
4.500%
5.450%
5.000%
As at December 31
2015
500
–
–
1,000
500
250
1,938
400
500
900
1,450
600
692
1,176
600
969
277
484
500
800
400
692
900
1,453
2014
–
638
325
1,000
500
250
1,624
400
500
900
1,450
600
580
986
600
–
232
406
500
800
400
580
754
870
16,981
(111)
(1,000)
14,895
(108)
(963)
15,870
13,824
1 Senior notes originally issued by Rogers Wireless Inc. which are unsecured obligations of RCI and for which RCP was an unsecured co-obligor as at December 31, 2015 and
December 31, 2014.
2 Senior notes and debentures originally issued by Rogers Cable Inc. which are unsecured obligations of RCI and for which RCP was an unsecured guarantor as at December 31,
2015 and December 31, 2014.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 123
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Each of the above senior notes and debentures are unsecured and,
as at December 31, 2015 and December 31, 2014, were
guaranteed by RCP, ranking equally with all of RCI’s other senior
notes, debentures, bank credit facilities, and letter of credit facilities.
We use derivatives to hedge the foreign exchange risk associated
with the principal and interest components of all of our US dollar-
denominated senior notes and debentures (see note 16).
Effective January 1, 2016, as a result of the dissolution of RCP (see
note 1), RCP is no longer a guarantor or co-obligor, as applicable,
for the Company’s bank credit and letter of credit facilities, senior
notes and debentures, and derivative instruments. RCI continues to
be the obligor in respect of each of these, while RCCI is either a co-
obligor or guarantor for the senior notes and debentures and a
guarantor, as applicable, for the bank credit and letter of credit
facilities and derivative instruments.
WEIGHTED AVERAGE INTEREST RATE
Our effective weighted average rate on all debt and short-term
borrowings, as at December 31, 2015, including the effect of all of
the associated debt derivative instruments and the exercised bond
forward, was 4.82% (2014 – 5.20%).
BANK CREDIT AND LETTER OF CREDIT FACILITIES
In 2015, we entered into a new bank credit facility (non-revolving
credit facility) that provides access to $1.0 billion of non-revolving
borrowings, in addition to our existing $2.5 billion revolving credit
facility (revolving credit facility). The non-revolving credit facility
matures in April 2017 with no scheduled principal repayments prior
to maturity. The interest rate charged on borrowings under the
non-revolving credit
facility falls within the range of pricing
indicated for our revolving credit facility.
In December 2015, we amended our non-revolving bank credit
facility to allow partial, temporary repayment of this facility from
December 2015 through May 2016; the maximum credit limit
remains $1.0 billion.
During 2015, we borrowed $6,025 million (2014 – $1,330 million)
under our revolving and non-revolving credit facilities and repaid
$5,525 million (2014 – $1,330 million) (see note 30).
In April 2014, we re-negotiated the terms of our revolving credit
facility to increase the maximum amount available from $2.0 billion
to $2.5 billion while extending the maturity date from July 2017 to
July 2019. The $2.5 billion revolving credit facility is available on a
fully revolving basis until maturity and there are no scheduled
rate charged on
to maturity. The interest
reductions prior
borrowings from the revolving credit facility ranges from nil to
1.25% per annum over the bank prime rate or base rate, or 0.85%
to 2.25% (1.00% to 2.25% prior to April 2014) over the bankers’
acceptance rate or London Inter-Bank Offered Rate.
In April 2014, we arranged for the return and cancellation of
approximately $0.4 billion of letters of credit that were issued in
relation to the 700 MHz spectrum licence auction completed in
early 2014 and the corresponding letter of credit facility was
permanently cancelled.
As at December 31, 2015, we had $500 million (2014 – nil)
outstanding under our revolving and non-revolving credit facilities.
As at December 31, 2015, we had available liquidity of $3.0 billion
(2014 – $2.5 billion) under our $3.6 billion of revolving and non-
revolving credit and letter of credit facilities (2014 – $2.6 billion), of
which we had utilized approximately $0.1 billion (2014 – $0.1
billion) related to outstanding letters of credit and $0.5 billion of
borrowings (2014 – nil).
SENIOR NOTES AND DEBENTURES
Interest is paid on our senior notes as follows:
• semi-annually on all of our
fixed rate senior notes and
debentures; and
• quarterly on our floating rate senior notes.
We have the option to redeem each of our fixed rate senior notes
and debentures, in whole or in part, at any time, if we pay the
premiums specified in the corresponding agreements.
124 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
Issuance of senior notes
The table below provides a summary of the senior notes that we issued in 2015 and 2014.
(In millions of dollars, except interest rates and discounts)
Date Issued
2015 issuances
December 8, 2015
December 8, 2015
Total for 2015
2014 issuances
March 10, 2014
March 10, 2014
March 10, 2014
March 10, 2014
Total for 2014
Principal
amount
US
US
700
300
250
400
600
750
US
Due date
Interest rate
Discount/
premium at
issuance
Total gross
proceeds 1
(Cdn$)
Transaction costs
and discounts 2
(Cdn$)
2025
2044
2017
2019
2024
2044
3.625%
5.000%
99.252%
101.700%
Floating
2.80%
4.00%
5.00%
100.000%
99.972%
99.706%
99.231%
937
401
1,338
250
400
600
832
2,082
13
24
1 Gross proceeds before transaction costs and discounts (see note 30).
2 Transaction costs and discounts are included as deferred transaction costs and discounts in the carrying value of the long-term debt, and recognized in net income using the
effective interest method.
N
O
T
E
S
T
O
C
O
N
S
O
L
I
D
A
T
E
D
F
I
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Concurrent with the 2015 issuances and the 2014 issuance
denominated in US dollars, we entered into debt derivatives to
convert all interest and principal payment obligations to Canadian
dollars (see note 16).
Repayment of senior notes and related derivative settlements
During 2015, we repaid our US$550 million ($702 million) and
US$280 million ($357 million) senior notes that were due in March
2015. At the same time, the associated debt derivatives were
settled at maturity for net proceeds received of $154 million,
resulting in a net repayment of $905 million including settlement of
the associated debt derivatives (see note 16).
During 2014, we repaid or repurchased our US$750 million ($834
million) and US$350 million ($387 million) senior notes that were
due in March 2014. At
the associated debt
derivatives were settled at maturity for net proceeds received of
repayment of $1,186 million
$35 million,
including settlement of
the associated debt derivatives (see
note 16).
resulting in a net
the same time,
PRINCIPAL REPAYMENTS
The table below shows the principal repayments on our long-term
debt due in each of the next five years and thereafter as at
December 31, 2015.
(In millions of dollars)
2016
2017
2018
2019
2020
Thereafter
Total long-term debt
1,000
1,250
1,938
900
900
10,993
16,981
FOREIGN EXCHANGE
We recognized $11 million in 2015 (2014 – $11 million) in foreign
exchange losses in finance costs on the Consolidated Statements
of Income. These losses were entirely offset by an equivalent
amount reclassified from the hedging reserve. The offset was a
result of the debt derivatives being accounted for as effective
hedges against the foreign exchange risk related to the principal
and interest components of our US dollar-denominated debt
throughout 2015 and 2014.
TERMS AND CONDITIONS
As at December 31, 2015 and 2014, we were in compliance with all
financial covenants,
the terms and
conditions of our long-term debt agreements. There were no
financial leverage covenants in effect other than those under our
bank credit and letter of credit facilities.
financial ratios, and all of
two of
three specified credit
The 8.75% debentures due in 2032 contain debt incurrence tests
and restrictions on additional
investments, sales of assets, and
payment of dividends, all of which are suspended in the event the
public debt securities are assigned investment grade ratings by at
rating agencies. As at
least
December 31, 2015, these public debt securities were assigned an
investment grade rating by each of the three specified credit rating
agencies and, accordingly, these restrictions have been suspended
as long as the investment grade ratings are maintained. Our other
senior notes do not have any of these restrictions, regardless of the
related credit
ratings. The repayment dates of certain debt
agreements can also be accelerated if there is a change in control
of RCI.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 125
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 22: OTHER LONG-TERM LIABILITIES
As at December 31
(In millions of dollars)
Note
2015
2014
Deferred pension liability
Supplemental executive retirement
plan
Stock-based compensation
Other
23
23
25
296
321
56
50
53
56
37
48
Total other long-term liabilities
455
462
NOTE 23: POST-EMPLOYMENT BENEFITS
ACCOUNTING POLICY
Post-employment benefits
We offer contributory and non-contributory defined benefit
pension plans that provide employees with a lifetime monthly
pension on retirement.
USE OF ESTIMATES AND JUDGMENTS
ESTIMATES
Detailed below are the significant assumptions used in the actuarial
calculations used to determine the amount of the defined pension
obligation and related expense.
Significant estimates are involved in determining pension-related
balances. Actuarial estimates are based on projections of
employees’ compensation levels at
retirement.
