At the speed
of life Rogers Communications Inc.
2016 Annual Report
At home, across the country
and around the world –
that’s the speed of life,
and it’s never been faster.
About Rogers
Rogers is a leading diversified Canadian communications and media company
that’s working to deliver a great experience to our customers every day.
We are Canada’s largest provider of wireless communications services and
one of Canada’s leading providers of cable television, high-speed Internet,
information technology, and telephony services to consumers and businesses.
Through Rogers Media, we are engaged in radio and television broadcasting,
sports, televised and online shopping, magazines and digital media.
Our shares are publicly traded on the Toronto Stock Exchange
(TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI).
Page 3
Page 4
Page 5
Delivering on our
strategy in 2016
2016 financial and
operating results
Segment
overview
Pages 7–15
Letter from
the CEO
Page 15
Looking
ahead
Pages 16–17
Corporate
governance
Page 18
Senior executive
officers
Page 19
Directors
Pages 20–21
Page 22
Page 23
Corporate social
responsibility
Our vision
and values
2016 financial
report
Page 152
Shareholder
information
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC.
1
2
ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
Delivering on
our strategy in 2016
Total revenue
(In billions of dollars)
Adjusted
operating profit
(In billions of dollars)
13.7
13.4
5.0
5.0
5.1
12.9
Free cash flow
(In billions of dollars)
1.7
1.7
1.4
2014
2015
2016
2014
2015
2016
2014
2015
2016
5%
Wireless
service revenue
growth
compared
to 2%
in 2015
11%
Internet
revenue growth
the growth
engine of our
Cable segment
4bps
decrease
in Wireless
postpaid churn
to a churn rate
of 1.23%
in 2016
97k
Internet
net additions
60k or 162%
increase
from 2015
286k
Wireless
postpaid net
additions
180k or 170%
increase
from 2015
56%
increase in
self-serve
transactions
on the
Rogers brand
from 2015
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC.
3
2016 financial
and operating results
Total revenue
Adjusted operating profit
$13.7
Billion
Wireless 57%
Cable 25%
Media 15%
Business Solutions 3%
KEY FINANCIAL INFORMATION
(In millions of dollars, except margins and per share amounts, unaudited)
Total revenue
Total service revenue 1
Adjusted operating profit 2
Adjusted operating profit margin 2
Net income 3
Adjusted net income 2, 3
Basic earnings per share 3
Adjusted basic earnings per share 2, 3
Additions to property, plant and equipment
Cash provided by operating activities
Free cash flow 2
Annualized per-share dividend at year-end
KEY PERFORMANCE INDICATORS
Subscriber count results (000s) 1
Wireless postpaid net additions
Wireless prepaid net additions
Internet net additions
Television net losses
Phone net additions (losses)
Additional Wireless metrics 1
Postpaid churn (monthly)
Postpaid ARPA (monthly)
Blended ARPU (monthly)
Ratios
Capital intensity 1
Dividend payout ratio of free cash flow 2
Return on assets 1,3
Adjusted net debt / adjusted operating profit 2
1 As defined. See “Key Performance Indicators”.
$5.1
Billion
2016
13,702
13,027
5,092
37.2%
835
1,481
$1.62
$2.88
2,352
3,957
1,705
$1.92
Wireless 63%
Cable 32%
Media 3%
Business Solutions 2%
Years ended December 31
2015
% Change
13,414
12,649
5,032
37.5%
1,342
1,479
$2.61
$2.87
2,440
3,747
1,676
$1.92
2
3
1
(0.3 pts)
(38)
-
(38)
-
(4)
6
2
–
As at or years ended December 31
2016
2015
Change
286
111
97
(76)
4
1.23%
$117.37
$60.42
17.2%
58%
2.9%
3.0
106
75
37
(128)
(60)
1.27%
$110.74
$59.71
18.2%
59%
4.6%
3.1
180
36
60
52
64
(0.04 pts)
$6.63
$0.71
(1.0 pts)
(1.0 pts)
(1.7 pts)
(0.1)
2 Adjusted operating profit, adjusted operating profit margin, adjusted net income, adjusted basic earnings per share, free cash flow, dividend payout ratio of free cash flow, and adjusted net
debt / adjusted operating profit are non-GAAP measures and should not be considered substitutes or alternatives 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.
3 As a result of an IASB-issued clarification to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See “Accounting Policies” for more information.
4
ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
Wireless
Cable &
Business
Solutions
Media
2016 Revenue
2016 Revenue
2016 Revenue
$7.9
Billion
l Service 92%
l Equipment 8%
Canada’s largest
service provider
95% LTE
coverage
of Canada’s
population
A Canadian
leader in
M2M communications
& IoT applications
$3.8
Billion
$2.1
Billion
l Television 41%
l Internet 39%
l Phone 10%
l Business Solutions 10%
l Sports 56%
l TV and Radio Broadcasting 22%
l The Shopping Channel
and other 22%
Ignite
Gigabit
Internet service
offered to our entire
Cable footprint
in 2016
4.2 Million
homes passed, representing
the largest cable footprint
across ON, NB and NL 1
#1
sports media
brand in Canada
for the second
year in a row
Owner of the
Toronto
Blue Jays
Baseball Club
Canada’s
largest cable
TV provider
Operating
51 radio stations
& 25 TV channels
1 Ontario, New Brunswick, and Newfoundland and Labrador
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC.
5
6
ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
Our 2016 results reflect solid
execution of our plan and
the value inherent in our
unmatched asset portfolio.
Building for
the long term
Alan D. Horn
Chairman of the Board
and Interim President
and Chief Executive Officer
Fellow Shareholders,
In 2016, we took important strategic steps designed to
build long-term shareholder value, while at the same
time delivering strong results.
We continued to invest in our networks and our people to
provide an ever-improving experience for our customers.
Our 2016 results reflect solid execution of our plan and
the value inherent in our unmatched asset portfolio.
We achieved our best subscriber acquisition and retention
metrics for a number of years, and revenue, adjusted
operating profit and free cash flow all increased in line with
our 2016 targets. Shareholder return for the year, which
included $988 million in dividend payments, was 12.6%.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC.
7
We achieved our best
subscriber metrics in
recent years.
2016 Achievements Against Guidance 1
(in millions of dollars, except percentages)
2015 Actuals
2016 Guidance ranges 3
2016 Actuals
Achievement
Consolidated Guidance
Revenue
Adjusted operating profit 2
Additions to property, plant and equipment 3
Free cash flow 2
13,414
5,032
2,440
1,676
Increase of 1% to 3%
13,702
2.1%
Increase of 1% to 3%
5,092
1.2%
2,300 to 2,400
2,352
n/m
Increase of 1% to 3%
1,705
1.7%
1 The table outlines guidance ranges for selected full-year 2016 consolidated financial metrics provided in our January 27, 2016 earnings release.
Achieved
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 substitutes or alternatives 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.
We regained strong momentum in Wireless,
our largest segment, despite another year of
intense competition. We gained more market
share than we have in several years, reinforcing
our position as Canada’s largest wireless
provider. We also attracted the highest number
of new postpaid customers in Rogers history
while retaining more existing customers.
Our postpaid customer churn was at its
lowest level since 2010.
In Cable, Internet continued to be the growth
engine of this business. Our product mix
continues to shift to these higher-margin
services. At Rogers, we offer the fastest
widely available speeds in our marketplace.
Accordingly, we reported double-digit Internet
revenue growth in 2016 and our Ignite Internet
offerings are being experienced by an ever-
increasing number of Canadian households.
8
ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
Revenue, adjusted
operating profit
and free cash flow
all increased in
line with our
2016 targets.
Late in 2016, we announced a long-term
strategic partnership with Comcast to bring
Rogers customers a best-in-class video
experience by deploying the X1 all-IP-based
video platform. As a result, we terminated
our internal IPTV initiative. While the financial
impact of this was significant, we plan to offer
customers a proven, scalable IPTV experience
beginning in early 2018. They will also benefit
from a continuous stream of the latest
innovations in voice, data, video, smart home
monitoring, and other connected devices in
the home. In the interim, customers will see
enhancements to our existing TV platform,
as well as new customer premise equipment
which will leverage our DOCSIS 3.1 network
upgrade completed in 2016.
Media delivered another year of compelling
content and entertainment. For the second
year in a row, Sportsnet was the number one
sports media brand in Canada. We made a
commitment to shift from print to digital to
keep pace with changing audience demands.
We regained strong momentum in
our largest segment, Wireless, despite
another year of intense competition.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC.
9
Roam Like Home has revolutionized
the way our customers use their
smartphones when they travel.
10 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
Rogers has
consistently
differentiated
itself by
investing in
our network to
deliver leading
network service
performance.
Based on the Commissioner for Complaints
for Telecommunications Services 2015-2016
Annual Report, Rogers had a complaint
resolution rate of 95% which was the best of any
major Canadian carrier. We still have significant
work to do and look forward to doing more for
our customers in 2017, including offering more
self-serve options and new ways to interact with
us digitally.
Rogers has consistently differentiated itself
by investing in our network to deliver leading
network service performance. Today, more
than ever, this is critical to our ongoing
success. The average number of connected
devices has increased to more than 10 per
household. Customers are consuming more
and more video content, including 4K television.
Customers need more speed and capacity
and this will only increase. We are in the best
position to provide this now and customers can
be sure that with Rogers, they will continue to
enjoy a leading Internet and video experience.
As always, our customers are at the centre of
everything we do, and our top priority is to
offer the products and services they want
and need for the best customer experience.
With that in mind, we launched a number of
tools and offerings throughout the year to
make our customers’ lives a little easier.
Among others, we expanded worry-free
wireless roaming; launched simplified,
mobile-first billing; and introduced a tool
that allows families to manage their wireless
data in real time. We also introduced Rogers
Unison, which offers the features of a
traditional office desk phone system across
multiple devices, allowing businesses to
become more mobile and cost-effective.
We recognize our customers want simplicity
and immediacy when it comes to customer
care. One of the ways we have addressed this
is by investing in a variety of self-serve options,
including social media support. We were
the first telecommunications company in the
world to launch customer care via Facebook
Messenger, and this year, we were among the
first globally to launch on Twitter. Our approach
is resonating with customers, as we saw 56%
more self-service transactions in 2016 than
in the prior year.
Our customers are
at the centre of
everything we do
.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 11
We offer the fastest
widely available
Internet speeds in
our marketplace.
Our hybrid fibre-coax cable network allows us
to scale efficiently in line with our customers’
growing demands. In our footprint, 46% of
our residential Internet customers experience
speeds of 100 Mbps or higher – twice as fast
as our major competitor’s widely available
speed. In anticipation of our customers’ future
needs, we also rolled out our Ignite Gigabit
Internet service using the latest DOCSIS 3.1
technology to our entire footprint of more
than four million homes in 2016.
Our Wireless spectrum and network
investments enable us to provide the
connectivity, speed and reliability our
customers have come to enjoy and expect.
We expanded our multi-band LTE wireless
network coverage to 95% of Canada’s
population and continued to roll out our
prime 700 MHz spectrum, which now covers
91% of Canada’s population.
As with our networks, we are committed to
making the right investments in our people to
ensure we deliver for our customers. Our goal
has always been to attract, develop and retain
the best people to serve our customers.
46%
of our Internet
residential
customers
experience the
benefits from
speeds of
100 Mbps
or more.
In 2016, we increased our investment in
training and development. We launched
an intensive leadership program for more
than 160 executives, and we plan to broaden
that program to include another 650 leaders.
This year we are also expanding our
onboarding program to include all of our
1,400 call centre employees. We again
garnered external recognition for our efforts
to make Rogers a great place to work when
we were named one of Canada’s Top 100
Employers for the fourth consecutive year.
Rogers has always been committed to
making meaningful contributions to the
communities where we live and work.
This year, we expanded our Connected
for Success program across our Cable
footprint. The program offers access to
affordable broadband Internet to more
than 150,000 low-income Canadians living
in community housing. I encourage you to
review the corporate social responsibility
section of this annual report for a more
detailed discussion of our commitments.
12 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 13
We intend to deliver sustainable
long-term growth by making
the most of the opportunities
embedded in our existing assets.
14 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
Our 2017 guidance
reflects a stronger
growth outlook.
Full Year 2017 Guidance 1
(In millions of dollars, except percentages)
Consolidated Guidance
2016 Actual
2017 Guidance Ranges 1
Revenue
Adjusted operating profit 2
Additions to property, plant and equipment, net 3
Free cash flow 2
13,702
5,092
2,352
1,705
Increase of 3% to 5%
Increase of 2% to 4%
2,250 to 2,350
Increase of 2% to 4%
1 Guidance ranges presented as percentages reflect percentage increases over full-year 2016 actual results.
2 Adjusted operating profit and free cash flow are non-GAAP measures and should not be considered substitutes or alternatives
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 net of proceeds on disposition, but does not include expenditures for spectrum licences.
Looking ahead
We begin 2017 with a strong financial
position, including investment grade debt
ratings with stable outlooks. We plan to
enhance our financial flexibility, improve
our execution and capture cost efficiencies
and productivity improvements we see
throughout the business. This will position
us well to translate our revenue growth into
increased profitability and free cash flow.
As such, our 2017 guidance reflects a
stronger growth outlook compared to
our achievements in 2016.
We have the right plan, tremendous strength
in our 25,000 dedicated employees and
executive team to build on the momentum
we have established. As always our goal is
to deliver sustainable, long-term growth by
making the most of the opportunities
embedded in our existing assets.
In closing, I would like to thank our
customers, employees and shareholders
for their support and my fellow Board
members for their stewardship and
guidance. While 2017 will undoubtedly
mark another year of fierce competition,
we will continue our journey of building
long-term value for the benefit of all our
key stakeholders.
We plan to
enhance our
financial flexibility,
improve our
execution and
capture cost
efficiencies and
productivity
improvements we
see throughout
our business.
Alan D. Horn
Chairman of the Board
and Interim President
and Chief Executive Officer
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 15
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 15
Corporate governance
As of February 9, 2017
“ Rogers is committed to sound corporate governance practices
and the structure of our Board is intended to ensure that the Directors
and management act in the interests of all Rogers shareholders.
Rogers benefits from the presence of strong, independent voices on our
Board who add valued perspectives to oversight and decision making.”
Charles Sirois
Lead Director
Rogers Communications Inc.
Rogers Communications Inc.’s Board of Directors (the Board)
biographies – in the Corporate Governance section at rogers.
is strongly committed to sound corporate governance and
com/governance. At this link, you will find a summary of the
continually reviews its governance practices and benchmarks
differences between the NYSE corporate governance rules
them against acknowledged leaders and evolving legislation.
applicable to U.S.-based companies and our governance
We are a family-founded and controlled company and take
practices as a non-U.S.-based issuer that is listed on the NYSE.
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.
Voting control of Rogers Communications Inc. is held by 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.
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
As substantial stakeholders, the Rogers family is represented
to financial reporting; assesses the accounting systems and
on our Board and brings a long-term commitment to oversight
financial control systems; and evaluates the qualifications,
and value creation. At the same time, we benefit from having
independence and work of external and internal auditors.
outside directors who are experienced North American
It also reviews risk management policies and associated
business leaders.
processes to identify major risk exposures.
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 Corporate Governance Committee assists and makes
recommendations to ensure the Board has developed
appropriate systems and procedures to enable it to exercise
The composition of our Board and structure of its various
and discharge its responsibilities. To carry this out, the
committees are outlined in the table on the next page. As well,
Corporate Governance Committee assists the Board in
we make available detailed information on our governance
developing, recommending and establishing corporate
structures and practices – including our complete Statement
governance policies and practices, and leads the Board
of Corporate Governance Practices, our codes of conduct
in its periodic review of the performance of the Board
and ethics, full committee charters and Board member
and its committees.
16 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
Board of Directors and its Committees
Audit
and Risk
Corporate
Governance
Nominating
Human
Resources
Executive
Finance
Pension
Chair Member
Alan D. Horn, cpa, ca
Charles Sirois
C. William D. Birchall
Bonnie R. Brooks
Robert K. Burgess
John H. Clappison, fcpa, fca
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’ good governance practices
Separation
of CEO and
Chairman Roles 1
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
Board
Education
Sessions
Committee
Authority to
Retain Independent
Advisors
Director Material
Relationship
Standards
1 As a result of the departure of our former CEO, on an interim basis the roles of CEO and
Chairman are not separated. The roles of CEO and Chairman will again be seperate once
our new CEO commences at Rogers.
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.
The Finance Committee reviews and reports to the Board
on matters relating to the Company’s investment strategies
and general debt and equity structure.