Maximum retirement benefits are primarily based on career
average earnings, subject to certain adjustments. The most recent
actuarial valuations were completed as at January 1, 2015.
the time of
Principal actuarial assumptions
Weighted average of significant
assumptions:
Defined benefit obligation
Discount rate
Rate of compensation
increase
Mortality rate
Pension expense
Discount rate
Rate of compensation
increase
Mortality rate
2015
2014
4.3%
4.1%
3.0%
CIA Private with
CPM B Scale
3.0%
CIA Private with
CPM B Scale
4.1%
5.1%
3.0%
CIA Private with
CPM B Scale
3.0%
CIA Private with
CPM A Scale
We separately calculate our net obligation for each defined benefit
future benefits
pension plan by estimating the amount of
employees have earned in return for their service in the current and
prior years and discounting those benefits to determine their
present value.
We accrue our pension plan obligations as employees provide the
services necessary to earn the pension. We use a discount rate
based on market yields on high quality corporate bonds at the
measurement date to calculate the accrued pension benefit
obligation. Remeasurements of
the accrued pension benefit
obligation are determined at the end of the year and include
actuarial gains and losses, returns on plan assets, and any change in
the effect of the asset ceiling. These are recognized in other
comprehensive income and retained earnings.
The cost of pensions is actuarially determined and takes into
account
the following assumptions and methods for pension
accounting related to our defined benefit pension plans:
• expected rates of salary increases for calculating increases in
future benefits;
• mortality rates for calculating the life expectancy of plan
members; and
• past service costs from plan amendments are immediately
expensed in net income.
We recognize our net pension expense for our defined benefit
pension plans and contributions to defined contribution plans as
an employee benefit expense in operating costs on the
Consolidated Statements of Income in the periods the employees
provide the related services.
Termination benefits
We recognize termination benefits as an expense when we are
committed to a formal detailed plan to terminate employment
before the normal retirement date and it is not realistic that we will
withdraw it.
126 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
Sensitivity of key assumptions
In the sensitivity analysis shown below, we determine the defined
benefit obligation using the same method used to calculate the
defined benefit obligation we recognize on the Consolidated
Statements of Financial Position. We calculate sensitivity by
changing one assumption while holding the others constant. This
leads to limitations in the analysis as the actual change in defined
benefit obligation will likely be different from that shown in the
table, since it is likely that more than one assumption will change at
a time, and that some assumptions are correlated.
Increase (decrease)
in accrued benefit
obligation
Increase (decrease)
in pension
expense
(In millions of dollars)
2015
2014
2015
2014
Discount rate
Impact of 0.5% increase
Impact of 0.5% decrease
(146)
167
(141)
162
(18)
19
(15)
16
Rate of future compensation
increase
Impact of 0.25% increase
Impact of 0.25% decrease
Mortality rate
Impact of 1 year increase
Impact of 1 year decrease
18
(18)
39
(41)
18
(18)
35
(36)
3
(3)
4
(4)
3
(3)
3
(3)
EXPLANATORY INFORMATION
We have contributory and non-contributory defined benefit
pension plans that are made available to most of our employees.
The plans provide pensions based on years of service, years of
contributions, and earnings. We do not provide any non-pension
post-retirement benefits. We also provide unfunded supplemental
pension benefits to certain executives.
We sponsor a number of pension arrangements for employees,
including defined benefit and defined contributions plans. The
Rogers Defined Benefit Plan provides a defined pension based on
years of service and earnings, and with no increases in retirement
for inflation. Participation in the plan is voluntary and enrolled
employees are required to make regular contributions into the
plan. In 2009 and 2011, we purchased group annuities for our then
retirees. Accordingly, the current plan members are primarily active
Rogers employees as opposed to retirees. An unfunded
supplemental pension plan is provided to certain senior executives
to provide benefits in excess of amounts that can be provided from
the defined pension plan under the Canada Income Tax Act’s
maximum pension limits.
We also sponsor smaller defined benefit pension plans in addition
to the Rogers Defined Benefit Plan. The Pension Plan for
Employees of Rogers Communications Inc. and the Rogers
Pension Plan for Selkirk Employees are legacy closed defined
benefit pension plans. The Pension Plan for Certain Federally
Regulated Employees of Rogers Cable Communications Inc.
is
similar to the main pension plan but only federally regulated Cable
business employees are eligible to participate.
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In addition to the defined benefit pension plans, we also provide
defined contributions plans to certain unionized New Brunswick
employees, employees of
the Toronto Blue Jays and Rogers
Centre, and some US subsidiaries. Additionally, we also provide
other tax-deferred savings arrangements including a Group RRSP
and a Group TFSA program which are accounted for as deferred
contribution arrangements.
The assets of the defined benefit pension plans are held in
segregated accounts isolated from our assets. We administer the
defined benefit pension plans pursuant to applicable regulations,
the Statement of Investment Policies and Procedures and to the
mandate of the Pension Committee of the Board of Directors. The
Pension Committee of
the Board of Directors oversees our
administration of the defined benefit pension plans, which includes
the following principal areas:
• overseeing the funding, administration, communication and
investment management of the plans;
• selecting and monitoring the performance of all third parties
including audit,
the plans,
performing duties in respect of
actuarial and investment management services;
• proposing, considering and approving amendments to the
defined benefit pension plans;
• proposing, considering and approving amendments of
the
Statement of Investment Policies and Procedures;
• reviewing management and actuarial
reports prepared in
respect of the administration of the defined benefit pension
plans; and
• reviewing and approving the audited financial statements of the
defined benefit pension plan funds.
The assets of the defined benefit pension plans are invested and
managed following all applicable regulations and the Statement of
Investment Policies and Procedures with the objective of having
adequate funds to pay the benefits promised by the plan, and
reflect the characteristics and asset mix of each defined benefit
pension plan. Investment and market return risk is managed by:
• contracting professional
investment managers to execute the
Investment
investment strategy following the Statement of
Policies and Procedures and regulatory requirements;
• specifying the kinds of investments that can be held in the plans
and monitoring compliance;
• using asset allocation and diversification strategies; and
• purchasing annuities from time to time.
The funded pension plans are registered with the Office of the
Superintendent of Financial
Institutions and are subject to the
Federal Pension Benefits Standards Act. The plans are also
registered with the Canada Revenue Agency and are subject to the
Canada Income Tax Act. The benefits provided under the plans
and the contributions to the plans are funded and administered in
accordance with all applicable legislation and regulations.
There are risks related to contribution increases, inadequate plan
surplus, unfunded obligations and return risk for the defined
benefit pension plans, which we mitigate through the governance
described above. Any significant changes to these defined benefit
pension plans items may affect our future cash flows.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 127
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The table below sets out the estimated present value of accrued
plan benefits and the estimated market value of the net assets
available to provide these benefits for our funded plans.
Plan assets are comprised mainly of pooled funds that invest in
common stocks and bonds that are traded in an active market. The
table below shows the fair value of the total pension plan assets by
major category.
(In millions of dollars)
Plan assets, at fair value
Accrued benefit obligations
Deficiency of plan assets over accrued benefit
obligations
Effect of asset ceiling limit
Net deferred pension liability
Consists of:
Deferred pension asset
Deferred pension liability
Net deferred pension liability
The table below shows our pension fund assets.
As at December 31
2015
2014
1,432
(1,713)
1,285
(1,592)
(281)
(3)
(284)
12
(296)
(284)
(307)
(7)
(314)
7
(321)
(314)
(In millions of dollars)
Plan assets, beginning of year
Interest income
Remeasurements, (loss) return on plan
assets recognized in other
comprehensive (loss) income
and equity
Contributions by employees
Contributions by employer
Benefits paid
Administrative expenses paid from
plan assets
Years ended December 31
2015
1,285
56
2014
1,037
57
(10)
32
118
(46)
(3)
94
30
106
(37)
(2)
(In millions of dollars)
Equity securities
Debt securities
Other – cash
Total fair value of plan assets
As at December 31
2015
2014
873
554
5
774
506
5
1,432
1,285
The table below shows our net pension expense. Net interest cost
is included in finance costs and other pension expenses are
included in salaries and benefits expense in operating costs on the
Consolidated Statements of Income.
(In millions of dollars)
Plan cost:
Service cost
Net interest cost
Net pension expense
Administrative expense
Total pension cost recognized in net
income
Years ended December 31
2015
2014
98
9
107
3
110
70
4
74
2
76
Net interest cost, a component of the plan cost above is included in
finance costs and is outlined as follows:
Plan assets, end of year
1,432
1,285
The table below shows the accrued benefit obligations arising from
funded obligations.
(In millions of dollars)
2015
2014
Years ended December 31
(In millions of dollars)
Net interest cost:
Interest income on plan assets
Interest cost on plan obligation
Net interest cost recognized in finance
costs
Years ended December 31
2015
2014
(56)
65
9
(57)
61
4
1,592
98
65
(46)
32
1,209
70
61
(37)
30
The remeasurement recognized in other comprehensive income, is
determined as follows:
(In millions of dollars)
2015
2014
Years ended December 31
(28)
259
(Loss) return on plan assets (excluding
interest income)
Change in financial assumptions
Change in demographic assumptions
Effect of experience adjustments
Change in asset ceiling
Remeasurement recognized in other
comprehensive income (loss) and
equity
(10)
45
–
(17)
4
94
(265)
15
(9)
2
22
(163)
Accrued benefit obligations, beginning
of year
Service cost
Interest cost
Benefits paid
Contributions by employees
Remeasurements, recognized in other
comprehensive (income) loss
and equity
Accrued benefit obligations, end of
year
1,713
1,592
The table below shows the effect of the asset ceiling.
Years ended December 31
(In millions of dollars)
2015
2014
Asset ceiling, beginning of year
Interest
Remeasurements, change in asset
ceiling (excluding interest income)
Asset ceiling, end of year
(7)
(1)
5
(3)
(9)
(1)
3
(7)
128 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
We also provide supplemental unfunded pension benefits to
certain executives. The table below includes our accrued benefit
obligations, pension expense included in employee salaries and
benefits, net interest cost and other comprehensive income.
(In millions of dollars)
2015
2014
Years ended December 31
Accrued benefit obligation, beginning
of year
Pension expense included in employee
salaries and benefits expense
Net interest cost recognized in finance
costs
Remeasurement recognized in other
comprehensive (income) loss
Benefits paid
Accrued benefit obligation, end of year
56
3
2
(2)
(3)
56
49
2
2
5
(2)
56
Plan assets consist primarily of pooled funds that invest in common
stocks and bonds. The pooled Canadian equity funds have
investments in our equity securities. As a result, approximately
$3 million (2014 – $3 million) of the plans’ assets are indirectly
invested in our own equity securities.
We make contributions to the plans to secure the benefits of plan
members and invest in permitted investments using the target
ranges established by our Pension Committee, which reviews
actuarial assumptions on an annual basis.
The table below shows the actual contributions to the plans.
(In millions of dollars)
Employer contribution
Employee contribution
Total contribution
Years ended December 31
2015
2014
118
32
150
106
30
136
Certain subsidiaries have defined contribution plans with total
pension expense of $3 million in 2015 (2014 – $2 million), which is
included in employee salaries and benefits expense.
We estimate our 2016 employer contributions to be $119 million.
The average duration of the defined benefit obligation as at
December 31, 2015 is 19 years (2014 – 20 years).
ALLOCATION OF PLAN ASSETS
return on plan assets was $44 million in 2015
Actual
(2014 – $149 million).
Allocation of plan assets
2015
2014
Target asset
allocation
percentage
We have recognized a cumulative loss in other comprehensive
income and retained earnings of $306 million as at December 31,
2015 (2014 – $324 million).
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Equity securities:
Domestic
International
Debt securities
Other – cash
19.7%
41.3%
38.7%
0.3%
20.3% 10% to 29%
40.0% 29% to 48%
39.4% 38% to 47%
0% to 2%
0.3%
Total
100.0%
100.0%
NOTE 24: SHAREHOLDERS’ EQUITY
CAPITAL STOCK
Share class
Preferred shares
Number of shares
authorized for issue
400 million
Class A Voting shares
112,474,388
Voting rights
• None
Features
• Without par value
• Issuable in series, with
rights and terms of each
series to be fixed by our
Board of Directors prior to
the issue of any series
• Without par value
• Each
share
can
converted
Class B Non-Voting share
into
be
one
• Each share entitled to
50 votes
Class B Non-Voting shares
1.4 billon
• Without par value
• None
RCI’s Articles of Continuance under the Company Act (British
Columbia) impose restrictions on the transfer, voting and issue of
the Class A Voting and Class B Non-Voting shares to ensure that
we remain qualified to hold or obtain licences required to carry on
certain of our business undertakings in Canada. We are authorized
to refuse to register transfers of any of our shares to any person
who is not a Canadian in order to ensure that Rogers remains
qualified to hold the licences referred to above.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 129
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIVIDENDS
In 2015 and 2014, we declared and paid the following dividends
on our outstanding Class A Voting and Class B Non-Voting shares:
Date declared
Date paid
January 28, 2015
April 21, 2015
August 13, 2015
October 22, 2015
April 1, 2015
July 2, 2015
October 1, 2015
January 4, 2016
February 12. 2014
April 22, 2014
August 14, 2014
October 23, 2014
April 4, 2014
July 2, 2014
October 1, 2014
January 2, 2015
Dividend per
share (dollars)
0.48
0.48
0.48
0.48
1.92
0.4575
0.4575
0.4575
0.4575
1.83
NOTE 25: STOCK-BASED COMPENSATION
ACCOUNTING POLICY
Stock option plans
Cash-settled share appreciation rights (SARs) are attached to all
stock options granted under our employee stock option plan. This
feature allows the option holder to choose to receive a cash
payment equal to the intrinsic value of the option (the amount by
which the market price of the Class B Non-Voting share exceeds
the exercise price of the option on the exercise date) instead of
exercising the option to acquire Class B Non-Voting shares. We
classify all outstanding stock options with cash settlement features
as liabilities and carry them at their fair value, determined using the
Black-Scholes option pricing model or trinomial option pricing
models, depending on the nature of the share-based award. We
remeasure the fair value of the liability each period and amortize it
to operating costs using graded vesting, either over the vesting
period or to the date an employee is eligible to retire (whichever is
shorter).
Restricted share unit (RSU) and deferred share unit (DSU) plans
We recognize outstanding RSUs and DSUs as liabilities, measuring
the liabilities and compensation costs based on the awards’ fair
values, which are based on the market price of the Class B Non-
Voting shares, and recognizing them as charges to operating costs
If an award’s fair value
over the vesting period of the awards.
changes after it has been granted and before the exercise date, we
recognize the resulting changes in the liability as a charge to
operating costs in the year the change occurs. For RSUs, the
payment amount is established as of the vesting date. For DSUs,
the payment amount is established as of the exercise date.
130 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
The holders of Class A shares are entitled to receive dividends at
the rate of up to five cents per share but only after dividends at the
rate of five cents per share have been paid or set aside on the
Class B shares. Class A Voting and Class B Non-Voting shares
therefore participate equally in dividends.
On January 27, 2016, the Board of Directors declared a quarterly
dividend of $0.48 per Class A Voting share and Class B Non-Voting
share, to be paid on April 1, 2016, to shareholders of record on
March 13, 2016.
Employee share accumulation plan
Employees voluntarily participate in the share accumulation plan by
contributing a specified percentage of their regular earnings. We
match employee contributions up to a certain amount and
recognize our contributions as a compensation expense in the year
we make them. Expenses relating to the employee share
accumulation plan are included in operating costs.
USE OF ESTIMATES AND JUDGMENTS
ESTIMATES
Significant management estimates are used to determine the fair
value of stock options, RSUs, and DSUs. The table below shows the
weighted-average fair value of stock options granted during 2015
and 2014, and the principal assumptions used in applying the
for non-performance-based options and
Black-Scholes model
trinomial option pricing models for performance-based options to
determine their fair value at grant date:
Years ended December 31
2015
2014
Weighted average fair value
$
4.65
$
7.35
Risk-free interest rate
Dividend yield
Volatility of Class B Non-Voting shares
Weighted average expected life
Weighted average time to vest
Weighted average time to expiry
Employee exit rate
Suboptimal exercise factor
Lattice steps
1.1%
4.5%
22.0%
n/a
2.4 years
9.9 years
3.9%
1.5
50
1.2%
4.0%
25.7%
n/a
2.4 years
9.9 years
3.9%
1.6
50
Volatility has been estimated based on the actual trading statistics
of our Class B Non-Voting shares.
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EXPLANATORY INFORMATION
The table below is a summary of our stock-based compensation
expense, which is included in employee salaries and benefits
expense.
(In millions of dollars)
2015
2014
Years ended December 31
Stock options
Restricted share units
Deferred share units
Equity derivative effect, net of interest
receipt
Total stock-based compensation
expense
18
40
19
(22)
55
(9)
34
2
10
37
As at December 31, 2015, we had a total liability recognized at its
fair value of $157 million (2014 – $144 million) related to stock-
based compensation, including stock options, RSUs and DSUs. The
current portion of this is $107 million (2014 – $106 million) and is
included in accounts payable and accrued liabilities. The long-term
portion of this is $50 million (2014 – $37 million) and is included in
other long-term liabilities (see note 22).
The total intrinsic value of vested liabilities, which is the difference
between the strike price of the share-based awards and the trading
price of the RCI Class B Non-Voting shares for all vested share-
based awards as at December 31, 2015 was $56 million
(2014 – $67 million).
We paid $73 million in 2015 (2014 – $48 million) to holders of
stock options, RSUs, and DSUs upon exercise using the cash
settlement feature, representing a weighted average share price on
the date of exercise of $46.63 (2014 – $43.42).
STOCK OPTIONS
Options to purchase our Class B Non-Voting shares on a one-for-
one basis may be granted to our employees, directors and officers
by the Board of Directors or our Management Compensation
Committee. There are 65 million options authorized under various
plans, and each option has a term of seven to ten years. The vesting
period is generally graded vesting over four years; however the
Management Compensation Committee may adjust the vesting
terms on the grant date. The exercise price is equal to the fair
market value of the Class B Non-Voting shares, determined as the
five-day average before the grant date as quoted on the TSX.