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
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 17
Senior executive officers
1
6
2
7
3
8
4
9
5
10
11
12
For detailed biographical information
of Rogers’ Executive Officers go to
rogers.com/investors
11 Jamie Williams
Chief Information Officer
12 Dirk Woessner
President,
Consumer Business Unit
1 Alan D. Horn, cpa, ca
Interim President and
Chief Executive Officer
2 Bob Berner
Chief Technology Officer
3 Frank Boulben
Chief Strategy Officer
4 Rick Brace
President,
Media Business Unit
5 Dale Hooper
Chief Brand Officer
6 Nitin Kawale
President,
Enterprise Business Unit
7 Deepak Khandelwal
Chief Customer Officer
8 David Miller
Chief Legal Officer and Secretary
9 Jim Reid
Chief Human Resources Officer
10 Anthony Staffieri, fcpa, fca
Chief Financial Officer
18 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
Directors
1
6
2
7
3
8
4
9
5
10
11
12
13
For detailed biographical information
of Rogers’ Directors go to
rogers.com/investors
* Alan D. Horn, cpa, ca
Chairman
Rogers Communications Inc.
* Pictured on previous page
1 Charles Sirois, cm
Lead Director
Rogers Communications Inc.
Chairman
Telesystem Ltd.
2 C. William D. Birchall
Company Director
3 Bonnie R. Brooks, cm
Company Director
4 Robert K. Burgess
Company Director
5 John H. Clappison, fcpa, fca
Company Director
6 Philip B. Lind, cm
Vice Chairman
7 John A. MacDonald
Company Director
8
Isabelle Marcoux
Chair
Transcontinental Inc.
9 The Hon. David R. Peterson,
pc, qc
Chairman Emeritus
Cassels Brock & Blackwell LLP
10 Edward S. Rogers
Deputy Chairman
11 Loretta A. Rogers
Company Director
12 Martha L. Rogers
Company Director
13 Melinda M. Rogers
Company Director
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 19
Corporate
social
responsibility
We’re always striving to do what’s right for our
stakeholders and our country, whether it’s providing
access to the Internet to people who can’t afford it,
exercising environmental stewardship across our
organization, or ensuring our suppliers are living up
to our own values.
Recognized
as one of
Canada’s
Top 100
Employers.
Our Connected for Success program offers
access to affordable broadband Internet to over
150,000 Canadians with low-incomes living
in community housing. Originally launched in
2013 in partnership with Toronto Community
Housing, we expanded the program in 2016 so
that it is now available for residents in non-profit
housing organizations across our Cable footprint,
giving them the tools and resources needed to
experience the benefits of connectivity.
In 2016, we made significant strides to ensure
that our suppliers are adhering to ethical and
sustainable practices that meet with our own
values. In early 2016, we joined the Joint Audit
Cooperation (JAC), a group of global telecom
companies that share common suppliers.
Through our participation in JAC, we share audit
results among our peers to ensure that our
suppliers adhere to internationally recognized
supply chain and sustainability standards along
the ICT supply chain, upholding human rights
and social, labour and environmental standards.
Rogers was the first Canadian company to join
JAC and we began our first audits in 2016.
20 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
In addition to ensuring that our products are
made while upholding sustainability principles,
we also ensure that our products and services
are inclusive and accessible. We have a team of
customer service representatives who specialize
in our accessibility offerings. We continue to
offer a wireless accessibility data and text plan
for people who are deaf or hard-of-hearing or
have speech impediments. The plan includes
unlimited messaging and adjusts based on the
customer’s monthly usage.
We continue to make steady progress towards
our environmental targets to reduce our
greenhouse gas emissions and energy usage
by 25% and 10%, respectively, by 2025, based
on 2011 levels. We were once again named
as one of Canada’s Greenest Employers by
Mediacorp. We also received our best-ever
score from our 2016 Carbon Disclosure Project
submission – receiving an overall grade of B,
ahead of our industry and Canadian average
of C, demonstrating that we are taking the
necessary steps to reduce our carbon emissions.
In 2016, Rogers Hometown Hockey
returned to host events in 24 new
Canadian communities, uniting hockey
fans and families across the country.
In 2016, we continued to invest in lighting
upgrades, temperature adjustments and
equipment run times in order to reduce
energy consumption. We’ve also made energy
improvements, with more energy efficient
computers, monitors and lighting. Our waste
reduction programs have also continued to take
hold. Our Get Up & Get Green internal waste
program has allowed us to centralize waste bins
and allow for better sorting measures.
Within our business, we have also invested in
the employee experience by delivering more
training and development programs. In 2016,
our employee engagement score rose by two
points to 78%, showing that our investments are
making an impact on our employees. We were
also recognized once again this year as one of
Canada’s Top 100 Employers, one of Canada’s
Best Diversity Employers, one of Canada’s Top
Employers for Young People and one of Greater
Toronto’s Top Employers.
In addition, we’re continuing to support the
Canadian economy through our business and
community investments. Over the last year,
we’ve donated approximately $60 million
through cash and in-kind donations to various
charitable organizations and causes and our
Jays Care Foundation funds programs and
facilities that promote physical activity, education
and life-skill development among Canadian
youth. As well, through the Rogers Employee
Volunteer program, employees are given
one paid day off annually, to volunteer at the
registered charity of their choice.
We look forward to continuing our stewardship
as a responsible corporate citizen for all of the
stakeholders of our organization.
For more information on Corporate Social
Responsibility at Rogers, please see our website
rogers.com/csr and look out for our 2016 CSR
Report, which will be released in spring 2017.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 21
Our vision
and values
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
22 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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24 MANAGEMENT’S DISCUSSION AND ANALYSIS
71
26 Executive Summary
26 About Rogers
27
29
2016 Highlights
Financial Highlights
30 Understanding Our Business
Products and Services
30
32 Competition
34
Industry Trends
Social Responsibility
Governance and Risk Management
71 Governance at Rogers
73
74 Risk Management
75 Risks and Uncertainties Affecting Our Business
81 Controls and Procedures
82
Regulation in Our Industry
83 Wireless
85 Cable
86 Media
35 Our Strategy, Key Performance Drivers, and Strategic
87
Highlights
35 Our Strategic Priorities
2016 Objectives
36
Key Performance Drivers and 2016 Strategic Highlights
36
2017 Objectives
38
Financial and Operating Guidance
39
Other Information
87 Accounting Policies
91
93 Non-GAAP Measures
96
Key Performance Indicators
Summary of Financial Results of Long-Term Debt
Guarantor
Five-Year Summary of Consolidated Financial Results
97
40 Capability to Deliver Results
98
CONSOLIDATED FINANCIAL STATEMENTS
Leading Networks
Powerful Brands
40
42
42 Widespread Product Distribution
43
First Class Media Content
43 Customer Experience
Engaged People
43
43
Financial Strength and Flexibility
44 Healthy Trading Volumes and Dividends
98 Management’s Responsibility for Financial Reporting
99
Report of Independent Registered Public Accounting Firm
101 Consolidated Statements of Income
102 Consolidated Statements of Comprehensive Income
45 2016 Financial Results
103 Consolidated Statements of Financial Position
104 Consolidated Statements of Changes in Shareholders’
Equity
105 Consolidated Statements of Cash Flows
106 Notes to Consolidated Financial Statements
45
46
Summary of Consolidated Results
Key Changes in Financial Results This Year
Compared to 2015
Business Solutions
47 Wireless
50 Cable
52
53 Media
54 Additions to Property, Plant and Equipment
55 Review of Consolidated Performance
58 Quarterly Results
61 Overview of Financial Position
62 Managing Our Liquidity and Financial Resources
Sources and Uses of Cash
62
Financial Condition
65
66
Financial Risk Management
70 Dividends and Share Information
71 Commitments and Contractual Obligations
71 Off-Balance Sheet Arrangements
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 23
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our forward-looking information and statements include forecasts
and projections related to the following items, some of which are
non-GAAP measures (see “Non-GAAP Measures”
for more
information), among others:
• revenue;
• total service revenue;
• adjusted operating profit;
• 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;
• the cost of acquiring and retaining subscribers and deployment
of new services;
• continued cost reductions and efficiency improvements;
• traction against our ratio of adjusted net debt / adjusted
operating profit; 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 2017 consolidated guidance on 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.
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, 2016. This MD&A should be read in
conjunction with our 2016 Audited Consolidated Financial
Statements, which have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
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 9, 2017 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. Rogers 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,
2016, and last year refers to the year ended December 31, 2015.
All results commentary is compared to the equivalent period in
2015 or as at December 31, 2015, 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,
assume, believe,
intend, estimate, plan, project, guidance,
outlook, target, and similar expressions, although not all forward-
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 have been 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.
24 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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
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
forward-looking information or
the factors or assumptions
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.
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.
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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MANAGEMENT’S DISCUSSION AND ANALYSIS
Executive Summary
ABOUT ROGERS
Rogers is a leading diversified Canadian communications and media company.
2016 REVENUE BY SEGMENT
(%)
$13.7
Billion
WIRELESS 57%
CABLE 25%
MEDIA 15%
BUSINESS SOLUTIONS 3%
2016 ADJUSTED OPERATING PROFIT BY SEGMENT
(%)
$5.1
Billion
WIRELESS 63%
CABLE 32%
MEDIA 3%
BUSINESS SOLUTIONS 2%
Rogers is a leading diversified Canadian communications and
media company that’s working to deliver a great experience to our
customers every day. We are Canada’s largest provider of wireless
communications services and one of Canada’s leading providers of
cable television, high-speed Internet, information technology, and
telephony services to consumers and businesses. Through Rogers
Media, we are engaged in radio and television broadcasting,
sports, televised and online shopping, magazines, and digital
media.
Almost all of our operations and sales are in Canada. We have a
highly skilled and diversified workforce of approximately 25,200
employees. Our head office is in Toronto, Ontario and we have
numerous offices across Canada.
FOUR REPORTING SEGMENTS
We report our results of operations in four reporting 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
Media
network and data centre assets to support
a range of voice, data, networking,
hosting, and cloud-based services for the
enterprise, public sector, and carrier
wholesale markets.
A diversified portfolio of media properties,
including sports media and entertainment,
television and radio broadcasting,
specialty channels, multi-platform
shopping, digital media, and publishing.
26 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
2016 HIGHLIGHTS
KEY FINANCIAL INFORMATION
(In millions of dollars, except margins and per share amounts)
Consolidated
Total revenue
Total service revenue 1
Adjusted operating profit 2
Adjusted operating profit margin 2
Net income 3
Adjusted net income 2, 3
Basic earnings per share 3
Adjusted basic earnings per share 2, 3
Cash provided by operating activities
Free cash flow 2
Wireless
Revenue
Adjusted operating profit
Adjusted operating profit margin as a % of service revenue
Cable
Revenue
Adjusted operating profit
Adjusted operating profit margin
Business Solutions
Revenue
Adjusted operating profit
Adjusted operating profit margin
Media
Revenue
Adjusted operating profit
Adjusted operating profit margin
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Years ended December 31
2016
2015
% Chg
13,702
13,027
5,092
37.2%
835
1,481
$ 1.62
$ 2.88
3,957
1,705
7,916
3,285
45.3%
3,449
1,674
48.5%
384
123
32.0%
2,146
169
7.9%
13,414
12,649
5,032
37.5%
1,342
1,479
$ 2.61
$ 2.87
3,747
1,676
7,651
3,239
46.9%
3,465
1,658
47.8%
377
116
30.8%
2,079
172
8.3%
2
3
1
(0.3 pts)
(38)
–
(38)
–
6
2
3
1
(1.6 pts)
–
1
0.7 pts
2
6
1.2 pts
3
(2)
(0.4 pts)
1 As defined. See “Key Performance Indicators”.
2 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 substitutes or alternatives 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 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See “Accounting
Policies” for more information.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 27
MANAGEMENT’S DISCUSSION AND ANALYSIS
KEY PERFORMANCE INDICATORS
Subscriber count results (000s) 1
Wireless postpaid net additions
Wireless prepaid net additions
Wireless subscribers
Internet net additions
Internet subscribers
Television net losses
Television subscribers
Phone net additions (losses)
Phone subscribers
Additional Wireless metrics 1
Postpaid churn (monthly)
Postpaid ARPA (monthly)
Blended ARPU (monthly)
Ratios
Capital intensity 1
Dividend payout ratio of net income 1, 2
Dividend payout ratio of free cash flow 1, 3
Return on assets 1, 2
Adjusted net debt / adjusted operating profit 3
Employee-related information
Total active employees (approximate)
As at or years ended December 31
2016
2015
Chg
286
111
10,274
97
2,145
(76)
1,820
4
1,094
106
75
9,877
37
2,048
(128)
1,896
(60)
1,090
180
36
397
60
97
52
(76)
64
4
1.23%
$ 117.37
$ 60.42
1.27%
$110.74
$ 59.71
(0.04 pts)
6.63
0.71
$
$
17.2%
118.0%
57.9%
2.9%
3.0
18.2%
74.0%
58.9%
4.6%
3.1
(1.0 pts)
44.0 pts
(1.0 pts)
(1.7 pts)
(0.1)
25,200
26,200
(1,000)
1 As defined. See “Key Performance Indicators”.
2 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See “Accounting
Policies” for more information.
3 Dividend payout ratio of free cash flow and adjusted net debt / adjusted operating profit are non-GAAP measures and should not be considered substitutes or alternatives 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.
28 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
FINANCIAL HIGHLIGHTS
REVENUE AND ADJUSTED OPERATING PROFIT
• Revenue increased by 2% this year, primarily driven by Wireless
service revenue growth of 5%.
• Wireless service revenue increased largely as a result of a larger
subscriber base and the continued adoption of higher-postpaid-
ARPA-generating Rogers Share Everything plans and the
increase in data usage on these plans.
• Cable revenue decreased marginally as the 11% increase in
Internet revenue from the larger subscriber base and movement
of customers to higher-end speed and usage tiers was offset by
lower Television and Phone revenue, primarily due to Television
subscriber losses over the past year and the impact of Phone
pricing packages. We reported positive Cable total service unit
net additions in 2016, driven by Internet net additions of 97,000,
up 60,000 year on year, and improved Television net losses. We
continue to see an ongoing shift in product mix to higher-
margin Internet services, with 46% of our residential
Internet
base now on plans with download speeds of 100 megabits per
second or higher.
• Business Solutions revenue increased this year primarily as a
result of the growth in on-net next generation services (including
the
our data centre businesses), which more than offset
continued planned reduction in lower margin, off-net legacy
revenue.
• Media revenue increased as a result of higher sports-related
revenue, driven by the strength of Sportsnet and the success of
the Toronto Blue Jays, partially offset by continued softness in
publishing and radio advertising.
• Adjusted operating profit
increased 1% this year, with a
consolidated adjusted operating profit margin of 37.2%,
resulting from higher adjusted operating profit in Wireless,
Cable, and Business Solutions, partially offset by lower adjusted
operating profit in Media.
NET INCOME
• Net income decreased 38% to $835 million, primarily as a result
of the impairment and related charges we recognized on our
Internet Protocol
television (IPTV) product because of our
decision to discontinue developing this product and develop a
long-term relationship with Comcast Corporation (Comcast) and
deploy their X1 IP-based video platform, along with higher
restructuring, acquisition and other costs and higher equity
losses associated with the wind down of shomi. See “Review of
Consolidated Performance” for more information.
CASH FLOW
• Our substantial cash flow generation enabled us to reduce
outstanding debt, continue to make investments in our network,
and return substantial dividends to shareholders. We paid $988
million in dividends in 2016.
• Our cash provided by operating activities increased 6% this year
to $3,957 million as a result of higher net funding provided by
non-cash working capital and lower interest paid. Free cash flow
increased 2% this year to $1,705 million as a result of higher
adjusted operating profit and lower additions to property, plant
and equipment, partially offset by higher cash income taxes.
LIQUIDITY POSITION
• Ended the year with approximately $2.7 billion of available
liquidity (2015 – $3.3 billion), comprised of nil cash on hand
(2015 – $0.01 billion), $2.4 billion available under our bank credit
facilities (2015 – $3.0 billion), and $0.25 billion available under
our $1.05 billion accounts receivable securitization program
(2015 – $0.25 billion available under our $1.05 billion accounts
receivable securitization program).
• Our adjusted net debt / adjusted operating profit ratio improved
to 3.0 as at December 31, 2016 from 3.1 as at December 31,
2015.
• Issued US$500 million ($671 million) of 2.9% senior notes due 2026.
• Our overall weighted average cost of borrowings was 4.72% as
at December 31, 2016 (2015 – 4.82%) and our overall weighted
average term to maturity on our debt was 10.6 years as at
December 31, 2016 (2015 – 10.8 years).