Performance options
We granted 496,200 performance-based options in 2015 (2014 –
845,989) to certain key executives. These options vest on a graded
basis over four years provided that certain targeted stock prices are
met on or after each anniversary date. As at December 31, 2015,
we had 3,688,612 performance options (2014 – 4,740,308)
outstanding.
Summary of stock options
The table below is a summary of the stock option plans, including performance options:
Year ended December 31, 2015
Year ended December 31, 2014
(In number of units, except prices)
Number of options
exercise price Number of options
Weighted average
Outstanding, beginning of year
Granted
Exercised
Forfeited
Outstanding, end of year
Exercisable, end of year
5,759,786
1,289,430
(1,978,149)
(197,127)
4,873,940
2,457,005
$38.71
$44.77
$35.40
$43.49
$41.47
$38.57
6,368,403
845,989
(1,259,533)
(195,073)
5,759,786
3,363,046
Weighted average
exercise price
$37.39
$42.94
$34.14
$43.37
$38.71
$35.47
The table below shows the range of exercise prices, the weighted average exercise price and the weighted average remaining contractual
life as at December 31, 2015:
Range of exercise prices
$29.39 – $29.99
$30.00 – $34.99
$35.00 – $39.99
$40.00 – $44.99
$45.00 – $48.57
Options outstanding
Weighted average
remaining contractual
life (years)
Options exercisable
Weighted average
exercise price
Number
exercisable
Weighted average
exercise price
0.30
1.40
3.03
8.74
7.63
5.93
$29.40
$33.70
$37.96
$44.03
$47.27
86,299
1,094,635
466,126
178,421
631,524
$41.47
2,457,005
$29.40
$33.70
$37.96
$43.01
$47.44
$38.57
Number
outstanding
86,299
1,094,635
630,132
1,859,900
1,202,974
4,873,940
Unrecognized stock-based compensation expense as at December 31, 2015 related to stock-option plans was $7 million
(2014 – $7 million), and will be recognized in net income over the next four years as the options vest.
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 131
Performance DSUs
We granted 443,139 performance-based DSUs in 2015 (2014 – nil)
to certain key executives. The number of units that vest and will be
paid three years from the grant date will be within 50% to 150% of
the initial number granted based upon the achievement of certain
annual and cumulative three-year non-market targets.
Summary of DSUs
The table below is a summary of the DSUs outstanding, including
performance DSUs.
Years ended December 31
(In number of units)
2015
2014
Outstanding, beginning of year
Granted and reinvested dividends
Exercised
Forfeited
826,891
1,324,169
(257,677)
(122,512)
700,912
125,979
–
–
Outstanding, end of year
1,770,871
826,891
Unrecognized stock-based compensation
at
December 31, 2015, related to these DSUs was $26 million (2014 –
$2 million) and will be recognized in net income over the next
three years as the executive DSUs vest. All other DSUs are fully
vested.
expense
as
EMPLOYEE SHARE ACCUMULATION PLAN
Participation in the plan is voluntary. Employees can contribute up
to 10% of their regular earnings through payroll deductions (up to
an annual maximum of $25,000). The plan administrator purchases
our Class B Non-Voting shares on a monthly basis on the open
market on behalf of the employee. At the end of each month, we
make a contribution of 25% to 50% of the employee’s contribution
that month, and the plan administrator uses this amount
to
purchase additional shares on behalf of
the employee. We
recognize our contributions made as a compensation expense.
Compensation expense related to the employee share
accumulation plan was $38 million in 2015 (2014 – $38 million).
EQUITY DERIVATIVES
We have entered into equity derivatives to hedge a portion of our
stock-based compensation expense (see note 16) and recognized
a $22 million gain (2014 – $10 million loss)
in stock-based
compensation expense for these derivatives.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RESTRICTED SHARE UNITS
The RSU plan allows employees, officers and directors to
participate in the growth and development of Rogers. Under the
terms of the plan, RSUs are issued to the participant and the units
issued vest over a period of up to three years from the grant date.
On the vesting date, we will redeem all of the participants’ RSUs in
cash or by issuing one Class B Non-Voting share for each RSU. We
have reserved 4,000,000 Class B Non-Voting shares for issue under
this plan. We granted 683,095 RSUs in 2015 (2014 – 1,088,951).
Performance RSUs
We granted 114,979 performance-based RSUs in 2015 (2014 –
313,291) to certain key executives. The number of units that vest
and will be paid three years from the grant date will be within 50%
to 150% of
the initial number granted based upon the
achievement of certain annual and cumulative three-year non-
market targets.
Summary of RSUs
The table below is a summary of the RSUs outstanding, including
performance RSUs.
Years ended December 31
(In number of units)
2015
2014
Outstanding, beginning of year
Granted and reinvested dividends
Exercised
Forfeited
2,765,255
798,074
(822,972)
(255,952)
2,472,390
1,402,242
(828,645)
(280,732)
Outstanding, end of year
2,484,405
2,765,255
at
Unrecognized stock-based compensation
December 31, 2015 related to these RSUs was $41 million (2014 –
$48 million) and will be recognized in net income over the next
three years as the RSUs vest.
expense
as
DEFERRED SHARE UNIT PLAN
The DSU plan allows directors, certain key executives, and other
senior management
to receive certain types of
compensation in DSUs. Under the terms of the plan, DSUs are
issued to the participant and the units issued cliff vest over a period
of up to three years from the grant date.
to elect
132 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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NOTE 26: BUSINESS COMBINATIONS
ACCOUNTING POLICY
We account for acquisitions of subsidiaries using the acquisition
method of accounting. We calculate the fair value of
the
consideration paid as the sum of the fair value at the date of
acquisition of the assets we transferred and the equity interests we
issued, less the liabilities we assumed to acquire the subsidiary.
We measure goodwill as the fair value of
the consideration
transferred less the net recognized amount of the identifiable
assets acquired and liabilities assumed, which are generally
measured at fair value as of the acquisition date. When the excess
is negative, a gain on acquisition is recognized immediately in net
income.
We expense the transaction costs associated with acquisitions as
we incur them.
USE OF ESTIMATES AND JUDGMENTS
ESTIMATES
We use estimates to determine the fair values of assets acquired
and liabilities assumed, using the best available information,
including information from financial markets. These estimates
include key assumptions such as discount rates, attrition rates, and
terminal growth rates for performing discounted cash flow
analyses.
EXPLANATORY INFORMATION
We made several acquisitions in 2015 and 2014, which we
describe below. Goodwill recognized in the 2015 and in the 2014
dealer store acquisitions was deductible for tax purposes; goodwill
tax-deductible.
recognized on all other acquisitions was not
Goodwill represents the expected operational synergies with the
business acquired and/or intangible assets that do not qualify to be
recognized separately.
2015 ACQUISITIONS
Mobilicity
In July 2015, we completed the acquisition of 100% of
the
outstanding common shares of Mobilicity for cash consideration of
$443 million. Mobilicity provided wireless telecommunication
services to Canadians in Toronto, Ottawa, Calgary, Edmonton, and
Vancouver to its prepaid subscribers and owned AWS-1 spectrum
licences.
Subsequent to the acquisition of Mobilicity, Rogers and WIND
undertook an AWS-1 spectrum licence asset exchange in Southern
Ontario to create an additional 10 MHz of contiguous, paired
AWS-1 spectrum for Rogers. In addition, Rogers transferred certain
non-contiguous AWS-1 spectrum licences previously held by
Mobilicity in British Columbia, Alberta, and various regions in
Ontario to WIND for nominal cash proceeds.
Prior to the date of acquisition, Mobilicity was protected under the
Companies’ Creditors Arrangement Act and the acquisition date
fair value of the net identifiable assets exceeded the consideration
paid, resulting in a gain on acquisition of $102 million. This
acquisition provided an enhanced spectrum licence position and
tax losses to the Company.
Other
In 2015, we completed other individually immaterial acquisitions
for total cash consideration of $33 million.
Final fair values of assets acquired and liabilities assumed
The table below summarizes the final fair values of the assets
acquired and liabilities assumed for all the acquisitions described
above.
(In millions of dollars)
Mobilicity
Other
Total
Fair value of consideration
transferred
Net identifiable asset or liability:
Current assets
Property, plant and
equipment
Spectrum licences
Customer relationships 1
Deferred tax assets
Current liabilities
Other liabilities
Deferred tax liabilities
Fair value of net identifiable assets
acquired and liabilities assumed
(Gain on acquisition) goodwill
Acquisition transaction costs
443
5
11
458
–
175
(31)
(8)
(65)
545
(102)
16
33
3
6
–
19
–
(2)
–
(1)
25
8
–
476
8
17
458
19
175
(33)
(8)
(66)
570
16
1 Customer relationships are amortized over a period of seven years.
The table below shows the incremental revenue and net loss
before taxes for the Mobilicity acquisition since the date of
acquisition to December 31, 2015.
(In millions of dollars)
Incremental revenue
Net loss before taxes 1
1 Includes acquisition transaction costs of $16 million.
Mobilicity
30
17
PRO FORMA DISCLOSURES
If the Mobilicity acquisition had occurred on January 1, 2015, we
estimate our incremental revenue from the acquisition would have
been $59 million and income before income taxes would have
decreased by $17 million for the year ended December 31, 2015.
The pro forma disclosures are based on estimates and assumptions
we believe are reasonable. The information provided is not
necessarily an indication of what our consolidated financial results
will be in the future.
2014 ACQUISITIONS
Dealer stores
In January 2014, we completed an asset acquisition of certain
dealer stores located in British Columbia, Alberta, and Ontario for
cash consideration of $46 million, which was paid as a deposit in
the fourth quarter of 2013. The dealer stores are a retail distribution
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 133
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
business and sell telecommunication products and services. The
acquisition of
the dealer stores provided increased product
penetration.
Final fair values of assets acquired and liabilities assumed
The table below summarizes the final fair values of the assets
acquired and liabilities assumed for all the acquisitions described
above.
Source Cable Limited (Source)
In November 2014, we acquired 100% of the common shares of
Source for cash consideration of $156 million. Source is a television,
Internet, and phone service provider situated in Hamilton, Ontario,
and its subscriber footprint is situated adjacent to existing Rogers
cable systems.
NOTE 27: RELATED PARTY TRANSACTIONS
CONTROLLING SHAREHOLDER
Our ultimate controlling shareholder is the Rogers Control Trust
(the Trust), which holds voting control of RCI. The beneficiaries of
the Trust are members of the Rogers family. Certain directors of RCI
represent the Rogers family.
We entered into certain transactions with private Rogers family
holding companies controlled by the Trust. These transactions, as
summarized below, were recognized at the amount agreed to by
(In millions of dollars)
Fair value of consideration
transferred
Net identifiable asset or liability:
Cash
Current assets
Property, plant and
equipment
Customer relationships 1
Current liabilities
Other liabilities
Deferred tax liabilities
Fair value of net identifiable assets
acquired and liabilities assumed
Goodwill
Acquisition transaction costs
Goodwill allocated to the
following segments
Source
Cable
Dealer
stores
Total
156
46
202
1
2
9
38
(6)
(2)
(9)
33
123
1
–
2
–
35
–
–
–
1
4
9
73
(6)
(2)
(9)
37
70
9
–
132
1
Cable
Wireless
1 Customer relationships are amortized over a period of 5 years
the related parties and are subject to the terms and conditions of
formal agreements approved by the Audit and Risk Committee.
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Key management personnel include the directors and our most
senior corporate officers, who are primarily responsible for
planning, directing and controlling our business activities.
134 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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Compensation
The compensation expense for key management for employee
services was included in employee salaries and benefits as follows:
Years ended December 31
(In millions of dollars)
2015
2014
Salaries and other short-term employee
benefits
Post-employment benefits
Stock-based compensation 1
Total compensation
13
3
20
36
10
2
18
30
1 Stock-based compensation does not include the effect of changes in fair value of RCI
Class B Non-Voting shares or equity derivatives.
SUBSIDIARIES, ASSOCIATES, AND JOINT ARRANGEMENTS
We have the following material operating subsidiaries as at
December 31, 2015 and 2014:
• Rogers Communications Partnership (see note 1); and
• Rogers Media Inc.
We have 100% ownership interest
in these subsidiaries. Our
subsidiaries are incorporated in Canada and have the same
reporting period for annual financial statements reporting.
When necessary, adjustments are made to conform the accounting
policies of the subsidiaries to those of Rogers. There are no
significant
joint
arrangements, and associates to transfer funds to Rogers as cash
dividends or to repay loans or advances, subject to the approval of
other shareholders where applicable.
restrictions on the ability of
subsidiaries,
Transactions
We have entered into business transactions with companies whose
partners or senior officers are Directors of RCI, which include:
• the non-executive chairman of a law firm that provides a portion
We carried out
the following business transactions with our
associates and joint arrangements. Transactions between us and
our subsidiaries have been eliminated on consolidation and are not
disclosed in this note.
of our legal services;
• the chairman of a company that provides printing services to the
Years ended December 31
Company; and
• the chairman and chief executive officer of a firm to which the
Company pays commissions for insurance coverage (ceased as a
related party effective April 2015).
We recognize these transactions at the amount agreed to by the
related parties, which are also reviewed by the Audit and Risk
Committee. The amounts owing are unsecured, interest-free and
due for payment in cash within one month from the date of the
transaction. The following table summarizes related party activity for
the business transactions described above:
(In millions of dollars)
Printing, legal services, and
commission paid on
premiums for
insurance coverage
Years ended
December 31
Outstanding
balance as at
December 31
2015
2014
2015
2014
31
38
3
2
(In millions of dollars)
Revenue
Purchases
2015
115
170
2014
15
88
Outstanding balances at year-end are unsecured, interest-free, and
settled in cash.
(In millions of dollars)
Accounts receivable
Accounts payable and accrued
liabilities
As at December 31
2015
2014
56
30
–
15
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 135
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 28: GUARANTEES
We had the following guarantees as at December 31, 2015 and
2014 as part of our normal course of business:
BUSINESS SALE AND BUSINESS COMBINATION
AGREEMENTS
As part of transactions involving business dispositions, sales of
assets or other business combinations, we may be required to pay
counterparties for costs and losses incurred as a result of breaches
of
intellectual property right
infringement, loss or damages to property, environmental liabilities,
changes in laws and regulations (including tax legislation), litigation
against the counterparties, contingent liabilities of a disposed
business, or reassessments of previous tax filings of the corporation
that carries on the business.
representations and warranties,
SALES OF SERVICES
As part of transactions involving sales of services, we may be
required to make payments to counterparties as a result of
breaches of representations and warranties, changes in laws and
regulations (including tax legislation), or litigation against
the
counterparties.
PURCHASES AND DEVELOPMENT OF ASSETS
As part of transactions involving purchases and development of
assets, we may be required to pay counterparties for costs and
representations
losses incurred as a result of breaches of
and warranties, loss or damages to property, changes in laws and
regulations (including tax legislation), or litigation against
the
counterparties.
INDEMNIFICATIONS
We indemnify our directors, officers and employees against claims
reasonably incurred and resulting from the performance of their
services to Rogers. We have liability insurance for our directors and
officers and those of our subsidiaries.
No amount has been accrued in the Consolidated Statements of
Financial Position relating to these types of indemnifications or
guarantees as at December 31, 2015 or 2014. Historically, we have
not made any significant payments under these indemnifications or
guarantees.
NOTE 29: COMMITMENTS AND CONTINGENT LIABILITIES
ACCOUNTING POLICY
Contingent liabilities are liabilities of uncertain timing or amount
and are not recognized until we have a present obligation as a
result of a past event, it is probable that we will experience an
outflow of resources embodying economic benefits to settle the
obligation, and a reliable estimate can be made of the amount of
the obligation.
We disclose our contingent liabilities unless the possibility of an
outflow of resources in settlement is remote.
USE OF ESTIMATES AND JUDGMENTS
JUDGMENTS
We are exposed to possible losses related to various claims and
lawsuits against us for which the outcome is not yet known. We
therefore make significant
in determining the
probability of loss when we assess contingent liabilities.
judgments
EXPLANATORY INFORMATION
COMMITMENTS
The table and paragraphs below show the future minimum payments for our contractual commitments that are not recognized as
liabilities as at December 31, 2015:
(In millions of dollars)
Operating leases
Player contracts 1
Purchase obligations 2
Program rights 3
Total commitments
Less than
1 Year
153
137
457
620
1,367
1-3 Years
4-5 Years
229
166
286
1,135
1,816
114
80
136
1,096
1,426
After
5 Years
64
–
94
2,948
3,106
Total
560
383
973
5,799
7,715
1 Player contracts are Toronto Blue Jays players’ salary contracts into which we have entered and are contractually obligated to pay.
2 Purchase obligations are the contractual obligations under service, product, and handset contracts to which we have committed for at least the next five years.
3 Program rights are the agreements into which we have entered to acquire broadcasting rights for sports broadcasting programs and films for periods in excess of one year at
contract inception.
136 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
Operating leases are for office premises and retail outlets across
the country. The majority of the lease terms range from five to
ten
$219 million
for
(2014 – $210 million).
years. Rent
2015 was
expense
As at December 31, 2015, our contractual commitments were
$282 million for the acquisition of property, plant and equipment
and $156 million for the acquisition of intangible assets.
As at December 31, 2015, our contractual commitments related to
all of our associates and joint ventures were $459 million.
CONTINGENT LIABILITIES
We have the following contingent liabilities as at December 31,
2015:
System Access Fee – Saskatchewan
In 2004, a class action was commenced against providers of
wireless communications in Canada under the Class Actions Act
(Saskatchewan). The class action relates to the system access fee
wireless carriers charge to some of their customers. The plaintiffs
are seeking unspecified damages and punitive damages, which
would effectively be a reimbursement of all system access fees
collected.