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REVENUE BY SEGMENT
(IN MILLIONS OF DOLLARS)
2016
2015
2014
7,916
3,449
384
2,146
7,651
3,465
377
2,079
7,305
3,467
382
1,826
Wireless
Cable
Business Solutions
Media
ADJUSTED OPERATING PROFIT BY SEGMENT
(IN MILLIONS OF DOLLARS)
2016
2015
2014
3,285
1,674
123
169
3,239
1,658
116
172
3,246
1,665
122
131
Wireless
Cable
Business Solutions
Media
ADJUSTED BASIC EARNINGS PER SHARE
($)
2016
2015
2014
$2.88
$2.87
$2.97
OTHER SIGNIFICANT DEVELOPMENTS
• We announced our intention to hire Joseph Natale as President
and Chief Executive Officer, effective July 2017. Alan Horn is
currently acting as our Interim President and Chief Executive
Officer.
• Late in 2016, we announced a long-term agreement with
Comcast to bring their X1 IP-based video platform to our
customers in early 2018. Customers will benefit from Comcast’s
substantial research and development investments and their
continuing commitment to innovation.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 29
MANAGEMENT’S DISCUSSION AND ANALYSIS
Understanding Our Business
Rogers is a leading diversified Canadian communications and
media company. We report our results based on four reporting
segments, as follows:
Wireless provides wireless voice and data communication services
to individual consumers, businesses, governments, 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 and Labrador. 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
the enterprise, public sector, and carrier wholesale markets over
our fibre network facilities.
Media provides services in sports media and entertainment
(including both the Toronto Blue Jays and our 12-year, exclusive
national licensing agreement (NHL Agreement) with the National
Hockey League (NHL) to broadcast all nationally televised live NHL
hockey games within Canada on multiple platforms), television and
radio broadcasting, multi-platform shopping experiences, digital
media, and publishing.
During the year, our Wireless, Cable, and Business Solutions
reporting segments were operated by our wholly-owned
subsidiary, Rogers Communications Canada Inc. (RCCI). In 2015,
those segments were operated by 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.
PRODUCTS AND SERVICES
WIRELESS
in innovative wireless network
Rogers is a Canadian leader
technologies and services. We provide postpaid and prepaid
wireless services under the Rogers, Fido, and chatr brands, and
provide consumers and businesses with the latest wireless devices,
services, and applications including:
• mobile and fixed high-speed Internet access;
• wireless voice and enhanced voice features;
• wireless home phone;
• device protection;
• text messaging;
• e-mail;
• global voice and data roaming, including Roam Like Home and
Fido Roam;
• bridging landline phones with wireless phones;
• 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 in Ontario, New Brunswick, and Newfoundland and
Labrador.
Internet services include:
• Internet access (including basic and unlimited usage packages),
security solutions, and e-mail;
• access speeds of up to one gigabit per second (Gbps), covering
our entire Cable footprint;
• Rogers Ignite unlimited packages, combining fast and reliable
speeds with the freedom of unlimited usage; and
• plans available under both the Rogers and Fido brands.
Television services include:
• local and network TV, including starter and premium channel
packages along with à la carte channels;
• on-demand television;
• personal video recorders (PVRs), including Whole Home PVRs
and a 4K PVR;
• linear and time-shifted programming;
• digital specialty channels;
• 4K television programming, including all 2016 and 2017 regular
season Toronto Blue Jays home games and select marquee NHL
and National Basketball Association (NBA) 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.
30 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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
• Rogers Public Cloud, which enables businesses to manage
their IT infrastructure in the cloud securely and cost effectively;
and
• extensive wireless and cable access networks services for primary,
bridging, and back-up connectivity.
MEDIA
Our portfolio of Media assets reaches Canadians from coast to
coast.
In Television, we operate several conventional and specialty
television networks:
• Sportsnet’s four regional stations, Sportsnet ONE, Sportsnet 360,
and Sportsnet World;
• City network, which,
together with affiliated stations, has
broadcast distribution to approximately 86% of Canadian
households;
• OMNI multicultural broadcast television stations;
• specialty channels that include FX (Canada), FXX (Canada),
Outdoor Life Network, VICELAND, and G4 Canada; and
• The Shopping Channel (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
markets across Canada, including popular radio brands such as
98.1 CHFI, 680 NEWS, Sportsnet The FAN, KiSS, JACK FM, and
SONiC.
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As part of our strategic change to focus on digital media, our
services and products include:
• our digital
including Rogers NHL
sports-related assets,
GameCentre LIVE and Sportsnet NOW;
• many well-known consumer brands,
such as Maclean’s,
Chatelaine, Today’s Parent, Flare, and Hello! Canada;
• Texture by Next Issue, our digital magazine service, which offers
unlimited access to a catalogue of over 230 premium Canadian
and US magazine titles; and
• a broad digital presence that continues the extension of content
across new and existing platforms.
In Sports Media and 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, concerts, trade shows, and special events.
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 also grants
Rogers national rights on those platforms to the NHL playoffs and
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.
OTHER
Other services we offer to consumers and businesses include:
• Rogers Smart Home Monitoring and Smart Business Monitoring,
an innovative home or business monitoring, security, and
automation system; and
• Rogers Platinum MasterCard and Fido MasterCard, credit cards
that allow customers to earn cashback rewards points on credit
card spending.
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; and
• our 50% ownership interest in Glentel
Inc. (Glentel), a large
provider of multicarrier wireless and wireline products and
services with several hundred Canadian retail distribution outlets.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 31
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 affect our customer churn.
Traditional wireline telephone and television services are now
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 affect 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 long-term evolution (LTE)
network caters to customers seeking the increased capacity and
speed it provides. We compete with Bell, Telus, Shaw, MTS,
Videotron, SaskTel, and Eastlink, all of whom operate LTE
networks. We also compete with these providers on high-speed
system for mobile
packet
communications (GSM) networks and with providers that use
alternative wireless technologies,
like Wi-Fi “hotspots” and
mobile virtual network operators (MVNO), such as President’s
Choice Mobile and Primus.
and global
(HSPA)
access
• Product, branding, and pricing — we compete nationally with
Bell, Telus, and Shaw,
including their discount brands Virgin
Mobile (Bell), Koodo (Telus), and Freedom Mobile (Shaw). We
also compete with various regional players and resellers.
• Distribution of services and devices — we compete with other
service providers for dealers, prime locations for our own stores,
and third-party retail distribution shelf space.
• Wireless networks — 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 known as 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.
32 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
CABLE
Internet
We compete with other Internet Service Providers (ISPs) that offer
residential and commercial high-speed Internet access services.
Rogers and Fido high-speed Internet services compete directly
with:
• Bell and Cogeco’s Internet service in Ontario;
• Bell Aliant’s
in New Brunswick
Internet
and
services
Newfoundland and Labrador; and
• various resellers using wholesale telecommunication company
digital subscriber line (DSL) and cable Third-Party Internet Access
(TPIA) services in local markets.
Television
We compete with:
• other
Canadian multi-channel
Distribution
Broadcast
including Bell, Shaw, other alternative
Undertakings (BDUs)
satellite TV services, and IPTV;
• over-the-top (OTT) video offerings through providers like Netflix,
YouTube, Apple, Amazon Prime Video, Google, and other
channels streaming their own content; and
• over-the-air
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
Brunswick, and Newfoundland and Labrador;
• Incumbent Local Exchange Carrier (ILEC) local loop resellers and
Voice over IP (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, including mobile
phones and wireless home phone products.
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 Zayo;
• 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 Corus Entertainment, some of which have greater
national coverage;
viewers and
• other specialty channels;
• distant Canadian signals and US border stations, given the time-
shifting capability available to subscribers;
• other media,
including newspapers, magazines,
radio, and
outdoor advertising; and
• content available on the Internet, such as web-based streaming
services.
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
SiriusXM;
• 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.
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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 publishing products 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
• online information and entertainment websites.
Competition in Sports Media and Entertainment includes other:
• televised and online sports programming;
• Toronto professional teams, for attendance at Toronto Blue Jays
games;
• MLB teams, for Toronto Blue Jays players and fans;
• local sporting and special event venues; and
• professional sports teams, for merchandise sales revenue.
Our digital media assets compete with:
• other content available on the Internet, including news services,
streaming services, and portals; and
• traditional media, including TV, radio, and publishing.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 33
MANAGEMENT’S DISCUSSION AND ANALYSIS
INDUSTRY TRENDS
The telecommunications industry in Canada and our reporting segments are affected by various overarching trends relating to changing
technologies, consumer demands, economic conditions, and regulatory developments. See “Risks and Uncertainties Affecting Our
Business” and “Regulation in Our Industry” for more information. Outlined in the table below are industry trends affecting our specific
reporting segments.
WIRELESS 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. Consumer
demand for mobile devices, digital media, and on-demand content is
pushing providers to build networks that can support the expanded use of
applications, mobile video, messaging, and other wireless data.
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 83% of the
population and is expected to grow at an estimated 0.9% annually over the
next four years, per International Data Corporation.
The Canadian Radio-television and Telecommunications Commission
(CRTC) Wireless Code has limited consumer 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 allow less time for carriers to recover subsidies.
Subscribers are increasingly bringing their own devices or keeping their
existing devices longer 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 and service options.
Mobile commerce continues to increase as more devices and platforms
adopt secure technology to facilitate wireless transactions.
CABLE TRENDS
The Internet and social media are increasingly being used as a substitute
for wireline telephone services, and televised content is increasingly
available online. 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. The CRTC’s decision to
lower wholesale Internet access rates may also adversely affect
companies that wholesale Internet services.
television technology continues to improve with 4K TV
Broadcast
broadcasts and high dynamic range (HDR) for higher resolution and
improved motion video.
The CRTC Let’s Talk TV guidance requires service providers to offer
customers with pick-and-pay choices, small reasonably priced packages,
and affordable entry-level TV channel options that may negatively impact
the industry. In 2016, the CRTC established several criteria to increase
Internet access for Canadian residents and businesses. As a result,
subscribers should have access to speeds of at least 50 Mbps and a
service with unlimited data allowance.
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 increasingly offering 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, cable and wireline companies are shifting their networks
towards higher speed and capacity data over cable service interface
specifications
(FTTH)
technologies. These technologies provide faster potential data
communication speeds, allowing both television and Internet signals to
reach consumers more quickly in order to sustain reliable speeds to
address the increasing number of Internet-capable devices.
and fibre-to-the-home
(DOCSIS)
3.0/3.1
BUSINESS SOLUTIONS 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 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. As next generation
platforms become more popular, our competition will begin to include
systems integrators and manufacturers.
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.
MEDIA TRENDS
Consumer demand for digital media, mobile devices, and on-demand
content is increasing and media products, such as magazines, have
experienced significant digital uptake, requiring industry players to
increase their efforts in digital content and capabilities in order to
compete. This trend is also causing advertisers to shift their spending
from conventional TV and print publishing to digital platforms.
Competition has changed and traditional media assets in Canada are
increasingly being controlled by a small number of competitors with
significant scale and financial resources. Technology has allowed new
entrants and even individuals to become media players in their own
right.
Some players have become more vertically integrated across both
traditional and emerging platforms. Relationships between providers
and purchasers of content have 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. Therefore, ownership of content and/or
long-term agreements with content owners has also become
increasingly important
teams, and
networks are also experimenting with the delivery of live sports content
through online, social, and virtual platforms, while non-traditional sports
are also growing in mindshare.
to media companies. Leagues,
34 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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Our Strategy, Key Performance Drivers, and Strategic Highlights
As part of our overall strategy and related priorities, we set new corporate objectives each year to progress on our long-term
strategic priorities and address short-term opportunities and risks.
OUR STRATEGIC PRIORITIES
We announced our new set of strategic priorities in May 2014. 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, we 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 strategy is to accelerate revenue
growth in a sustainable way and translate this revenue growth into
free cash flow, an
strong margins, adjusted operating profit,
increasing return on assets, and returns to shareholders.
OVERHAUL THE CUSTOMER EXPERIENCE
Improving customer experience is core to our 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, with a focus on
becoming a leader in self-serve options. 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 2016 by International Data Corporation
Canada at an estimated $22 billion for 2017. 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,
and have begun offering emerging services, such as unified
communications and collaboration, security, cloud, and Internet of
Things (IoT). We believe our strategy of being first-to-market with
business service innovation, supported by an aligned and
execution-focused organization, will deliver new opportunities for
Rogers in the business market. These opportunities will be a key
focus of ours as we strive to attract and serve more business
customers.
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 continue to evolve.
The new expectation is that content will be available “on demand”.
Whether it is watching the latest episode of their 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.
Rogers has some of the most sought-after media assets in Canada,
with a deep roster of leading sports assets, top radio stations, iconic
periodicals, 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
remove barriers to collaboration,
as One Rogers, we must
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 across our product sets and customer
base.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 35
MANAGEMENT’S DISCUSSION AND ANALYSIS
2016 OBJECTIVES
For 2016, we set forth the following objectives related to our strategic priorities. Following these objectives are our strategic highlights for
the year, showing our achievements against these objectives.
Strategic Priority
2016 Objectives
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
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
KEY PERFORMANCE DRIVERS AND 2016 STRATEGIC HIGHLIGHTS
The following achievements display the progress we made towards meeting our 2016 objectives we set last year.
BE A STRONG CANADIAN GROWTH COMPANY
• 100% achievement of our 2016 guidance on selected full-year
metrics and achieved our best subscriber metrics in recent years.
See “Financial and Operating Guidance” for more information.
OVERHAUL THE CUSTOMER EXPERIENCE
• Launched a number of tools and offerings with a focus on
becoming a leader in self-serve options. We saw a 56% increase
in self-serve transactions on the Rogers brand and a 9% increase
on the Fido brand this year.
• Expanded Roam Like Home to over 100 destinations in Europe,
Asia, Mexico, South America, and Latin America,
further
simplifying how Wireless consumers use the Internet, make calls,
and send texts and e-mails. Customers have access to their
Canadian plan features while traveling, all at a relatively low cost.
Furthermore, we broadened the availability of Roam Like Home
by making it available on most consumer Wireless plans.
• Introduced Fido Roam, allowing customers to use existing data,
talk, and text from their Fido Pulse plans while traveling, for a low
daily price. Fido Roam covers all of
the US along with
destinations in Europe,
the Caribbean, South and Central
America, the Middle East, Oceania, South Africa, and Asia.
• Launched Data Manager, a new tool that gives families the ability
to manage their wireless data in real-time and provide worry-free
control.
• Launched Rogers EnRoute and Fido EnRoute, tools that save our
customers time by giving them the ability to track, in real-time,
when a technician will arrive for an installation or service call.
• Launched DeviceAdvice and Message Me for our Fido
customers. DeviceAdvice is a tool allowing customers to self-
diagnose device issues and receive quick, personalized advice so
they can maximize the performance of their device. Message Me
allows customers to contact Fido customer representatives via
Facebook Messenger on their mobile or desktop device.
• Launched Rogers Assist, an app that allows all Rogers
employees to submit an issue to customer care on behalf of their
friends, family, and acquaintances.
• Collaborated with a Canadian app creator that helps people with
cognitive special needs, to create how-to videos for using a
wireless device. Rogers.com now features five videos with
easy-to-follow instructions and closed-captioning that explain
how to perform key functions related to your Rogers wireless
device like sending a text or picture, connecting to a Wi-Fi
network, and making a phone call.
• Expanded our Connected for Success program to more
communities across Ontario, New Brunswick, and Newfoundland
and Labrador. This program provides affordable Internet services
to people that live in non-profit housing. This expansion more
than doubled the number of eligible households across the
country to up to 150,000.
• Released Rogers’ 2016 Transparency Report, our annual report
on how we share customer information in response to requests
from legal authorities. We are committed to protecting our
customers’ privacy and fulfilling our obligation as a good
corporate citizen to follow the law and contribute to public
safety.
36 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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DRIVE GROWTH IN THE BUSINESS MARKET
• Launched Rogers Unison, a new mobile solution that brings the
features of a traditional landline office phone to one’s mobile
phone. We were the first telecommunications provider in North
America to launch such a solution. This solution allows our
customers to stay connected across multiple devices regardless
of their location, allowing them to better serve their customers.
• Launched Rogers Public Cloud, a new data sovereign, cloud
infrastructure as-a-service solution that lets businesses securely
manage critical data, applications, servers, systems software, and
network resources over the Internet.
• Launched Rogers Ignite Gigabit
to small business
customers in Ontario, enabling them to leverage blazing-fast
Internet
speeds and unlimited data usage to improve
productivity with faster file transfers, real-time data backup for
business continuity, and high-quality video conferencing. The
increased bandwidth also means businesses can connect more
users online simultaneously, without compromising Internet
performance.
Internet
• Announced certain IoT as-a-service offerings to simplify the
process of managing complex IoT solutions. Two of the first
solutions being offered as a service include Farm & Food
Monitoring and Level Monitoring.