In 2007, the Saskatchewan Court granted the plaintiffs’ application
to have the proceeding certified as a national, “opt-in” class action
where affected customers outside Saskatchewan must take specific
steps to participate in the proceeding. In 2008, our motion to stay
the proceeding based on the arbitration clause in our wireless
service agreements was granted. The Saskatchewan Court directed
that its order, in respect of the certification of the action, would
exclude customers who are bound by an arbitration clause from
the class of plaintiffs.
In 2009, counsel for the plaintiffs began a second proceeding
under the Class Actions Act (Saskatchewan) asserting the same
claims as the original proceeding. If successful, this second class
action would be an “opt-out” class proceeding. This second
proceeding was ordered conditionally stayed in 2009 on the basis
that it was an abuse of process.
In 2013, the plaintiffs applied for an order to be allowed to proceed
with the second system access fee class action. However, the court
denied this application and the second action remains
conditionally stayed.
At the time the Saskatchewan class action was commenced in
2004, corresponding claims were filed in multiple jurisdictions
across Canada, although no active steps were taken by the
plaintiffs. In 2014, the Nova Scotia Supreme Court declined to stay
or dismiss the corresponding claim brought by the plaintiffs in
Nova Scotia as an abuse of process. In April 2015, the Nova Scotia
Court of Appeal permanently stayed the Nova Scotia claim. The
plaintiffs are seeking leave to appeal to the Supreme Court of
Canada. The Manitoba Court of Queen’s Bench unconditionally
stayed the corresponding claim brought in Manitoba as an abuse
is
of process. A decision from the Manitoba Court of Appeal
pending. A similar decision has been issued by the British
Columbia Court of Appeal. In 2015, the Court of Queen’s Bench of
Alberta declined to dismiss the corresponding claim in Alberta. In
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October 2015, the Alberta Court of Appeal granted our appeal
and dismissed the claim in Alberta. We have not recognized a
liability for this contingency.
System Access Fee – British Columbia
In December 2011, a class action was launched in British Columbia
against providers of wireless communications in Canada in
response to the system access fee wireless carriers charge to some
their customers. The class action related to allegations of
of
to the Business Practices and
misrepresentations contrary
Consumer Protection Act (British Columbia), among other things.
The plaintiffs sought unspecified damages and restitution. In June
2014,
the court denied the plaintiffs’ certification application,
concluding that there is nothing in the term “system access fee” to
suggest it is a fee to be remitted to the government. An appeal by
the plaintiffs was dismissed by the British Columbia Court of
Appeal in 2015, finding that the conclusion of the trial judge was
unassailable. The plaintiffs are seeking leave to appeal to the
Supreme Court of Canada. We have not recognized a liability for
this contingency.
911 Fee
In June 2008, a class action was launched in Saskatchewan against
providers of wireless communications services in Canada. It involves
allegations of breach of contract, misrepresentation, and false
advertising, among other things, in relation to the 911 fee that had
been charged by us and the other wireless telecommunication
providers in Canada. The plaintiffs are seeking unspecified
damages and restitution. The plaintiffs intend to seek an order
class action in
certifying the proceeding as a national
Saskatchewan. We have not
this
contingency.
recognized a liability for
of wireless
communications
Cellular devices
In July 2013, a class action was launched in British Columbia against
providers
and
manufacturers of wireless devices. The class action relates to the
alleged adverse health effects incurred by long-term users of
cellular devices. The plaintiffs are seeking unspecified damages
and punitive damages, effectively equal to the reimbursement of
the portion of revenue the defendants have received that can
reasonably be attributed to the sale of cellular phones in Canada.
We have not recognized a liability for this contingency.
in Canada
Income taxes
We provide for income taxes based on all of the information that is
currently available and believe that we have adequately provided
these items. The calculation of applicable taxes in many cases,
however, requires significant judgment (see note 12) in interpreting
tax rules and regulations. Our tax filings are subject to audits, which
could materially change the amount of current and deferred
income tax assets and liabilities and provisions, and could,
in
certain circumstances, result in the assessment of interest and
penalties.
Outcome of proceedings
The outcome of all
including the matters described above,
resolution that includes the uncertainties of litigation.
the proceedings and claims against us,
to future
It is not
is subject
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 137
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
possible for us to predict the result or magnitude of the claims due
to the various factors and uncertainties involved in the legal
process. Based on information currently known to us, we believe it
is not probable that
these
proceedings and claims, individually or in total, will have a material
adverse effect on our business or financial results or financial
the ultimate resolution of any of
condition. If it becomes probable that we will be held liable for
claims against us, we will recognize a provision during the period in
which the change in probability occurs, which could be material to
our Consolidated Statements of
Income or Consolidated
Statements of Financial Position.
NOTE 30: SUPPLEMENTAL CASH FLOW INFORMATION
CHANGE IN NON-CASH OPERATING WORKING CAPITAL
ITEMS
Years ended December 31
(In millions of dollars)
2015
2014
Accounts receivable
Inventories
Other current assets
Accounts payable and accrued liabilities
Unearned revenue
Total change in non-cash working capital
items
(185)
(66)
(23)
33
(61)
(302)
(81)
26
(18)
(2)
86
11
CASH PROVIDED BY FINANCING ACTIVITIES
(In millions of dollars)
Note
2015
2014
Years ended December 31
(In millions of dollars)
Note
2015
2014
Years ended December 31
Payments on termination of
US$550 million debt derivatives
Payments on termination of
US$280 million debt derivatives
Payments on termination of bond
forwards
Payments on termination of
US$750 million debt derivatives
Payments on termination of
US$350 million debt derivatives
Payments on foreign exchange
forward contracts
Total gross payments on debt
derivatives, bond forwards, and
foreign exchange forward
contracts
21
21
16
21
21
(596)
(309)
(25)
–
–
–
–
–
–
(773)
(413)
(929)
(930)
(2,115)
1,059
2,150
The following tables provide details on the net cash issuance and
repayment of long-term debt.
Proceeds on debt derivatives and
foreign exchange forward
contracts
Payments on debt derivatives, bond
forwards, and foreign exchange
forward contracts
Net cash proceeds on debt
derivatives, bond forwards, and
foreign exchange forward
contracts
(930)
(2,115)
(In millions of dollars)
Net issuance of senior notes
Borrowings under bank credit
21
129
35
facilities
The following two tables provide details on the gross proceeds
(payments) on debt derivatives, bond forwards, and foreign
exchange forward contracts.
Discount on bank credit facilities
Total proceeds on issuance of
long-term debt
Years ended December 31
Note
21
21
2015
1,338
6,025
(25)
2014
2,082
1,330
–
7,338
3,412
(In millions of dollars)
Note
2015
2014
(In millions of dollars)
Note
2015
2014
Years ended December 31
Years ended December 31
Net repayment of senior notes
Repayment of bank credit
facilities
Total repayment of long-term
debt
21
21
(1,059)
(1,221)
(5,525)
(1,330)
(6,584)
(2,551)
Proceeds on termination of
US$550 million debt derivatives
Proceeds on termination of
US$280 million debt derivatives
Proceeds on termination of
US$750 million debt derivatives
Proceeds on termination of
US$350 million debt derivatives
Proceeds on foreign exchange
forward contracts
Total gross proceeds on debt
derivatives and foreign exchange
forward contracts
21
21
21
21
702
357
–
–
–
–
–
834
387
929
1,059
2,150
138 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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Glossary of Selected Industry Terms
and Helpful Links
3G (Third Generation Wireless): The third
generation of mobile phone standards and
technology. A key aim of 3G standards was to
enable mobile broadband data speeds above
384 Kbps. 3G networks enable network operators
to offer users a wider range of more advanced
services while achieving greater network capacity
through improved spectral efficiency. Advanced
services include video and multimedia messaging
and broadband wireless data, all in a mobile
environment.
3.5G (Enhanced Third Generation Wireless):
Evolutionary upgrades to 3G services that
provide significantly enhanced broadband
wireless data performance to enable multi-
megabit data speeds. The key 3.5G technologies
in North America are HSPA and CDMA EV-DO.
4G (Fourth Generation Wireless): A technology
that offers increased voice, video and multimedia
capabilities, a higher network capacity, improved
spectral efficiency, and high-speed data rates over
current 3G benchmarks.
4K - Ultra-High Definition Video: Denotes
a specific television display resolution of
4096 x 2160 pixels. 1920 x 1080 resolution full
HD televisions present an image of around
2 megapixels, while the 4K generation of screens
delivers an 8 megapixel image.
ARPA (Average Revenue per Account): This
business performance measure expressed as a
dollar rate per month includes all the revenue
generated by an account as opposed to a user or
device so that a customer who has many devices
will typically have a higher ARPA than a customer
with only one device.
ARPU (Average Revenue per User): This business
performance measure, expressed as a dollar rate
per month, is predominantly used in the wireless
and cable industries to describe the revenue
generated per customer per month. ARPU is an
indicator of a wireless or cable business’ operating
performance.
AWS (Advanced Wireless Services): The wireless
telecommunications spectrum band that is
used for wireless voice, data, messaging services,
and multimedia.
Bandwidth: Bandwidth can have two different
meanings: (1) a band or block of radio frequencies
measured in cycles per second, or Hertz; (2) an
amount or unit of capacity in a telecommunications
transmission network. In general terms, bandwidth
is the available space to carry a signal. The greater
the bandwidth, the greater the information-
carrying capacity.
Bps (Bits per Second): A measurement of data
transmission speed used for measuring the amount
of data that is transferred in a second between
two telecommunications points or within network
devices. Kbps (kilobits per second) is thousands of
bps; Mbps (megabits per second) is millions of bps;
Gbps (gigabits per second) is billions of bps; and
Tbps (terabits per second) is trillions of bps.
BYOD (Bring Your Own Device): Refers to the
action that customers are able to sign up for
wireless services on a personally purchased device
as opposed to the traditional means of acquiring
one through a term contract.
Broadband: Communications services which
allows for the high-speed transmission of voice,
data, and video simultaneously at rates of 1.544
Mbps and above.
BDU (Broadcast Distribution Undertaking):
An undertaking for the reception of broadcasting
and the retransmission thereof by radio waves or
other means of telecommunication to more than
one permanent or temporary residence or dwelling
unit or to another such undertaking.
Cable Telephony (Phone): The transmission of real-
time voice communications over a cable network.
Churn: This business performance measure is
used to describe the disconnect rate of customers
to a telecommunications service. It is a measure
of customer turnover and is often at least partially
reflective of service quality and competitive
intensity. It is usually expressed as a percentage
and calculated as the number of subscriber units
disconnecting in a period divided by the average
number of units on the network in the same period.
CLEC (Competitive Local Exchange Carrier):
A telecommunications provider company that
competes with other, already established carriers,
generally the ILEC.
Cloud Computing: The ability to run a program
or application on many connected computers
simultaneously as the software, data and services
reside in data centres.
CRTC (Canadian Radio-television and
Telecommunications Commission): The federal
regulator for radio and television broadcasters
and cable TV and telecommunications
companies in Canada.
CPE (Customer Premise Equipment):
Telecommunications hardware, such as modems
or set-top boxes, that is located at the home or
business of a customer.
Data Centre: A facility used to house computer
systems and associated components, such
as telecommunications and storage systems.
It generally includes redundant or backup
power supplies, redundant data communications
connections, environmental controls (e.g., air
conditioning, fire suppression), and security
controls.
DOCSIS (Data Over Cable Service Interface
Specification): A non-proprietary industry standard
developed by CableLabs that allows for equipment
interoperability from the headend to the CPE. The
latest version (DOCSIS 3.0/3.1) enables bonding of
multiple channels to allow for 250 Mbps or greater
transmission speeds depending upon how many
channels are bonded together.
DSL (Digital Subscriber Line): A family of
broadband technologies that offers always-on,
high-bandwidth (usually asymmetrical) transmission
over an existing twisted-pair copper telephone line.
DSL shares the same phone line as the telephone
service but it uses a different part of the phone
line’s bandwidth.
Fibre Optics: A method for the transmission of
information (voice, video or data) in which light is
modulated and transmitted over hair-thin filaments
of glass called fibre optic cables. The bandwidth
capacity of fibre optic cable is much greater than
that of copper wire and light can travel relatively
long distances through glass without the need
for amplification.
FTTH (Fibre-to-the-Home): Represents fibre optic
cable that reaches the boundary of the living space,
such as a box on the outside wall of a home.
GSM (Global System for Mobile): A TDMA-
based technology and a member of the “second
generation” (2G) family of mobile protocols that is
deployed widely around the world, especially at the
850, 900, 1800, and 1900 MHz frequency bands.
HDR (High Dynamic Range): An imaging
technique used to reproduce a greater dynamic
range of luminosity than is possible with standard
digital imaging or photographic techniques.
Homes Passed: Total number of homes which have
the potential for being connected to a cable system
in a defined geographic area.
Hosting (Web Hosting): The business of housing,
serving, and maintaining files for one or more
websites or email accounts. Using a hosting
service allows many companies to share the cost
of a high-speed Internet connection for serving
files, as well as other Internet infrastructure and
management costs.
Hotspot: A Wi-Fi access point in a public place
such as a café, train station, airport, commercial
office property, or conference centre.
HSPA (High Speed Packet Access): HSPA is an
IP-based packet-data enhancement technology
that provides high-speed broadband packet data
services over 3G networks. HSPA+ provides high-
speed broadband packet data services at even
faster speeds than HSPA over 4G networks.
HUP (Hardware Upgrade): When an existing
wireless customer upgrades to a new wireless
device, this is referred to as a HUP or Hardware
UPgrade.
ILEC (Incumbent Local Exchange Carrier): The
dominant telecommunications company providing
local telephone service in a given geographic
area when competition began. Typically an ILEC is
the traditional phone company and original local
exchange carrier in a given market.
ISED Canada (Innovation, Science and Economic
Development Canada): The Canadian federal
government department responsible for, amongst
other things, the regulation, management, and
allocation of radio spectrum and establishing
technical requirements for various wireless systems.
IP (Internet Protocol): The packet-based computer
network protocol that all machines on the Internet
must know so they can communicate with one
another. IP is basically a set of data switching and
routing rules that specify how information is cut
up into packets and how they are addressed for
delivery between computers.
IPTV (Internet Protocol Television): A system
where a digital television signal is delivered using
Internet Protocol. Unlike broadcasting, viewers
receive only the stream of content they have
requested (by surfing channels or ordering video
on demand).
ISP (Internet Service Provider): A provider
of Internet access service to consumers
and/or businesses.
LAN (Local Area Network): A network
created via linked computers within a small
area, such as a single site or building.
140 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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Helpful Links
Canadian Radio-Television and
Telecommunications Commission (CRTC)
The CRTC is an independent public organization
that regulates and supervises the Canadian
broadcasting and telecommunications systems.
It reports to Parliament through the Minister of
Canadian Heritage. www.crtc.gc.ca
Innovation, Science and Economic Development
Canada (ISED Canada)
ISED Canada is a ministry of the federal government
whose mission is to foster a growing, competitive,
knowledge-based Canadian economy. It also
works with Canadians throughout the economy
and in all parts of the country to improve conditions
for investment, improve Canada’s innovation
performance, increase Canada’s share of global
trade, and build an efficient and competitive
marketplace. www.ic.gc.ca
Federal Communications Commission (FCC)
The FCC is an independent United States
government agency. The FCC was established by
the Communications Act of 1934 and is charged
with regulating interstate and international
communications by radio, television, wire, satellite,
and cable. The FCC’s jurisdiction covers the 50
states, the District of Columbia, and U.S. territories.
www.fcc.gov
Canadian Wireless Telecommunications
Association (CWTA)
The CWTA is the industry trade organization and
authority on wireless issues, developments, and
trends in Canada. It represents wireless service
providers as well as companies that develop and
produce products and services for the industry,
including handset and equipment manufacturers,
content and application creators, and business-to-
business service providers.
www.cwta.ca
The Wireless Association (CTIA)
The CTIA is an international non-profit membership
organization, founded in 1984, representing wireless
carriers and their suppliers, as well as providers
and manufacturers of wireless data services and
products. The CTIA advocates on their behalf before
all levels of government. www.ctia.org
GSM Association (GSMA)
The GSMA is a global trade association representing
nearly 800 operators with more than 250 companies
in the broader mobile ecosystem, including
handset and device makers, software companies,
equipment providers, and Internet companies, as
well as organizations in adjacent industry sectors.
In addition, more than 180 manufacturers and
suppliers support the Association’s initiatives as
associate members. The GSMA works on projects
and initiatives that address the collective interests
of the mobile industry, and of mobile operators in
particular. www.gsma.com
LTE (Long-Term Evolution): A fourth
generation cellular wireless technology (also
known as 4G) which has evolved and enhanced
the UMTS/HSPA+ mobile phone standards.
LTE improves spectral efficiency, lowers costs,
improves services, and, most importantly,
allows for higher data rates. LTE technology is
designed to deliver speeds up to 150 Mbps
with further increases over time.
LTE Advanced: A mobile communication
standard which represents a major
enhancement of the LTE standard. With a
peak data rate of 1 Gbps, LTE Advanced also
offers faster switching between power states
and improved performance at the cell edge.
M2M (Machine to Machine): The wireless
inter-connection of physical devices or
objects that are seamlessly integrated into
an information network to become active
participants in business processes. Services
are available to interact with these ‘smart
objects’ over the Internet, query, change
their state and to capture any information
associated with them.
Near-net: Customer location(s) adjacent to
network infrastructure allowing connectivity to
the premises to be extended with relative ease.
Off-net: Customer location(s) where
network infrastructure is not readily available,
necessitating the use of a third-party leased
access for connectivity to the premises.
On-net: Customer location(s) where network
infrastructure is in place to provide connectivity
to the premises without further builds or third
party leases. An on-net customer can be
readily provisioned.
OTT (Over-the-Top): Audio, visual, or
alternative media distributed via the Internet
or other non-traditional media.