• Launched Business App Market, a new platform for small
businesses to manage multiple cloud-based applications.
INVEST IN AND DEVELOP OUR PEOPLE
• Recognized again as a Top Employer for 2017 in November
2016 and as a Top Employer for Young People in January 2017
by the editors of Canada’s Top 100 Employers.
• Selected as one of Canada’s Best Diversity Employers for 2016 in
in March 2016 for
a report
recognition of our efforts to promote diversity and inclusion in
the workplace.
released by Mediacorp Inc.
• Named one of Canada’s Greenest Employers for 2016 by the
editors of Canada’s Top 100 Employers in April 2016, an award
recognizes employers with innovative environmental
that
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 2016, an award that recognizes
employers that incorporate social, economic, and ecological
benefits and costs in their normal course of business.
• Launched an intensive leadership program for more than
160 executives.
• Expanded our national onboarding program to include
1,400 call centre employees and launched a mobile onboarding
solution for part-time employees.
• Continued to modernize our workplace to help us be more
productive to better serve our customers.
beats our closest English-language competitor, and marks a 7%
increase year on year. The 2016 Blue Jays regular season was the
most-watched Blue Jays season in network history, reaching
20 million Canadians. In November 2016, Sportsnet delivered its
largest World Series audience ever, with an average audience of
2.66 million viewers, which more than doubled Sportsnet’s
previous
game.
Furthermore, Sportsnet achieved great success with the World
Cup of Hockey, with an average audience of 1.1 million viewers
for the entire tournament, and reached 15.5 million Canadians
throughout the tournament.
all-time most-watched World
Series
• Launched Sportsnet NOW, one of the first mainstream sports TV
channels in North America to be available direct to consumers,
as well as Sportsnet 4K, which delivered all regular season
Toronto Blue Jays home games in 4K. This will continue in 2017,
during which we plan to bring sports fans more than 100 Blue
Jays, NHL, and NBA games in 4K.
• Broadcast the first live NBA, NHL, and MLB games in 4K.
• Introduced the new NextBox 4K PVR, giving customers the ability
to record up to eight 4K programs at one time and store up to
90 hours of 4K entertainment.
• Added six new programs to the 2016/2017 schedule for
Canadian specialty channel VICELAND, including the network’s
first-ever scripted series, Nirvana The Band The Show. This new
original programming series is produced by VICE Media Canada
Inc. (VICE) through VICE Studio Canada.
• Successfully completed the second year of our exclusive 12-year
national NHL Agreement while bringing the NHL to more
than ever before. Rogers Hometown Hockey
Canadians
returned for a third season during the 2016-2017 NHL season
with hockey festivities and entertainment.
• Continued our commitment to deliver world-class Canadian
content by adding two new original scripted series to our City
lineup, with the millennial-focused comedy Second Jen and
drama Bad Blood: The Vito Rizzuto Story.
FOCUS ON INNOVATION AND NETWORK LEADERSHIP
• Extended our Ignite Gigabit Internet coverage to cover Rogers’
entire cable footprint, such that we offer the fastest widely
available Internet speeds in our marketplace.
• Announced the long-term strategic partnership with Comcast
Corporation to bring our customers a world-class IPTV service
with the most advanced features available in the market today by
deploying Comcast’s X1 IP-based video platform.
• Extended our 700 MHz LTE network reach to 91% of Canada’s
population in 2016, compared to 78% in 2015. Extended our
overall LTE network reach to 95% of Canada’s population in
2016, compared to 93% in 2015.
• Installed a new suite of technology and enterprise solutions to
enable the most connected arena in Canada, the Rogers Place in
Edmonton.
DRIVE COMPELLING CONTENT EVERYWHERE
• For the second consecutive year, Sportsnet solidified its position
as the destination for Canadian sports fans by closing out 2016
as Canada’s number-one sports media brand. Sportsnet won
eight months in 2016 and has widened the gap from its closest
competitor with a 42% lead in average minute audience and a
39% lead in audience share. Sportsnet.ca reached an all-time
high with 4.25 million unique visitors in October 2016, which
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
by bringing Rogers Hometown Hockey to 150,000 Canadians,
introducing low-cost
for more community housing
residents, and bringing viewers our strongest primetime lineup
ever, while delivering a strong year of NHL and Sportsnet.
Internet
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 37
MANAGEMENT’S DISCUSSION AND ANALYSIS
2017 OBJECTIVES
Strategic 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
2017 Objectives
Achieve our 2017 financial targets while at the same time
investing to support future growth
Foster good relationships and obtain positive feedback from our
customers through continual
improvements to our customer
service with a focus on self-serve
Utilize our enterprise-grade networks and introduce new
products to gain market share in the business market
Invest in our employees’ futures, in part so they say they are
proud to work for us, and to enhance employee engagement
Maintain our status as the number-one sports media brand in
Canada and leverage that status across our different platforms
Continue to grow our leadership in Wireless and Internet, and
set forth developments to reclaim a sound position in video
Introduce the best customer offerings possible through
leveraging the skills and capabilities of all our internal teams
Be a strong
Canadian growth
company
Overhaul
the customer
experience
Go to
market as
one Rogers
Drive growth
in the business
market
Focus on
innovation
& network
leadership
Invest in
and develop
our people
Deliver compelling
content everywhere
38 ROGERS COMMUNICATIONS INC. 2016 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.
2016 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 2016 financial metrics.
✓
✓
✓
✓
(In millions of dollars,
except percentages)
Consolidated Guidance 1
Revenue
Adjusted operating profit 2
2015
Actuals
2016
Guidance
Ranges
2016
Actuals
Achievement
13,414 Increase of
1% to 3%
5,032 Increase of
1% to 3%
13,702 2.1%
5,092 1.2%
Additions to property,
2,440
plant and equipment 3
2,300 to
2,400
2,352 n/m
Free cash flow 2
1,676 Increase of
1% to 3%
1,705 1.7%
Missed ✘
Achieved ✓
n/m – not meaningful
1 The table outlines guidance ranges for selected full-year 2016 consolidated financial
metrics provided in our January 27, 2016 earnings release. 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 substitutes or alternatives for GAAP measures. These are not defined
terms under IFRS and do not have standard meanings, so they 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.
2017 FULL-YEAR CONSOLIDATED GUIDANCE
We expect steady growth in 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 further reduce debt, and to
continue to return cash to shareholders.
(In millions of dollars, except
percentages)
2016
Actuals
2017 Guidance
Ranges 1
Consolidated Guidance
Revenue
Adjusted operating profit 2
Additions to property, plant
and equipment, net 3
Free cash flow 2
13,702
5,092
Increase of 3% to 5%
Increase of 2% to 4%
2,352
1,705
2,250 to 2,350
Increase of 2% to 4%
1 Guidance ranges presented as percentages reflect percentage increases over full-
year 2016 actual results.
2 Adjusted operating profit and free cash flow are non-GAAP measures and should not
be considered substitutes or alternatives 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 net of proceeds on disposition, but does
not include expenditures for spectrum licences.
The above table outlines guidance ranges for selected full-year
2017 consolidated financial metrics. These ranges take into
consideration our current outlook and our actual results for 2016.
the financial outlook is to assist
investors,
The purpose of
shareholders, and others in understanding certain financial metrics
relating to expected 2017 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
full-year Board-approved
basis that are consistent with annual
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 2017 guidance ranges above are based on many assumptions
including, but not limited to, the following material assumptions:
• continued intense competition consistent with our experience
during the full-year 2016 in all segments in which we operate;
• a substantial portion of our US dollar-denominated expenditures
for 2017 is hedged at an average exchange rate of $1.33/US$;
• key interest rates remain relatively stable throughout 2017;
• no significant additional
regulatory developments, shifts in
economic condition, or macro changes in the competitive
environment affecting our business activities. We note that
regulatory decisions expected during 2017 could materially alter
underlying assumptions around our 2017 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 and in
smaller,
is not expected to
materially impact our Cable revenue;
reasonably priced packages,
• the CRTC decision to significantly reduce interim rates for the
capacity charge tariff component of wholesale high-speed
access service pending approval of final rates is expected to have
an impact on our Cable 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 2017 at a similar rate as in 2016;
• our relative market share in Wireless and Cable will not be
negatively impacted;
• continued subscriber growth in Wireless and Cable Internet;
moderating net losses in Cable Television subscribers; and a
relatively stable Phone subscriber base;
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 39
MANAGEMENT’S DISCUSSION AND ANALYSIS
• 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
including our print publishing
traditional media businesses,
offerings; and
• with respect to additions to property, plant and equipment:
• 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 will make expenditures to prepare our network for our
anticipated rollout of the Comcast X1 IPTV platform in early
2018.
Capability to Deliver Results
LEADING NETWORKS
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 95% 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, 2016 on our LTE network alone;
• is supported by voice and data roaming agreements with
international carriers in more than 200 destinations, including a
growing number of LTE roaming operators; and
• includes network sharing arrangements with three regional
wireless operators that 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, 2016 include:
Type of spectrum
Rogers licence
700 MHz
24 MHz in Canada’s major geographic markets, covering 91.1%
of the Canadian population.
850 MHz
25 MHz across Canada.
1900 MHz
60 MHz in all areas of Canada except 40 MHz in 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
subscribers (4G LTE in the future).
3.5G HSPA+
2G GSM and
subscribers (4G LTE in the future).
3.5G HSPA+
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.
40 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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We also have access to additional spectrum through the following network sharing agreements:
Type of spectrum
Kind of venture
2.3 GHz/3.5 GHz range
Inukshuk Wireless Partnership is a joint operation with BCE Inc. in
which Rogers holds a 50% interest. Inukshuk holds 30 MHz (of
which 20 MHz is usable) of FDD 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
(between
50-175 MHz) in most of the major population centres across
Canada. The current fixed wireless LTE national network utilizes
the jointly held 2.3 GHz and 3.5 GHz spectrum bands.
also holds 3.5 GHz
TDD licences
Who it supports
Mobile and fixed wireless subscribers.
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;
• with TBayTel, that covers the combined base of customers in
northwestern Ontario; and
3.5G / 4G HSPA+, 4G LTE
subscribers.
3.5G / 4G HSPA+ subscribers.
• with Quebecor (Videotron) to provide LTE services across the
3.5G / 4G LTE subscribers.
province of Quebec.
We have an option arrangement to buy additional spectrum, subject to commercial terms and regulatory approvals, as follows:
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.
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 and Labrador. We also operate a
transcontinental fibre-optic network that extends over 46,000 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
In Canada, the network extends coast-to-coast and
site traffic.
includes local and regional
fibre, transmission electronics and
systems, hubs, points of presence, 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 and 750 MHz of shared cable
spectrum in Ontario and Atlantic Canada, respectively, 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 completed 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 strengthened the
customer experience and, in addition to allowing us to reclaim
significant amounts of network capacity, enabled us to reduce
future network operating and maintenance costs. The migration
from analog to digital required additional spending as it involved
fitting analog homes with digital converters and removing existing
analog filtering equipment.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 41
MANAGEMENT’S DISCUSSION AND ANALYSIS
Broadband Internet service is provided using a DOCSIS CCAP
3.0/3.1 platform, which combines multiple radio frequency
channels onto one access point at
the customer premise,
delivering exceptional performance. The bandwidth of our Internet
service offerings has increased 55-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. As at December 31, 2016, 100% of our cable
network has been upgraded to DOCSIS CCAP technology
supporting DOCSIS 3.1 and Ignite Gigabit Internet.
We continue to invest in and improve our cable network;
for
example, with technology to support gigabit Internet speeds, Rogers
4K TV, our 4K PVR set-top box, and a significant commitment to live
broadcasting in 4K, including all regular season Toronto Blue Jays
home games in 2017 and numerous NHL and NBA games.
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
collocation, cloud, and managed services solutions. We own and
operate 16 state-of-the-art, highly reliable, certified data centres
across Canada, including:
• Canada’s first Tier III Design and Construction certified 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.
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.
42 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
We also own or utilize some of Canada’s most recognized brands
including:
• the wireless brands of Rogers, Fido, and chatr;
• over 20 TV stations and specialty channels, including Sportsnet,
FX (Canada) and FXX (Canada), OMNI, VICELAND, and City;
• publications,
including Maclean’s, Chatelaine, Today’s Parent,
Flare, and Hello! Canada;
• Texture by Next Issue, with a catalogue of over 230 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;
• an exclusive 12-year agreement with the NHL that allows us to
deliver unprecedented coverage of professional hockey;
• TSC, the leading nationally broadcast, interactive, multi-channel
Canadian retailer; 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, Fido, and chatr 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,
and 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 and fido.ca;
• our call centres, outbound telemarketing, and door-to-door
agents;
• major retail chains; and
• an extensive network of third-party retail locations.
BUSINESS SOLUTIONS
Our sales team and third-party retailers sell Business Solutions
services to the enterprise, public sector, and carrier wholesale
markets. 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;
• 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 2016-2017 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
• delivery of our exclusive Canadian English language broadcast
and mobile rights for the 2016 World Cup of Hockey.
CUSTOMER EXPERIENCE
We are committed to providing our customers with the best
experience possible. To do this, we have invested in several
different methods, such as:
• contact centres located throughout Canada;
• an innovative Integrated Voice Response (IVR) system that can
take calls in four languages, including English, French, Mandarin,
and Cantonese;
• self-serve options, including:
• the ability for Fido and Rogers consumer customers to
complete price plan changes and hardware upgrades online;
• simplified login, allowing Fido customers to log in to their
accounts online or through the Fido MyAccount app using
their Facebook login credentials, eliminating the need to
remember multiple login credentials and making self-service
easier to access;
• the ability for customers to install
their Internet and TV
the need for a technician visiting their
products without
residence; and
• Rogers EnRoute, a new tool that saves customers time by
giving them the ability to track on their phone when a
technician will arrive for an installation or service call;
• customer care available over Facebook Messenger (a global first
for a telecommunications company) and Twitter (among the first
globally);
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• Family Data Manager, a data manager tool that allows Wireless
customers to manage and customize their data usage in real-
time through MyRogers;
• a simplified mobile bill, making it easier for customers to read
and understand their monthly charges;
• Roam Like Home and Fido Roam, worry-free wireless roaming
allowing Canadians to use their wireless plan like they do at
home when traveling to included destinations; and
• Rogers Assist, an app that allows all Rogers employees to submit
an issue to customer care on behalf of their friends, family, and
acquaintances.
ENGAGED PEOPLE
For our team of approximately 25,200 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 $2.7 billion as at
December 31, 2016. 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 $1,047 million of marketable equity
securities in publicly-traded companies as at December 31, 2016.
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 2016, we anticipate generating a net cash surplus in 2017
from our cash provided by operating activities. We expect that we
will have sufficient capital resources to satisfy our cash funding
requirements in 2017, 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 bank advance balance, cash
provided by operating activities, the amount available under our
$2.8 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, 2016, there were no significant
restrictions on the flow of funds between Rogers and its subsidiary
companies.
facilities, our accounts
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 43
MANAGEMENT’S DISCUSSION AND ANALYSIS
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, 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 1.1 million shares in 2016. In addition, our Class A
Voting common shares trade on the TSX. Dividends are the same
on both classes of shares. In 2016, each share paid an annualized
dividend of $1.92.
44 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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2016 Financial Results
See “Accounting Policies” in this MD&A and the notes to our 2016
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 strategy and the results of our peers and
SUMMARY OF CONSOLIDATED RESULTS
(In millions of dollars, except margins and per share amounts)
Revenue
Wireless
Cable
Business Solutions
Media
Corporate items and intercompany eliminations
Revenue
Adjusted operating profit
Wireless
Cable
Business Solutions
Media
Corporate items and intercompany eliminations
Adjusted operating profit 1
Adjusted operating profit margin 1
Net income 2
Basic earnings per share 2
Diluted earnings per share 2
Adjusted net income 1, 2
Adjusted basic earnings per share 1, 2
Adjusted diluted earnings per share 1, 2
Additions to property, plant and equipment
Cash provided by operating activities
Free cash flow 1
Total service revenue 3
competitors. Many of these are not defined terms under IFRS and
should not be considered 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
2016
2015 % Chg
7,916
3,449
384
2,146
(193)
7,651
3,465
377
2,079
(158)
13,702
13,414
3,285
1,674
123
169
(159)
3,239
1,658
116
172
(153)
3
–
2
3
22
2
1
1
6
(2)
4
5,092
37.2%
1
5,032
37.5% (0.3 pts)
835
1,342
$ 1.62 $ 2.61
$ 1.62 $ 2.60
1,481
1,479
$ 2.88 $ 2.87
$ 2.86 $ 2.86
2,352
3,957
1,705
13,027
2,440
3,747
1,676
12,649
(38)
(38)
(38)
–
–
–
(4)
6
2
3
1 Adjusted operating profit, adjusted operating profit margin, adjusted net income, adjusted basic and diluted earnings per share, and free cash flow are non-GAAP measures and
should not be considered substitutes or alternatives 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 a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See “Accounting
Policies” for more information.
3 As defined. See “Key Performance Indicators”.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 45
MANAGEMENT’S DISCUSSION AND ANALYSIS
KEY CHANGES IN FINANCIAL RESULTS THIS
YEAR COMPARED TO 2015
REVENUE
Wireless service revenue increased this year primarily as a result of a
larger subscriber base and the continued adoption of higher-
postpaid-ARPA-generating Rogers Share Everything plans.
Cable revenue decreased marginally this year as the impacts of a
Internet products and the
higher subscriber base for our
movement of customers to higher-end speed and usage tiers were
more than offset by Television subscriber losses and the impact of
Phone pricing packages.
Business Solutions revenue increased this year primarily as a result
of the growth in on-net next generation services, including our data
centre businesses, which more than offset the continued reduction
in lower margin, off-net legacy revenue.
Media revenue increased this year primarily as a result of higher
sports-related revenue, driven by the success of Sportsnet and the
Toronto Blue Jays, partially offset by continued softness in
publishing and radio advertising.
ADJUSTED OPERATING PROFIT
Wireless adjusted operating profit increased this year primarily as a
result of service revenue growth as described above, partially offset
by higher costs associated with increased volumes and costs of
devices.
Cable adjusted operating profit increased this year as a result of
lower operating expenses.
Business Solutions adjusted operating profit increased this year as a
result of the increase in revenues described above.
Media adjusted operating profit decreased this year primarily as a
result of higher sports-related costs, partially offset by lower
conventional broadcast TV, publishing, and radio costs and the
higher revenue described above.
NET INCOME AND ADJUSTED NET INCOME
income decreased this year primarily as a result of a
Net
$484 million charge recognized on our
IPTV product, a
$140 million loss associated with the writedown of our shomi joint
venture, and higher restructuring, acquisition and other costs.
Adjusted net income increased marginally this year as a result of
higher adjusted operating profit, partially offset by higher other
expense and higher income tax expense.
46 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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WIRELESS
2016 WIRELESS REVENUE MIX
(%)
ROGERS IS CANADA’S LARGEST PROVIDER OF
WIRELESS COMMUNICATIONS SERVICES
As at December 31, 2016, we had:
• approximately 10.3 million subscribers; and
• approximately 34% subscriber share and 33% revenue share
of the Canadian wireless market.
WIRELESS FINANCIAL RESULTS
$7.9
Billion
SERVICE 92%
EQUIPMENT 8%
Years ended December 31
WIRELESS SUBSCRIBER RESULTS 1
(In thousands, except churn, postpaid ARPA,
and blended ARPU)
Years ended December 31
2016
2015
Chg
Postpaid
Gross additions
Net additions
Total postpaid subscribers 2
Churn (monthly)
ARPA (monthly)
Prepaid
Gross additions
Net additions
Total prepaid subscribers 2, 3
Churn (monthly)
Blended ARPU (monthly)
1,521
286
8,557
1.23%
1,354
106
8,271
1.27%
$117.37 $110.74
167
180
286
(0.04 pts)
6.63
$
761
111
1,717
3.32%
677
75
1,606
3.45%
$ 60.42 $ 59.71
84
36
111
(0.13 pts)
0.71
$
1 Subscriber counts, subscriber churn, postpaid ARPA, and blended ARPU are key
performance indicators. See “Key Performance Indicators”.
2 As at end of period.
3 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
(%)
2016
2015
2014
1.23%
1.27%
1.27%
(In millions of dollars, except margins)
2016
2015 1
% Chg
Revenue
Service revenue
Equipment revenue
Revenue
Operating expenses
Cost of equipment 2
Other operating expenses
Operating expenses
Adjusted operating profit
7,258
658
6,902
749
5
(12)
7,916
7,651
1,947
2,684
1,845
2,567
4,631
4,412
3,285
3,239
3
6
5
5
1
Adjusted operating profit margin as a % of
service revenue
Additions to property, plant and equipment
45.3% 46.9% (1.6 pts)
(19)
866
702
1 The operating results of Mobilicity are included in the Wireless results of operations
from the date of acquisition on July 2, 2015.
2 Includes the cost of equipment revenue and direct channel subsidies.
WIRELESS SERVICE REVENUE
(IN MILLIONS OF DOLLARS)
2016
2015
2014
WIRELESS SUBSCRIBER BREAKDOWN
(IN THOUSANDS)
2016
2015
2014
Postpaid
Prepaid
$7,258
$6,902
$6,743
8,557
1,717
8,271
1,606
8,073
1,377
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 47
The 1% increase in blended ARPU this year was a result of:
• increased service 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 over the past year.
We believe the increases in gross and net additions to our postpaid
subscriber base and the lower postpaid churn this year were results
of our strategic focus on enhancing the customer experience by
providing higher-value offerings, such as our Share Everything
plans, improving our customer service, and continually increasing
the quality of our network. We believe the increases in gross and
net additions to our prepaid subscriber base and the lower prepaid
churn were a result of our continued focus on the promotion of our
chatr offerings.
ROAM LIKE HOME AND FIDO ROAM SUBSCRIBERS
(IN THOUSANDS)
2016
2015
2014
5,459
2,252
457
revenue (net of subsidies)
Equipment revenue
Equipment
sales to:
• independent dealers, agents, and retailers; and
• subscribers through fulfillment by Wireless’ customer service
includes revenue from
groups, websites, telesales, and corporate stores.
The 12% decrease in revenue from equipment revenue this year
was a result of:
• larger average subsidies given to customers who purchased
devices; and
• a 4% decrease in device upgrades by existing subscribers;
partially offset by
• higher gross additions.
MANAGEMENT’S DISCUSSION AND ANALYSIS
REVENUE
Our revenue depends on the size of our subscriber base, the
revenue per account, the revenue from the sale of wireless devices,
and other equipment revenue.
Service revenue
Service 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 5% increase in service revenue this year was a result of:
• larger postpaid and prepaid subscriber bases. The overall
increase in service revenue pertaining to the increased prepaid
subscriber base was partially a result of our mid-2015 acquisition
of Mobilicity; and
• the continued adoption of customer-friendly Rogers Share
Everything plans and the general increase in data usage noted
on these types of plans. These plans generate higher postpaid
ARPA, bundle in various calling features and long distance,
provide the ability to pool and manage data usage across
multiple devices, and grant access to our other offerings, such as
Roam Like Home, Rogers NHL GameCentre LIVE, Spotify, and
Texture by Next Issue.
The 6% 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 have increasingly utilized the
advantages of premium offerings and access their shareable plans
with multiple devices on the same account.
POSTPAID ARPA (MONTHLY)
($)
2016
2015
2014
SHARE EVERYTHING SUBSCRIBERS AS A PERCENTAGE
OF OUR ROGERS-BRANDED POSTPAID SUBSCRIBER BASE
(%)
2016
2015
2014
$117.37
$110.74
$106.41
58%
51%
31%
48 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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 6% increase in the cost of equipment this year was a result of:
• a shift in the product mix of device sales towards higher-cost
smartphones; and
• higher gross additions; partially offset by
• the decrease in device upgrades by existing subscribers, as
discussed above.
The 5% increase in other operating expenses this year was a result
of:
• higher service costs to support
the higher service revenue
discussed above; and
• higher advertising costs; partially offset by
• lower commissions.
ADJUSTED OPERATING PROFIT
The marginal increase in adjusted operating profit this year was a
result of higher
revenue, partially offset by higher operating
expenses, as discussed above.
WIRELESS ADJUSTED OPERATING PROFIT
(IN MILLIONS OF DOLLARS)
2016
2015
2014
$3,285
$3,239
$3,246
LTE COVERAGE AS A PERCENTAGE OF THE CANADIAN POPULATION
(%)
2016
2015
2014
95%
93%
84%
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2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 49
TELEVISION 45%
INTERNET 44%
PHONE 11%
Years ended December 31
2016
2015
Chg
97
2,145
37
2,048
(76)
1,820
(128)
1,896
4
1,094
(60)
1,090
4,241
4,153
60
97
52
(76)
64
4
88
25
5,059
(151)
5,034
176
25
MANAGEMENT’S DISCUSSION AND ANALYSIS
CABLE
2016 CABLE SERVICE REVENUE MIX
(%)
ONE OF CANADA’S LEADING PROVIDERS OF HIGH-
SPEED INTERNET, CABLE TELEVISION, AND PHONE
SERVICES
$3.4
Billion
As at December 31, 2016, we had:
• approximately 2.1 million high-speed Internet subscribers;
• approximately 1.8 million Television subscribers –
approximately 31% of Canadian cable television subscribers;
• approximately 1.1 million Phone subscribers; and
• a network passing approximately 4.2 million homes in
Ontario, New Brunswick, and Newfoundland and Labrador.
CABLE FINANCIAL RESULTS
CABLE SUBSCRIBER RESULTS 1
(In thousands)
Internet
Net additions
Total Internet subscribers 2
Years ended December 31
Television
(In millions of dollars, except margins)
2016
2015 % Chg
Revenue
Internet
Television
Phone
Service revenue
Equipment revenue
Revenue
Operating expenses
Cost of equipment
Other operating expenses
Operating expenses
Adjusted operating profit
1,495
1,562
386
3,443
6
1,343
1,669
445
3,457
8
3,449
3,465
3
1,772
4
1,803
1,775
1,807
1,674
1,658
11
(6)
(13)
–
(25)
–
(25)
(2)
(2)
1
Adjusted operating profit margin
Additions to property, plant and equipment
48.5% 47.8% 0.7 pts
1,085
5
1,030
CABLE REVENUE
(IN MILLIONS OF DOLLARS)
2016
2015
2014
$3,449
$3,465
$3,467
CABLE SERVICE REVENUE BREAKDOWN
(IN MILLIONS OF DOLLARS)
2016
2015
2014
Internet
Television
Phone
1,495
1,562
386
1,343
1,669
445
1,245
1,734
478
50 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
Net losses
Total Television subscribers 2
Phone
Net additions (losses)
Total Phone subscribers 2
Cable homes passed 2
Total service units 3
Net additions (losses)
Total service units 2
1 Subscriber count is a key performance indicator. See “Key Performance Indicators”.
2 As at end of period.
3 Includes Internet, Television, and Phone subscribers.
CABLE SUBSCRIBER BREAKDOWN
(IN THOUSANDS)
2016
2015
2014
Internet
Television
Phone
2,145
1,820
1,094
2,048
1,896
1,190
2,011
2,024
1,150
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.
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 marginal decrease in revenue this year was a result of:
• Television subscriber losses over the past year; partially offset by
• the impact and timing of general pricing increases implemented
over the past year, net of promotional pricing;
• a higher subscriber base for our Internet products; and
• the movement of Internet customers to higher speed and usage
tiers.
Internet revenue
The 11% increase in Internet revenue this year was a result of:
• a larger Internet subscriber base;
• general movement of customers to higher speed and usage
tiers of our Ignite broadband Internet offerings; and
• the net impact of changes in Internet service pricing; partially
offset by
Television revenue
The 6% 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; partially offset by
• the impact and timing of general pricing increases implemented
over the past year, net of promotional pricing.
Phone revenue
The 13% decrease in Phone revenue this year was a result of:
• the impact of pricing packages; partially offset by
• less promotional pricing provided to subscribers as a result of
the pricing packages described above.
Equipment revenue
Equipment revenue includes revenue generated from the sale of
digital cable set-top boxes and Internet modems.
• The decrease in equipment revenue this year was a result of a
decrease in cable set-top box sales compared to the prior year.
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• a decline in additional usage-based revenue as portions of the
subscriber base move to higher-value, unlimited usage plans;
and
• lower wholesale revenue as a result of a CRTC decision that
OPERATING EXPENSES
We assess Cable operating expenses in three categories:
• the cost of programming;
• the cost of equipment revenue (cable digital set-top boxes and
reduced access service rates.
Internet modem equipment); and
INTERNET SUBSCRIBERS
(IN THOUSANDS)
2016
2015
2014
>100 Mbps SUBSCRIBERS AS A PERCENTAGE
OF OUR INTERNET SUBSCRIBER BASE
(%)
2016
2015
2014
• all other expenses involved in day-to-day operations, to service
and retain existing subscriber relationships, and to attract new
subscribers.
The 2% decrease in operating expenses this year was a result of:
• lower service and programming costs, partially due to a vendor
credit received this year;
• relative shifts in product mix to higher-margin Internet from
conventional Television broadcasting; and
• various cost efficiency and productivity initiatives; partially
offset by
• increased advertising, partially related to our Ignite Internet and
4K TV offerings.
ADJUSTED OPERATING PROFIT
The 1% increase in adjusted operating profit this year was a result
of the revenue and expense changes described above.
2,145
2,048
2,011
46%
28%
4%
CABLE ADJUSTED OPERATING PROFIT
(IN MILLIONS OF DOLLARS)
2016
2015
2014
$1,674
$1,658
$1,665
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 51
MANAGEMENT’S DISCUSSION AND ANALYSIS
BUSINESS SOLUTIONS
LEADING-EDGE WIRELINE TELECOM AND DATA
COMMUNICATIONS SERVICES TO CANADIAN
BUSINESSES
As at December 31, 2016, Business Solutions:
• sold to enterprises and public sector;
• sold to other carriers on a wholesale basis;
• had 9,300 on-net fibre connected buildings; and
• had fibre passing close to an additional 24,500 near-net
buildings.
BUSINESS SOLUTIONS FINANCIAL RESULTS
(In millions of dollars, except margins)
2016
2015 % Chg
Years ended December 31
Revenue
Next generation
Legacy
Service revenue
Equipment revenue
Revenue
Operating expenses
Adjusted operating profit
307
71
378
6
384
261
123
288
85
373
4
377
261
116
7
(16)
1
50
2
–
6
Adjusted operating profit margin
Additions to property, plant and equipment
32.0% 30.8%
187
146
1.2pts
(22)
Business Solutions generates revenue from the provision of wireline
communications services and the sale of related equipment to
enterprises and public sector at
rates and to other
telecommunications carriers on a wholesale basis.
retail
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.
2016 BUSINESS SOLUTIONS SERVICE REVENUE MIX
(%)
$0.4
Billion
NEXT GENERATION 81%
LEGACY 19%
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 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.
REVENUE
The 1% increase in service revenue this year was a result of:
• the continuing execution of our plan to grow higher margin,
next generation on-net and near-net IP-based services revenue;
partially offset by
• 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.
Next generation services, which include our data centre operations,
represented 81% (2015 – 77%) of total service revenue during the
year.
OPERATING EXPENSES
Operating expenses this year were in line with 2015.
ADJUSTED OPERATING PROFIT
The 6% increase in adjusted operating profit this year was a result
of the revenue changes discussed above.
BUSINESS SOLUTIONS ADJUSTED OPERATING PROFIT
(IN MILLIONS OF DOLLARS)
Legacy revenue is generated mainly by circuit-switched local and
long distance voice services and legacy data services, provided over
time-division multiplexing (TDM) and prior generation data
platforms, with client access often delivered using leased third-
party network elements and tariffed ILEC services.
2016
2015
2014
$123
$116
$122
BUSINESS SOLUTIONS SERVICE REVENUE BREAKDOWN
(IN MILLIONS OF DOLLARS)
2016
2015
2014
Next Generation
Legacy
307
71
288
85
271
106
52 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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MEDIA
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
Jays;
• our exclusive national 12-year NHL Agreement;
• category-leading television and radio broadcasting
properties;
• multi-platform televised and online shopping;
• digital media; and
• publishing.
MEDIA FINANCIAL RESULTS
Years ended December 31
SPORTS REVENUE AND SPORTS REVENUE AS A PERCENTAGE
OF MEDIA REVENUE (%)
(IN MILLIONS OF DOLLARS)
2016
2015
2014
56%
52%
43%
$1,203
$1,106
$778
The 3% increase in revenue this year was a result of:
• higher sports-related revenue driven by the strength of Sportsnet
and the success of the Toronto Blue Jays; and
• higher digital advertising revenue; partially offset by
• lower advertising revenues across publishing and radio.
OPERATING EXPENSES
We assess Media operating expenses by:
• the cost of broadcast content, including sports programming
and production;
• the cost of retail products sold by TSC and Sports Media and
(In millions of dollars, except margins)
2016
2015 % Chg
Entertainment;
Revenue
Operating expenses
Adjusted operating profit
2,146
1,977
2,079
1,907
169
172
3
4
(2)
Adjusted operating profit margin
Additions to property, plant and equipment
7.9%
62
8.3% (0.4pts)
3
60
REVENUE
Media revenue is earned from:
• advertising sales across its television, radio, publishing, and
digital media properties;
• Toronto Blue Jays player payroll; and
• all other expenses involved in day-to-day operations.