Penetration: The degree to which a product or
service has been sold into, or adopted by, the
base of potential customers or subscribers in
a given geographic area. This value is typically
expressed as a percentage.
POPs (Persons of Population): A wireless
industry term for population or number
of potential subscribers in a market, a
measure of the market size. A POP refers to
one person living in a population area, which,
in whole or in substantial part, is included
in the coverage areas.
Postpaid: A conventional method of payment
for wireless service where a subscriber pays
a fixed monthly fee for a significant portion
of services. Usage (e.g. long distance) and
overages are billed in arrears, subsequent to
consuming the services. The fees are usually
arranged on a term contract basis.
Prepaid: A method of payment for wireless
service that allows a subscriber to prepay
for a set amount of airtime in advance of
actual usage. Generally, a subscriber’s
prepaid account is debited at the time of
usage so that actual usage cannot exceed
the prepaid amount until an additional
prepayment is made.
PVR (Personal Video Recorder): A consumer
electronics device or application software that
records video in a digital format. The term
includes set-top boxes with direct-to-disk
recording facility, which enables video capture
and playback to and from a hard disk.
Set-Top Box: A standalone device that receives
and decodes programming so that it may
be displayed on a television. Set-top boxes
may be used to receive broadcast, cable, and
satellite programming.
Spectrum: A term generally applied to
electromagnetic radio frequencies used in the
transmission of sound, data and video. Various
portions of spectrum are designated for use
in cellular service, television, FM radio, and
satellite transmissions.
SVOD (Subscription Video on Demand):
Offers, for a monthly charge, access to specific
programming with unlimited viewing on an
on-demand basis.
TPIA (Third-Party Internet Access): Wholesale
high-speed access services of large cable
carriers that enable independent service
providers to offer retail Internet services to their
own end-users.
TSU (Total Service Unit or Cable TSU): In
the cable TV industry, this refers to television,
Internet, and cable telephony subscribers.
A subscriber that has purchased television
and Internet services is counted as two TSUs.
A subscriber that has purchased television,
Internet, and cable telephony services is
counted as three TSUs, etc.
VOD (Video on Demand): A cable service
that allows a customer to select and view
movies and shows at any time from a library
of thousands of titles.
VoIP (Voice over IP): The technology used
to transmit real-time voice conversations
in data packets over a data network using
Internet Protocol. Such data networks
include telephone company networks, cable
TV networks, wireless networks, corporate
intranets, and the Internet.
VoLTE (Voice over LTE): A platform to provide
voice services to wireless customers over
LTE wireless networks. The LTE standard
only supports packet switching as it is all
IP-based technology. Voice calls in GSM are
circuit switched, so with the adoption of LTE,
carriers are required to re-engineer their voice
call network, while providing continuity for
traditional circuit-switched networks on 2G and
3G networks.
Wi-Fi: The commercial name for a networking
technology standard for wireless LANs that
essentially provide the same connectivity as
wired networks, but at lower speeds. Wi-Fi
allows any user with a Wi-Fi-enabled device to
connect to a wireless access point.
For a more comprehensive glossary of
industry and technology terms, go to
rogers.com/glossary
2015 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 141
Corporate and Shareholder Information
CORPORATE OFFICES
Rogers Communications Inc.
333 Bloor Street East, 10th Floor
Toronto, ON M4W 1G9
416-935-7777
CUSTOMER SERVICE AND
PRODUCT INFORMATION
888-764-3771 or rogers.com
SHAREHOLDER SERVICES
If you are a registered shareholder and have
inquiries regarding your account, wish to
change your name or address, or have
questions about lost stock certificates, share
transfers, estate settlements or dividends,
please contact our transfer agent and registrar:
CST Trust Company
P.O. Box 700, Postal Station B
Montreal, QC H3B 3K3, Canada
416-682-3860 or 800-387-0825
inquiries@canstockta.com
Duplicate Mailings
If you receive duplicate shareholder mailings from
Rogers Communications, please
contact CST Trust Company as detailed
above to consolidate your accounts.
INVESTOR RELATIONS
Institutional investors, securities analysts
and others requiring additional financial
information can visit rogers.com/investors
or contact us at:
888-935-7777 or
416-935-7777 (outside North America)
or investor.relations@rci.rogers.com
CORPORATE PHILANTHROPY
For information relating to Rogers’ various
philanthropic endeavours, refer to the
“About Rogers” section of rogers.com
SUSTAINABILITY
Rogers is committed to continuing to
grow responsibly and we focus our social
and environmental sustainability efforts
where we can make the most meaningful
impacts on both. To learn more, please visit
rogers.com/csr
STOCK EXCHANGE LISTINGS
Toronto Stock Exchange (TSX):
RCI.b – Class B Non-Voting shares
(CUSIP # 775109200)
RCI.a – Class A Voting shares
(CUSIP # 775109101)
New York Stock Exchange (NYSE):
RCI – Class B Non-Voting shares
(CUSIP # 775109200)
Equity Index Inclusions:
Dow Jones Canada Titans 60 Index
Dow Jones Telecom Titans 30 Index
FTSE All-World Index Series
FTSE4Good Global Index
Jantzi Social Index
S&P/TSX 60 Index
S&P/TSX Composite Dividend Index
S&P/TSX Composite Index
S&P/TSX Telecom Services Index
DEBT SECURITIES
For details of the public debt securities of
the Rogers companies, please refer to the
“Debt Securities” section under
rogers.com/investors
INDEPENDENT AUDITORS
KPMG LLP
ON-LINE INFORMATION
Rogers is committed to open and full financial
disclosure and best practices in corporate
governance. We invite you to visit the Investor
Relations section of rogers.com/investors where
you will find additional information about our
business, including events and presentations,
news releases, regulatory filings, governance
practices, corporate social responsibility and
our continuous disclosure materials, including
quarterly financial releases, annual information
forms and management information circulars.
You may also subscribe to our news by email or
RSS feeds to automatically receive Rogers news
releases electronically.
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rogers-communications
COMMON STOCK TRADING AND
DIVIDEND INFORMATION
Closing Price RCI.b on TSX
2015
High
Low
Close
Dividends
Declared
per Share
First Quarter
$47.01 $42.40 $42.40 $0.48
Second Quarter $44.30 $41.40 $44.30 $0.48
Third Quarter
$46.90 $43.19 $45.98 $0.48
Fourth Quarter $53.92 $45.55 $47.72 $0.48
Shares Outstanding at December 31, 2015
112,438,692
Class A
402,307,976
Class B
2016 Expected Dividend Dates
Record Date*:
Payment Date*:
March 13, 2016
June 12, 2016
September 11, 2016
December 11, 2016
* Subject to Board approval
April 1, 2016
July 4, 2016
October 3, 2016
January 3, 2017
Unless indicated otherwise, all dividends paid
by Rogers Communications are designated
as “eligible” dividends for the purposes of the
Income Tax Act (Canada) and any similar provincial
legislation.
DIRECT DEPOSIT SERVICE
Shareholders may have dividends deposited
directly into accounts held at financial institutions.
To arrange direct deposit service, please contact
CST Trust Company as detailed earlier on this
page.
DIVIDEND REINVESTMENT PLAN (DRIP)
Rogers offers a convenient dividend reinvestment
program for eligible shareholders to purchase
additional Rogers Communications shares
by reinvesting their cash dividends without
incurring brokerage fees or administration fees.
For plan information and enrolment materials
or to learn more about Rogers’ DRIP, please
visit canstockta.com/en/investorservices/
dividend_reinvestment_plans or contact CST
Trust Company as detailed earlier on this page.
ELECTRONIC DELIVERY OF
SHAREHOLDER MATERIALS
Registered shareholders can receive electronic
notice of financial reports and proxy materials
by registering at canstockta.com/en/
investorservices/delivery_of_investor_
materials/electronic_consent. This approach
gets information to shareholders more quickly
than conventional mail and helps Rogers protect
the environment and reduce printing and
postage costs.
GLOSSARY OF TERMS
For a comprehensive glossary of industry and
technology terms, go to rogers.com/glossary
CAUTION REGARDING FORWARD-LOOKING INFORMATION AND OTHER RISKS
This annual report includes forward-looking statements about the financial condition and prospects of Rogers Communications that involve significant risks and uncertainties that
are detailed in the “Risks and Uncertainties Affecting our Businesses” and “About Forward-Looking Information” sections of the MD&A contained herein, which should be read in
conjunction with all sections of this annual report.
The fibre used in the manufacture of the stock comes from well-managed forests,
controlled sources and recycled wood or fibre.
This annual report
is recyclable.
1 tree
preserved for
the future
2,120 litres
of water saved
17 kg
solid waste
not created
47 kg C02 of
net greenhouse
gases prevented
1,000,000 BTUs
energy not
consumed
2015
2014
2013
2012
© 2016
Rogers Communications Inc.
Other registered trademarks
that appear are the property
of the respective owners.
Design: Interbrand
Printed in Canada
142 ROGERS COMMUNICATIONS INC. 2015 ANNUAL REPORT
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