The 4% increase in operating expenses this year was a result of:
• higher sports-related costs; and
• higher digital media costs; partially offset by
• lower conventional broadcast TV and radio costs, partially due to
cost savings from operating efficiencies and job cuts during the
first half of 2016; and
• lower publishing costs due to the strategic shift related to
magazine content announced earlier this year.
• subscriptions to televised products;
• retail product sales;
• ticket sales, receipts of MLB revenue sharing, and concession
ADJUSTED OPERATING PROFIT
The 2% decrease in adjusted operating profit this year was a result
of the revenue and expense changes described above.
sales; and
• circulation of published products.
MEDIA ADJUSTED OPERATING PROFIT
(IN MILLIONS OF DOLLARS)
MEDIA REVENUE
(IN MILLIONS OF DOLLARS)
2016
2015
2014
2016 MEDIA REVENUE MIX
(%)
$2.1
Billion
2016
2015
2014
$2,146
$2,079
$1,826
$169
$172
$131
SPORTS 56%
BROADCASTING 22%
THE SHOPPING CHANNEL 13%
PUBLISHING 9%
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 53
MANAGEMENT’S DISCUSSION AND ANALYSIS
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. See “Managing Our Liquidity and Financial
or capital
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)
2016
2015
% Chg
Additions to property, plant and equipment
Years ended December 31
Wireless
Cable
Business Solutions
Media
Corporate
702
1,085
146
62
357
866
1,030
187
60
297
Total additions to property, plant and equipment 1
2,352
2,440
(19)
5
(22)
3
20
(4)
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
(IN MILLIONS OF DOLLARS)
2016
2015
2014
$2,352
$2,440
$2,366
2016 ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
(%)
$2.4
Billion
CABLE 46%
WIRELESS 30%
CORPORATE 15%
BUSINESS SOLUTIONS 6%
MEDIA 3%
CABLE
The increase in additions to property, plant and equipment in
Cable this year was a result of greater investment in network
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, partially offset by lower purchases
of our next generation NextBox digital set-top box along with lower
investment in information technology compared to last year.
Capital intensity 2
17.2% 18.2% (1.0 pts)
1 Additions to property, plant and equipment do not
include expenditures on
spectrum licences.
2 As defined. See “Key Performance Indicators”.
BUSINESS SOLUTIONS
The decrease in additions to property, plant and equipment in
Business Solutions this year was a result of greater investments to
our network and data centre last year.
WIRELESS
The decrease in additions to property, plant and equipment in
Wireless this year was a result of lower expenditures on our wireless
network, along with lower software and information technology
costs. Deployment of our 700 MHz LTE network has reached 91%
of Canada’s population as at December 31, 2016 (2015 – 78%).
The 700 MHz LTE network offers improved signal quality in
basements, elevators, and buildings with thick concrete walls.
Deployment of our overall LTE network has reached approximately
95% of Canada’s population as at December 31, 2016
(2015 – 93%).
MEDIA
The increase in additions to property, plant and equipment in
Media this year was a result of higher 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 information technology
costs as well as higher spending on premise improvements at our
various offices.
CAPITAL INTENSITY
Capital intensity decreased this year as a result of the decrease in
additions to property, plant and equipment as described above,
combined with the increase in revenue described previously in this
MD&A.
54 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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REVIEW OF CONSOLIDATED PERFORMANCE
This section discusses our net income and other expenses that do
not form part of the segment discussions above.
We had a liability of $189 million as at December 31, 2016
(2015 – $157 million)
related to stock-based compensation
recorded at its fair value, including stock options, RSUs, and DSUs.
Years ended December 31
We paid $69 million in 2016 (2015 – $73 million) to holders of
stock options, RSUs, and DSUs upon exercise.
(In millions of dollars)
2016
2015 % Chg
Adjusted operating profit 1
Deduct (add):
Stock-based compensation
Depreciation and amortization
Impairment of assets and related
onerous contract charges
Restructuring, acquisition and
other
Finance costs
Other expense (income) 2
Income tax expense 2
5,092
5,032
61
2,276
55
2,277
484
160
761
191
324
–
111
774
(4)
477
Net income 2
835
1,342
1
11
–
–
44
(2)
n/m
(32)
(38)
1 Adjusted operating profit is a non-GAAP measure and should not be considered 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.
2 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12
Income Taxes, certain amounts have been retrospectively amended. See “Accounting
Policies” for more information.
ADJUSTED OPERATING PROFIT
See “Key Changes in Financial Results This Year Compared to
2015” for a discussion of the increase in adjusted operating profit
this year.
STOCK-BASED COMPENSATION
Our stock-based compensation, which includes stock options (with
restricted share units (RSUs), and
stock appreciation rights),
deferred share units (DSUs), 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
the stock price appreciation risk
stock-based
compensation program. See “Financial Risk Management” for
information about equity derivatives.
for our
(In millions of dollars)
2016
2015
Years ended December 31
Impact of vesting
Impact of change in price
Equity derivatives, net of interest
receipt
Total stock-based compensation
70
24
(33)
61
57
20
(22)
55
Stock-based compensation increased to $61 million in 2016
(2015 – $55 million) primarily as a result of the vesting of additional
stock-based compensation to employees, directors, and key
executives.
DEPRECIATION AND AMORTIZATION
Years ended December 31
(In millions of dollars)
2016
2015 % Chg
Depreciation
Amortization
2,183
93
2,117
160
Total depreciation and amortization
2,276
2,277
3
(42)
–
Depreciation and amortization was stable 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; offset by
• certain intangible assets that were fully amortized; and
• ceasing amortization on certain brand name assets in 2016.
IMPAIRMENT OF ASSETS AND RELATED ONEROUS
CONTRACT CHARGES
During the year ended December 31, 2016, we recorded an
aggregate $484 million impairment charge and onerous contract
charge related to our IPTV product.
(In millions of dollars)
Year ended December 31, 2016
Impairment of property, plant and
equipment
Onerous contracts and other
Total impairment of assets and
related onerous contract charges
412
72
484
These charges related to our decision to discontinue developing
our IPTV product as a result of our decision to develop a long-term
relationship with Comcast and deploy their X1 IP-based video
platform. The onerous contract charges primarily relate to the
remaining contractual liabilities for the development of our IPTV
product and were recognized in accounts payable and accrued
liabilities. We did not record an impairment charge in 2015.
RESTRUCTURING, ACQUISITION AND OTHER
in
This year, we incurred $160 million (2015 – $111 million)
restructuring, acquisition and other expenses. These expenses in
2016 primarily consisted of severance costs associated with the
targeted restructuring of our employee base and costs related to
the wind down of and changes to certain businesses. In 2015,
these expenses were incurred primarily as a result of severance
costs associated with the targeted restructuring of our employee
base,
the reorganization of our OMNI television stations, the
acquisition of Mobilicity, and the purchase of our interest in Glentel.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 55
MANAGEMENT’S DISCUSSION AND ANALYSIS
FINANCE COSTS
(In millions of dollars)
2016
2015
% 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
Change in fair value of derivatives
Capitalized interest
Other
758
761
–
9
11
(18)
–
13
(16)
(18)
15
7
11
3
(29)
10
(100)
18
n/m
(38)
50
(2)
Total finance costs
761
774
1 Borrowings include long-term debt and short-term borrowings associated with our
accounts receivable securitization program.
Interest on borrowings
Interest on borrowings decreased this year as a result of a lower
amount of debt outstanding compared to 2015. See “Managing
Our Liquidity and Financial Resources” for more information about
our debt and related finance costs.
Loss on repayment of long-term debt
We recognized a $7 million loss on repayment of long-term debt in
2015 related to debt derivatives associated with the repayment or
repurchase of certain senior notes in March 2015. These losses
were deferred in the hedging reserve until maturity of the notes
and were then recognized in net income. The loss relates to
transactions in 2013 wherein foreign exchange rates on the related
debt derivatives were updated to then-current rates.
Loss on foreign exchange
During 2016, all of our US dollar-denominated senior notes and
debentures were hedged for accounting purposes. Foreign
exchange losses recognized in 2016 were primarily related to our
US dollar-denominated credit facility borrowings, which were not
designated as hedges for accounting purposes due to the short-
term nature of
the borrowings. Foreign exchange losses
recognized in 2015 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.
See “Managing Our Liquidity and Financial Resources” for more
information about our debt and related finance costs.
OTHER EXPENSE (INCOME)
The increase in other expense this year was primarily a result of
equity losses recognized on certain of our joint ventures. During
the year, we announced the decision to wind down our shomi joint
venture and recognized a loss of $140 million associated with the
writedown of the investment and our share of the estimated cost of
the remaining obligations of shomi. Additionally, we recognized a
net loss of $11 million this year on divestitures pertaining to
investments. In 2015, we recognized a $74 million gain on our
acquisition of Mobilicity, partially offset by 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.
56 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
INCOME TAX EXPENSE
The table below shows the difference between income tax
expense computed by applying the statutory income tax rate to
income before income tax expense 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 tax expense 1
Computed income tax expense 1
Increase (decrease) in income tax
expense resulting from:
Non-deductible stock-based
compensation
Non-deductible portion of equity
losses
Income tax adjustment, legislative
tax change
Non-taxable gain on acquisition 1
Non-taxable portion of capital gain
Other items
Total income tax expense 1
Effective income tax rate 1
Cash income taxes paid
2016
26.6%
1,159
308
5
18
3
–
(7)
(3)
324
28.0%
295
2015
26.5%
1,819
482
5
11
6
(20)
–
(7)
477
26.2%
184
1 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12
Income Taxes, certain amounts have been retrospectively amended. See “Accounting
Policies” for more information.
Our effective income tax rate this year was 28.0% compared to
26.2% for 2015. The effective income tax rate for 2016 was higher
than the statutory tax rate primarily as a result of non-deductible
equity losses recognized on certain of our investments, partially
offset by the non-taxable portion of capital gains on the sale of
investments.
Cash income taxes paid increased this year as a result of applying
non-capital losses from the Mobilicity transaction to offset our 2015
liability.
NET INCOME
Net income was 38% lower than last year. See “Key Changes in
Financial Results This Year Compared to 2015”
for more
information.
Years ended December 31
(In millions of dollars, except per share
amounts)
Net income 1
Basic earnings per share 1
Diluted earnings per share 1
2016
2015 % Chg
835
1,342
$1.62 $ 2.61
$1.62 $ 2.60
(38)
(38)
(38)
1 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12
Income Taxes, certain amounts have been retrospectively amended. See “Accounting
Policies” for more information.
ADJUSTED NET INCOME
Adjusted net income was marginally higher compared to 2015,
primarily as a result of higher adjusted operating profit and lower
finance costs, partially offset by higher other expense (income) and
higher income tax expense.
(In millions of dollars, except per share
amounts)
Adjusted operating profit 1
Deduct (add):
Depreciation and amortization
Finance costs 2
Other expense (income) 3
Income tax expense 4, 5
Adjusted net income 1
Years ended December 31
2016
2015 % Chg
5,092
5,032
1
2,276
761
40
534
2,277
767
(2)
511
1,481
1,479
–
(1)
n/m
5
–
–
–
Adjusted basic earnings per share 1
Adjusted diluted earnings per share 1
$ 2.88 $ 2.87
$ 2.86 $ 2.86
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
substitutes or alternatives 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 Finance costs exclude the $7 million loss on repayment of long-term debt for the year
ended December 31, 2015.
3 Other expense for 2016 excludes an $11 million net loss on divestitures pertaining to
investments and a $140 million loss on the wind down of our shomi joint venture. For
2015, other income excludes a $74 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 tax expense excludes the $213 million recovery (2015 – $40 million recovery)
for the year ended December 31, 2016 related to the income tax impact for adjusted
items. For 2016, income tax expense also excludes the $3 million expense (2015 –
$6 million expense) for the revaluation of deferred tax balances as a result of
legislative income tax rate changes.
5 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12
Income Taxes, certain amounts have been retrospectively amended. See “Accounting
Policies” for more information.
ADJUSTED NET INCOME
(IN MILLIONS OF DOLLARS)
2016
2015
2014
$1,481
$1,479
$1,532
EMPLOYEES
Employee salaries and benefits represent a material portion of our
expenses. As at December 31, 2016, we had approximately 25,200
employees (2015 – 26,200) across all of our operating groups,
including shared services and the corporate office. Total salaries
and benefits for full-time employees and part-time employees in
2016 were approximately $2,073 million (2015 – $1,975 million).
The increase was mainly a result of higher Toronto Blue Jays player
salaries and higher pension expenses.
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2015 FULL YEAR RESULTS COMPARED TO 2014
Revenue
Consolidated revenue increased by 4% in 2015, reflecting revenue
growth of 5% in Wireless and 14% in Media, while Cable revenue
was stable. Wireless revenue increased as a result of the continued
adoption of higher-postpaid-ARPA-generating Rogers Share
Everything plans, partially offset by the introduction of lower-priced
roaming plans. 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 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
Consolidated adjusted operating profit
increased in 2015 to
$5,032 million, reflecting increases in Media of $41 million, partially
offset by decreases in Business Solutions of $6 million. Wireless
adjusted operating profit decreased marginally as a result of higher
net unit costs for equipment and a greater number of upgrades,
partially offset by the continued adoption of higher-postpaid-
ARPA-generating service plans and higher equipment revenue.
Cable adjusted operating profit was stable in 2015 as a result of
higher investments in customer care, network, and customer value
enhancement-related costs, offset by various efficiency and
productivity initiatives. The decrease in Business Solutions was 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 improvements. Media adjusted operating
profit increased primarily as a result of the success of the Toronto
Blue Jays.
Net income and adjusted net income
Net
income increased to $1,342 million in 2015 from
$1,341 million in 2014 primarily as a result of lower restructuring,
acquisition and other costs, lower finance costs, lower income tax
expense, and higher other income, partially offset by higher
has been
depreciation
retrospectively amended as a result of the IFRS Interpretations
Committee’s agenda decision relating to IAS 12 Income Taxes. See
“Accounting Policies” for more information.
and amortization. Net
income
Adjusted net income decreased to $1,479 million in 2015 from
$1,532 million in 2014 as a result of higher depreciation and
amortization and higher other expense, partially offset by higher
adjusted operating profit and lower income tax expense. Adjusted
net income has been retrospectively amended as a result of the
IFRS Interpretations Committee’s agenda decision relating to
IAS 12 Income Taxes. See “Accounting Policies” for more
information.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 57
MANAGEMENT’S DISCUSSION AND ANALYSIS
QUARTERLY RESULTS
The table below shows our quarterly consolidated financial results and key performance indicators for 2016 and 2015.
QUARTERLY CONSOLIDATED FINANCIAL SUMMARY
2016
2015
(In millions of dollars, except per share amounts)
Full Year
Q4
Q3
Q2
Q1
Full Year
Q4
Q3
Q2
Q1
Revenue
Wireless
Cable
Business Solutions
Media
Corporate items and intercompany eliminations
7,916
3,449
384
2,146
(193)
2,058
858
96
550
(52)
2,037
865
95
533
(38)
1,931
870
97
615
(58)
1,890
856
96
448
(45)
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)
Total revenue
Adjusted operating profit (loss)
13,702
3,510
3,492
3,455
3,245
13,414
3,452
3,384
3,403
3,175
Wireless
Cable
Business Solutions
Media
Corporate items and intercompany eliminations
3,285
1,674
123
169
(159)
792
435
30
49
(47)
884
431
31
79
(40)
846
415
31
90
(35)
763
393
31
(49)
(37)
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)
Adjusted operating profit 1
Deduct (add):
Stock-based compensation
Depreciation and amortization
Impairment of assets and related onerous contract
charges
Restructuring, acquisition and other
Finance costs
Other expense (income) 2
Net income (loss) before income tax expense (recovery) 2
Income tax expense (recovery) 2
Net income (loss) 2
Earnings (loss) per share 2:
Basic
Diluted
Net income (loss) 2
Add (deduct):
Stock-based compensation
Restructuring, acquisition and other
Gain on acquisition of Mobilicity 2
Loss on non-controlling interest purchase obligation
Loss on repayment of long-term debt
Loss on wind down of shomi
Net loss (gain) on divestitures pertaining to investments
Impairment of assets and related onerous contract
charges
Income tax impact of above items 2
Income tax adjustment, legislative tax change
Adjusted net income 1, 2
Adjusted earnings per share 1, 2:
Basic
Diluted
Additions to property, plant and equipment
Cash provided by operating activities
Free cash flow 1
Total service revenue 3
5,092
1,259
1,385
1,347
1,101
5,032
1,226
1,345
1,337
1,124
61
2,276
484
160
761
191
1,159
324
835
16
555
484
34
188
(4)
(14)
(5)
(9)
18
575
–
55
188
220
329
109
220
15
572
–
27
189
9
535
141
394
12
574
–
44
196
(34)
309
79
230
55
2,277
–
111
774
(4)
1,819
477
1,342
16
580
–
23
192
4
411
112
299
13
576
–
37
190
(31)
560
135
425
14
562
–
42
182
26
511
148
363
12
559
–
9
210
(3)
337
82
255
$ 1.62 ($ 0.02) $ 0.43 $ 0.77 $ 0.45
$ 1.62 ($ 0.04) $ 0.43 $ 0.76 $ 0.44
$ 2.61 $ 0.58 $ 0.83 $ 0.70 $ 0.50
$ 2.60 $ 0.58 $ 0.82 $ 0.70 $ 0.48
(9)
220
394
230
1,342
299
425
363
255
16
34
–
–
–
–
–
18
55
–
–
–
140
50
–
(56)
–
15
27
–
–
–
–
–
–
(9)
–
12
44
–
–
–
–
(39)
–
(5)
3
55
111
(74)
72
7
–
–
–
(40)
6
16
23
–
–
–
–
–
–
(7)
–
13
37
(74)
72
–
–
–
–
(12)
–
14
42
–
–
–
–
–
–
(13)
6
12
9
–
–
7
–
–
–
(8)
–
484
(213)
3
484
(143)
–
1,481
382
427
427
245
1,479
331
461
412
275
$ 2.88 $ 0.74 $ 0.83 $ 0.83 $ 0.48
$ 2.86 $ 0.74 $ 0.83 $ 0.83 $ 0.47
552
598
220
3,085
2,352
3,957
1,705
13,027
647
1,121
495
3,308
549
1,185
598
3,328
604
1,053
392
3,306
$ 2.87 $ 0.64 $ 0.90 $ 0.80 $ 0.53
$ 2.86 $ 0.64 $ 0.89 $ 0.80 $ 0.53
475
227
266
3,048
2,440
3,747
1,676
12,649
621
1,114
476
3,204
571
1,456
660
3,183
773
950
274
3,214
835
61
160
–
–
–
140
11
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
substitutes or alternatives 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 a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See “Accounting
Policies” for more information.
3 As defined. See “Key Performance Indicators”.
58 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
FOURTH QUARTER 2016 RESULTS
Results commentary in “Fourth Quarter 2016 Results” compares
the fourth quarter of 2016 with the fourth quarter of 2015.
Higher revenue
Consolidated revenue increased 2% in the fourth quarter, largely
driven by Wireless service revenue growth of 6%.
Wireless service revenue increased 6% in the fourth quarter
primarily as a result of a larger subscriber base and the continued
adoption of higher-postpaid-ARPA-generating Rogers Share
Everything plans and the increase in data usage on these plans.
• higher handset sales as more consumers shift to smartphones;
and
• stable postpaid churn, which we believe is beginning to reflect
the realization of 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 and Fido Roam. Peak travel seasons typically impact
roaming usage and vary over the course of a calendar year.
Cable revenue increased marginally in the fourth quarter as strong
Internet revenue growth of 9% was largely offset by the decline in
Television and Phone revenue. We continue to see an ongoing
shift in product mix to higher-margin Internet services.
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
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Media revenue decreased 2% in the fourth quarter primarily as a
result of fewer postseason Toronto Blue Jays games compared to
last year, lower overall advertising revenue, and lower circulation
revenue within publishing, partially offset by higher sales at TSC.
Higher adjusted operating profit
Higher consolidated adjusted operating profit in the fourth quarter
reflects an increase in Wireless adjusted operating profit as a result
of the strong flow through of top line growth described above and
improved Cable performance due to the shift in product mix to
higher-margin Internet services.
Net loss and higher adjusted net income
The net loss of $9 million in the fourth quarter was primarily a result
of the $484 million impairment and other charges we recognized
related to the discontinued investment in our IPTV product. See
“Review of Consolidated Performance” for more information.
Adjusted net income increased in the fourth quarter as a result of
higher adjusted operating profit,
lower depreciation and
amortization, and lower finance costs, partially offset by higher
income tax expense.
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
reporting
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.
in each of our
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 tax expense.
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;
subscribers.
We continue to target organic growth in higher-value postpaid
subscribers. We have maintained a stable mix of postpaid and
prepaid subscribers. 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
time has resulted in higher costs for customer service,
over
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 third and fourth quarters typically
experience this activity as a result of “back to school” and holiday
season-related consumer behaviour. 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 revenue is dependent on customer travel volumes, which
is impacted by the value of the foreign exchange rate of the
Canadian dollar and general economic conditions.
Cable
The trends in Cable service 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; offset by
• competitive losses of Television 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.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 59
MANAGEMENT’S DISCUSSION AND ANALYSIS
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.
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 canceling 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
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, if and when the Toronto
Blue Jays play in the postseason; and
• programming and production costs and player payroll are
• the concentrated marketing we generally conduct in our fourth
expensed based on the number of games aired; and
quarter.
• the NHL season, where:
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
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:
• fluctuations in advertising and consumer market conditions;
• subscriber rate increases;
• higher sports and rights costs, including increases as we move
further along in our NHL Agreement; and
• continual investment in primetime and specialty programming
relating to both our broadcast networks (such as City) and our
specialty channels (such as FX (Canada)).
• 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). We expect a
correlation between the quality of revenue and earnings and
the extent of Canadian teams’ presence during the playoffs;
• programming and production costs are expensed based on
the timing of when the rights are aired or are expected to be
consumed; and
• advertising revenue and programming expenses
are
concentrated in the fall, winter, and spring months, with
playoff games commanding a premium in advertising
revenue.
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 depreciation
and amortization to be relatively stable for the next several years as
our additions to property, plant and equipment moderate and
certain intangible assets become fully amortized.
60 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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
2016
2015
$ Chg % Chg
Explanation of significant changes
–
1,949
315
215
11
1,792
318
303
(11)
157
(3)
(88)
See “Managing Our Liquidity and Financial Resources” for more information.
Reflects an increase in trade receivables driven by increased revenue.
(100)
9
(1) n/m
(29) Primarily reflects the reduction of a receivable pertaining to the divestiture of
Glentel’s international operations.
Current portion of derivative instruments
91
198
(107)
(54) Reflects changes in market values of debt derivatives and expenditure
derivatives primarily as a result of the difference between the year-end exchange
rate and the hedged rate on our outstanding derivatives, as well as the
settlement and maturity of certain derivatives discussed in “Financial Risk
Management”.
Total current assets
Property, plant and equipment
2,570
10,749
2,622
10,997
(52)
(248)
(2)
(2) Reflects the impairment of our IPTV-related assets as well as annual
depreciation, partially offset by additions to property, plant and equipment. See
“Additions to Property, Plant and Equipment” for more information.
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Intangible assets
Investments
7,130
2,174
7,243
2,271
(113)
(97)
Derivative instruments
Other long-term assets
Deferred tax assets
Goodwill 1
1,708
98
8
3,905
1,992
150
9
3,905
(284)
(52)
(1)
–
(2) Reflects amortization of intangible assets.
(4) Reflects lower carrying values as a result of certain divestitures and the wind
down of shomi, partially offset by fair value increases for publicly-traded
investments.
See “Current portion of derivative instruments” for more information.
(14)
(35) Reflects a reclassification of long-term receivables to current.
(11) n/m
n/m
–
Total assets
28,342
29,189
(847)
(3)
Liabilities and shareholders’ equity
Current liabilities:
Bank advances
Short-term borrowings
Accounts payable and accrued liabilities
71
800
2,783
–
800
2,708
71
–
75
Income tax payable
Current portion of provisions
186
134
96
10
90
124
n/m See “Managing Our Liquidity and Financial Resources” for more information.
–
3
94
n/m
Primarily reflects increased liabilities pertaining to onerous contract charges
recorded relating to our IPTV product and an overall increase in trade payables
as a result of the timing of payments made, partially offset by the reduction of a
payable pertaining to the divestiture of Glentel’s international operations.
Reflects the timing of tax installments.
n/m Primarily reflects a provision related to our share of remaining obligations
expected to be incurred in our shomi joint venture.
Unearned revenue
367
388
(21)
(5) Reflects a decrease pertaining to a loyalty program, partially offset by increases
Current portion of long-term debt
750
1,000
(250)
(25) Reflects the upcoming maturity of our $250 million and $500 million senior
in customer deposits at the Toronto Blue Jays.
Current portion of derivative instruments
22
15
7
47
notes in 2017, partially offset by the repayment of $1,000 million of senior notes
during the year.
Reflects changes in market values of equity and expenditure derivatives. See
“Financial Risk Management” for more information.
Total current liabilities
Provisions
Long-term debt
5,113
33
15,330
5,017
50
15,870
96
(17)
(540)
Derivative instruments
118
95
23
Other long-term liabilities
Deferred tax liabilities 1
Total liabilities
Shareholders’ equity 1
562
1,917
455
2,066
23,073
5,269
23,553
5,636
107
(149)
(480)
(367)
2
(34) n/m
24
(3) Primarily reflects revaluation from the appreciation of the Cdn$ relative to the
US$, the upcoming maturity of $750 million in senior notes in early 2017 that
are now classified as current, and a decrease in our credit facility borrowings.
See “Sources and Uses of Cash” for more information.
Reflects changes in market values of bond forwards and debt derivatives,
primarily as a result of the appreciation of the Cdn$ relative to the US$. See
“Financial Risk Management” for more information.
24
Reflects an increase in long-term pension obligations.
(7) Primarily reflects the reversal of certain temporary differences.
(2)
(7) Reflects changes in retained earnings and equity reserves.
Total liabilities and shareholders’ equity
28,342
29,189
(847)
(3)
1 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See “Accounting
Policies” for more information.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 61
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 items, 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:
Net repayments on short-term borrowings
Net (repayments) issuance of long-term debt
Net (repayments) proceeds on settlement of debt derivatives and forward contracts
Transaction costs incurred
Dividends paid
Other
Years ended December 31
2016
2015
4,994
14
5,008
(295)
(756)
3,957
(2,352)
(46)
(103)
–
45
(2,456)
–
(538)
(45)
(17)
(988)
5
(1,583)
(82)
11
(71)
5,004
(302)
4,702
(184)
(771)
3,747
(2,440)
(64)
(116)
(1,077)
(70)
(3,767)
(42)
754
129
(9)
(977)
–
(145)
(165)
176
11
Cash used in financing activities
Change in cash and cash equivalents
Cash and cash equivalents, beginning of year
(Bank advances) cash and cash equivalents, end of year
OPERATING ACTIVITIES
The 6% increase in cash provided by operating activities this year
was a result of higher net funding provided by non-cash working
capital and lower interest paid, partially offset by higher cash
income taxes paid.
INVESTING ACTIVITIES
Additions to property, plant and equipment
We spent $2,352 million this year on property, plant and
equipment before related changes in non-cash working capital
items, which was 4% lower than 2015. See “Additions to Property,
Plant and Equipment” for more information.
Acquisitions and other strategic transactions
Expenditures in 2015 included $129 million for the acquisition of
our 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,
and certain dealer stores.
62 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
FINANCING ACTIVITIES
Accounts receivable securitization
Below is a summary of
receivable securitization program for the quarter and year to date:
the activity relating to our accounts
(In millions of dollars)
Short-term borrowings
Proceeds received on short-term
borrowings
Repayment of short-term
borrowings
Net repayments on short-term
borrowings
Years ended December 31
2016
2015
295
294
(295)
(336)
–
(42)
total
funding under
the
As at December 31, 2016, our
securitization program was $800 million (2015 – $800 million) and
the program was committed to fund up to a maximum of
$1,050 million (2015 – $1,050 million). In July 2016, we amended
the terms of the accounts receivable securitization program to,
among other things, extend the expiry date from January 1, 2018
to January 1, 2019.
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
financial position and the funding received is recorded as
of
short-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 and letter of credit facilities
In April 2015, we borrowed the full amount of a new $1.0 billion
bank credit facility (non-revolving credit facility) that 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 2018 with no scheduled principal repayments prior
to maturity. In December 2015, we amended our non-revolving
bank credit facility to allow partial, temporary repayment from
December 2015 through May 2016; the maximum credit limit
remained $1.0 billion. As a result of repayments made during the
year, we reduced the amount of borrowings available under our
non-revolving credit facility from $1.0 billion to $301 million. The
interest rate charged on borrowings under the non-revolving credit
facility falls within the range of pricing indicated for our revolving
credit facility.
Below is a summary of the activity relating to our revolving and
non-revolving bank credit facilities for 2015 and 2016:
Year ended December 31, 2016
(In millions of dollars, except
exchange rates)
Notional
(US$)
Exchange
rate
Notional
(Cdn$)
Issuance of US dollar long-term
debt
2,188
1.31
2,877
Issuance of Canadian dollar
long-term debt
Total long-term debt issued
Repayment of US dollar long-
1,140
4,017
term debt
(2,038)
1.32
(2,686)
Repayment of Canadian dollar
long-term debt
Total long-term debt repaid
(1,540)
(4,226)
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Year ended December 31, 2015
(In millions of dollars, except
exchange rates)
Notional
(US$)
Exchange
rate
Notional
(Cdn$)
Issuance of Canadian dollar
long-term debt
Repayment of Canadian dollar
long-term debt
–
–
–
–
6,025
(5,525)
As at December 31, 2016, we had $301 million ($100 million and
US$150 million) of borrowings outstanding under our revolving
and non-revolving credit facilities (2015 – $500 million). Certain
funds were borrowed in US dollars to take advantage of a
favourable interest
rate spread; we have entered into debt
derivatives related to these borrowings to convert all the interest
and principal payment obligations to Canadian dollars. See
“Financial Risk Management” for more information.
As at December 31, 2016, we had available liquidity under our
bank credit facilities of $2.4 billion, as illustrated below. Each of
these facilities is unsecured and guaranteed by RCCI and ranks
equally with all of our senior notes and debentures.
(In millions of dollars)
Total revolving & non-revolving credit and
letter of credit facilities
Add (deduct):
Outstanding letters of credit
Borrowings
Bank advances
As at December 31
2016
2015
2,860
3,568
(68)
(301)
(71)
(68)
(500)
–
Available liquidity – bank credit facilities
2,420
3,000
Effective April 1, 2016, we amended our $2.5 billion revolving credit
facility to, among other things, extend the maturity date from
July 2019 to September 2020. At the same time, we also amended
the $1.0 billion non-revolving credit facility to, among other things,
extend the maturity date from April 2017 to April 2018.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 63
MANAGEMENT’S DISCUSSION AND ANALYSIS
Issuance of senior notes and related debt derivatives
The table below provides a summary of the senior notes we issued during 2016 and 2015, with the proceeds used to repay outstanding
advances under our credit facilities and for general corporate purposes.
(In millions of dollars, except interest rates and discounts)
Date Issued
2016 issuances
Principal
amount
Due
date
Interest
rate
Discount/premium
at issuance
Total gross
proceeds 1
(Cdn$)
Transaction costs
and discounts 2
(Cdn$)
November 4, 2016
US
500
2026
2.900%
98.354%
671
2015 issuances
December 8, 2015
December 8, 2015
Total for 2015
US
US
700
300
2025
2044
3.625%
5.000%
99.252%
101.700%
937
401
1,338
17
13
1 Gross proceeds before transaction costs, discounts, and premiums.
2 Transaction costs, discounts, and premiums are included as deferred transaction costs and discounts in the carrying value of the long-term debt, and recognized in net income
using the effective interest method.
The 2016 and 2015 senior notes were issued pursuant to public
offerings in the US.
Concurrent with the 2016 and 2015 issuances, we entered into
debt derivatives to convert all
interest and principal payment
obligations to Canadian dollars. See “Financial Risk Management”
for more information.
All the notes issued are unsecured and guaranteed by RCCI,
ranking equally with all of our other unsecured senior notes and
debentures, bank credit facilities, and letter of credit facilities.
Repayment of senior notes and related derivative settlements
The table below provides a summary of the repayment of our
senior notes during 2016 and 2015.
(In millions of dollars)
Maturity date
2016 repayments
May 26, 2016
2015 repayments
March 15, 2015
March 15, 2015
Total for 2015
Notional amount
(US$)
Notional amount
(Cdn$)
–
550
280
830
1,000
702
357
1,059
There were no debt derivatives associated with the 2016
repayment. The associated debt derivatives
the 2015
repayments were settled at maturity. See “Financial Risk
Management” for more information.
for
WEIGHTED AVERAGE COST OF BORROWINGS
(%)
2016
2015
2014
4.72%
4.82%
5.20%
64 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
RATIO OF ADJUSTED NET DEBT / ADJUSTED OPERATING PROFIT
2016
2015
2014
3.0x
3.1x
2.9x
Dividends
In 2016, we declared and paid dividends on each of our
outstanding Class A Voting and Class B Non-Voting shares. We
paid $988 million in cash dividends, an increase of $11 million from
2015. 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 will expire in April 2018. In November 2016, we
issued US$500 million ($671 million) of debt securities under the
US Shelf.
Dissolution of RCP
As a result of the dissolution of RCP on January 1, 2016, 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. Effective January 1, 2016,
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. See
“Understanding Our Business” and “Summary of Financial Results
of Long-Term Debt Guarantor” for more information.
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FREE CASH FLOW
(In millions of dollars)
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
Years ended December 31
2016
2015 % Chg
5,092
5,032
1
2,352
2,440
(4)
740
295
732
184
1,705
1,676
1
60
2
1 Adjusted operating profit and free cash flow are non-GAAP measures and should not
be considered as substitutes or alternatives 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 Additions to property, plant and equipment do not
include expenditures for
spectrum licences.
3 Cash income taxes are net of refunds received.
The 2% increase in free cash flow this year was primarily a result of:
• higher adjusted operating profit; and
• lower additions to property, plant and equipment; partially offset
by
• higher cash income tax payments as a result of applying
losses from the Mobilicity transaction during the
non-capital
same period in 2015.
FREE CASH FLOW
(IN MILLIONS OF DOLLARS)
2016
2015
2014
$1,705
$1,676
$1,437
FINANCIAL CONDITION
LIQUIDITY
(In millions of dollars)
Cash and cash equivalents
Bank credit facilities
Accounts receivable securitization program
Total available liquidity
As at December 31
2016
2015
–
2,420
250
11
3,000
250
2,670
3,261
In addition to the noted sources of available liquidity, we held
$1,047 million of marketable securities
in publicly-traded
companies as at December 31, 2016 (2015 – $966 million).
Weighted average cost of borrowings
Our borrowings had a weighted average cost of 4.72% as at
December 31, 2016 (2015 – 4.82%) and a weighted average term
to maturity of 10.6 years (2015 – 10.8 years). This comparatively
favourable decline in our 2016 weighted average interest rate
reflects the combined effects of:
• greater utilization of our bank credit facilities;
• our issuance of senior notes in November 2016 at comparatively
lower interest rates; and
• the scheduled repayments and repurchases of comparatively
more expensive senior notes made in March 2015 and
May 2016.
COVENANTS
The provisions of our $2.5 billion revolving and $301 million
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,
2016 and 2015, we were in compliance with all financial covenants,
financial ratios, and all of the terms and conditions of our debt
agreements. Throughout 2016, 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
issues. As at
Service (Moody’s)
December 31, 2016, the credit ratings on RCI’s outstanding senior
notes and debentures were as follows:
• Standard & Poor’s affirmed RCI’s senior unsecured debt at BBB+
to rate our public debt
with a stable outlook;
• Fitch affirmed its BBB+ rating with a stable 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, 2016:
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 stable outlook
BBB+ with a stable outlook
Baa1 with a stable outlook
Baa1 with a 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
securities
rated,
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).
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 65
MANAGEMENT’S DISCUSSION AND ANALYSIS
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
2016
2015
2014
6.7x
6.6x
6.4x
PENSION OBLIGATIONS
Our retiree pension plans had a funding deficit of approximately
$387 million as at December 31, 2016 (2015 – $281 million).
During 2016, our
increased by $106 million
primarily as a result of a decrease in the discount rate we used to
measure these obligations and increased participation in our
defined benefit pension plan prior to its closure to new members
in 2016.
funding deficit
We made a total of $125 million (2015 – $118 million) of
contributions to our pension plans. We expect our total estimated
FINANCIAL RISK MANAGEMENT
funding requirements to be $144 million in 2017 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 “Accounting Policies” for more information.
to
manage the rising cost of our pension plans, effective June 30,
2016, the Rogers Defined Benefit Pension Plan was closed to new
enrolment. Beginning July 1, 2016, employees not participating in
the Rogers Defined Benefit Pension Plan became eligible for
enrolment into a new Defined Contribution Pension Plan.
In order
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 2016 or 2015, and the pension plans did not
purchase additional annuities.
We use derivative instruments from time to time to manage risks related to our business activities, summarized as follows:
Derivative
Debt derivatives
Bond forwards
Expenditure derivatives
The risk they manage
Types of derivative instruments
• 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-
• Total return swap agreements
based compensation expense
We also manage our exposure to fluctuating interest rates and we
have fixed the interest rate on 91.2% (2015 – 90.3%) of our debt,
including short-term borrowings, as at December 31, 2016.
FIXED AND FLOATING DEBT AS A PERCENTAGE OF TOTAL BORROWINGS
(%)
$15.4
Billion
FIXED 91.2%
FLOATING 8.8%
We designate the debt derivatives related to our senior notes and
debentures as hedges for accounting purposes against the foreign
exchange risk associated with specific debt instruments. We do not
designate the debt derivatives related to our credit
facility
borrowings as hedges for accounting purposes. Our bond
forwards and expenditure derivatives are also designated as
hedges for accounting purposes.
66 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
DEBT DERIVATIVES
We use cross-currency interest rate exchange agreements (debt
derivatives) to hedge the foreign exchange risk on all of the interest
and principal payment obligations of our US dollar-denominated
senior notes and debentures.
New debt derivatives to hedge new senior notes issued
US
Hedging effect
(In millions of dollars,
except interest rates)
Effective date
Principal/
Notional
amount
(US$)
Maturity
date
Coupon
rate
Fixed
hedged
Cdn$
interest
rate 1
November 4, 2016
500
2026 2.900% 2.834%
December 8, 2015
December 8, 2015
700
300
2025 3.625% 3.566%
2044 5.000% 5.145%
Equivalent
(Cdn$)
671
937
401
As at December 31, 2016, we had US$6.7 billion of US dollar-
denominated senior notes and debentures, all of which were
hedged using debt derivatives.
(In millions of dollars, except exchange rates,
percentages, and years)
US dollar-denominated long-term debt 1
Hedged with debt derivatives
Hedged exchange rate
Percent hedged 2
Amount of borrowings at fixed rates 3
Total borrowings
Total borrowings at fixed rates
Percent of borrowings at fixed rates
Weighted average interest rate on
borrowings
Weighted average term to maturity
As at December 31
2016
2015
US$
US$
6,700 US$
6,700 US$
1.1070
100.0%
$
$
15,418 $
14,067 $
91.2%
6,200
6,200
1.0882
100.0%
15,947
14,397
90.3%
4.72%
10.6 years
4.82%
10.8 years
1 Converting from a fixed US$ coupon rate to a weighted average Cdn$ fixed rate.
1 US dollar-denominated long-term debt reflects the hedged exchange rate and the
hedged interest rate.
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Matured debt derivatives
(In millions of dollars)
Maturity date
March 15, 2015
March 15, 2015
Total
Notional amount
(US$)
Net cash
(proceeds) settlement
(Cdn$)
550
280
830
(106)
(48)
(154)
During the year, we entered into debt derivatives related to our
credit facility borrowings as a result of a favourable interest rate
spread obtained from borrowing funds in US dollars. We used
these derivatives to offset the foreign exchange and interest rate
risk on our US dollar-denominated credit facility borrowings. As a
result of the short-term nature of these debt derivatives related to
our credit facility borrowings, we have not designated them as
hedges for accounting purposes.
During 2016, we entered into and settled debt derivatives related
to our credit facility borrowings as follows:
Year ended December 31, 2016
(In millions of dollars, except exchange
rates)
Notional
(US$)
Exchange
rate
Notional
(Cdn$)
Debt derivatives entered
Debt derivatives settled
Net cash received
8,683
8,533
1.31
1.31
11,360
11,159
8
We did not enter into any debt derivatives related to our credit
facility borrowings during 2015.
2 Pursuant
to the requirements for hedge accounting under
IAS 39, Financial
Instruments: Recognition and Measurement, on December 31, 2016, and
December 31, 2015, RCI accounted for 100% of its debt derivatives as hedges
against designated US dollar-denominated debt. As a result, on December 31, 2016
and 2015, 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.
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, 2016,
approximately $5.9 billion of our outstanding public debt matures
over the next five years (2015 – $5.5 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 November 4, 2016, we exercised a $500 million notional bond
forward due January 4, 2017 in relation to the issuance of the
US$500 million senior notes due 2026 and paid $53 million to
settle the derivative. The amount paid represents the fair value of
the bond forward at the time of settlement and will be recycled into
finance costs from the hedging reserve using the effective interest
rate method over the life of the US$500 million senior notes due
2026.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 67
MANAGEMENT’S DISCUSSION AND ANALYSIS
On December 8, 2015, we exercised a $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 recycled into
finance costs from the hedging reserve using the effective interest
rate method over the life of the US$700 million senior notes due
2025.
As at December 31, 2016 we had $900 million notional amount of bond forwards outstanding (2015 – $1,400 million), 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, 2016
Hedged GoC
interest rate as at
December 31, 2015 1
10
10
30
Total
December 2014
December 2014
December 2014
January 4, 2017
April 30, 2018
December 31, 2018
500
500
400
1,400
–
2.52%
2.62%
2.34%
2.23%
2.52%
2016
2015
–
500
400
900
500
500
400
1,400
1 Bond forwards with maturity dates beyond December 31, 2016 are subject to GoC rate re-setting from time to time. The $500 million due April 2018 was extended in April 2016
to reset in April 2017. The $400 million due December 2018 was extended in December 2016 to reset in January 2018.
EXPENDITURE DERIVATIVES
We use foreign currency forward contracts (expenditure derivatives)
to hedge the foreign exchange risk on the notional amount of certain
forecasted US dollar-denominated expenditures. The table below
shows the expenditure derivatives into which we entered to manage
foreign exchange risk related to certain forecasted expenditures.
(In millions of dollars, except exchange rates)
Expenditure derivatives entered
Expenditure derivatives settled
Year ended December 31, 2016
Year ended December 31, 2015
Notional
(US$)
Exchange
rate
Notional
(Cdn$)
Notional
(US$)
Exchange
rate
Notional
(Cdn$)
990
840
1.33
1.22
1,318
1,025
990
810
1.28
1.11
1,266
902
The expenditure derivatives noted above have been designated as
hedges for accounting purposes.
As at December 31, 2016, we had US$1,290 million of expenditure
derivatives outstanding (2015 – US$1,140 million), at an average
rate of $1.32/US$ (2015 – $1.24/US$), with terms to maturity
ranging from January 2017 to December 2018 (2015 – January
2016 to December 2017). Our outstanding expenditure derivatives
maturing in 2017 are hedged at an average exchange rate of
$1.33/US$.
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, 2016, we had equity derivatives for 5.4 million RCI
Class B shares with a weighted average price of $50.30. 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
compensation liability
stock-based compensation
programs. In April 2016, we executed extension agreements for
each of our equity derivative contracts under substantially the same
terms and conditions with revised expiry dates to April 2017 (from
April 2016).
for our
In August 2016, we settled 0.3 million equity derivatives at a
weighted average price of $58.16 as a result of a reduction in the
number of share-based compensation units outstanding.
68 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
MARK-TO-MARKET VALUE
We record our derivatives using an estimated credit-adjusted,
mark-to-market valuation, calculated in accordance with IFRS.
As at December 31, 2016
Notional
amount
(US$)
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
5,200
1,500
1.0401
1.3388
5,409
2,008
1,751
(68)
Short-term debt derivatives not
accounted for as hedges:
As liabilities
150
1.3407
201
–
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 derivative assets or liabilities, short-term
borrowings, and cash and cash equivalents.
(In millions of dollars, except ratios)
2016
2015
As at December 31
Long-term debt 1
Net debt derivative assets valued without
any adjustment for credit risk
Short-term borrowings
Bank advances (cash and cash equivalents)
1,683
Adjusted net debt 2
Adjusted net debt / adjusted operating
900
(51)
profit 2,3
16,197
16,981
(1,740)
800
71
(2,180)
800
(11)
15,328
15,590
3.0
3.1
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Net mark-to-market debt
derivative asset
Bond forwards accounted for
as cash flow hedges:
As liabilities
Expenditure derivatives
accounted for as cash flow
hedges:
As assets
As liabilities
Net mark-to-market
expenditure derivative asset
Equity derivatives not
accounted for as hedges:
As assets
Net mark-to-market asset
(In millions of dollars, except
exchange rates)
Debt derivatives accounted for
as cash flow hedges:
990
300
1.2967
1.4129
1,284
424
40
(21)
19
1 Includes current and long-term portion of
long-term debt before deferred
transaction costs and discounts. See “Reconciliation of adjusted net debt” in the
section “Non-GAAP Measures” for the calculation of this amount.
2 Adjusted net debt and adjusted net debt / adjusted operating profit are non-GAAP
measures and should not be considered substitutes or alternatives 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 Adjusted net debt / adjusted operating profit is measured using adjusted operating
profit for the last twelve consecutive months.
270
8
1,659
As at December 31, 2015
Notional
amount
(US$)
Exchange
rate
Notional
amount
(Cdn$)
Fair
value
(Cdn$)
In addition to the cash and cash equivalents as at December 31,
2016 and December 31, 2015 noted above, we held
$1,047 million of marketable securities
in publicly-traded
companies (2015 – $966 million).
Our adjusted net debt decreased by $0.26 billion from
December 31, 2015 primarily as a result of a decrease in our
outstanding long-term debt, partially offset by a reduction in the
fair value of our net debt derivative asset. See “Overview of Financial
Position” for more information.
As assets
As liabilities
5,900
300
1.0755
1.3367
6,345
401
2,032
(4)
Net mark-to-market debt
derivative asset
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
Net mark-to-market asset
–
–
286
(15)
2,080
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 69
MANAGEMENT’S DISCUSSION AND ANALYSIS
DIVIDENDS AND SHARE INFORMATION
DIVIDENDS
The table below shows when dividends have been declared and paid on both classes of our shares:
Declaration date
Record date
January 27, 2016
April 18, 2016
August 11, 2016
October 20, 2016
January 28, 2015
April 21, 2015
August 13, 2015
October 22, 2015
March 13, 2016
June 12, 2016
September 11, 2016
December 12, 2016
March 13, 2015
June 12, 2015
September 11, 2015
December 11, 2015
Payment date
April 1, 2016
July 4, 2016
October 3, 2016
January 3, 2017
April 1, 2015
July 2, 2015
October 1, 2015
January 4, 2016
Dividend per
share (dollars)
Dividends paid
(in millions of dollars)
0.48
0.48
0.48
0.48
0.48
0.48
0.48
0.48
247
247
247
247
248
247
247
247
In January 2017, the Board declared a quarterly dividend of $0.48
per Class A Voting share and Class B Non-Voting share, to be paid
on April 3, 2017, to shareholders of record on March 13, 2017.
We currently expect that the remaining record and payment dates
for the 2017 declaration of dividends will be as follows, subject to
the declaration by our Board each quarter at its sole discretion:
Record date
June 12, 2017
September 15, 2017
December 11, 2017
Payment date
July 4, 2017
October 3, 2017
January 2, 2018
We use the weighted average number of shares outstanding to
calculate earnings per share and adjusted earnings per share.
Years ended December 31
(Number of shares in millions)
2016
2015
Basic weighted average number of
shares outstanding
Diluted weighted average number of
shares outstanding
515
517
515
517
ANNUALIZED DIVIDENDS PER SHARE
($)
$1.92
$1.92
$1.83
OUTSTANDING COMMON SHARES
As at December 31
2016
2015
2016
2015
2014
Common shares outstanding 1
Class A Voting
Class B Non-Voting
112,411,992 112,438,692
402,396,133 402,307,976
Total common shares
514,808,125 514,746,668
Options to purchase Class B
Non-Voting shares
Outstanding options
Outstanding options
exercisable
3,732,524
4,873,940
1,770,784
2,457,005
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.
70 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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COMMITMENTS AND CONTRACTUAL OBLIGATIONS
CONTRACTUAL OBLIGATIONS
The table below shows a summary of our obligations under firm contractual arrangements as at December 31, 2016. See notes 3, 21, and
28 to our 2016 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
750
727
–
9
–
159
161
422
73
93
510
–
3,704
–
3,081
1,294
(445)
15
(51)
235
165
359
110
108
1,083
12
5,966
–
2,350
1,033
–
–
–
109
18
153
31
32
1,067
3
4,796
After
5 Years
–
10,016
5,832
(1,134)
–
–
94
–
105
27
–
2,421
3
17,364
Total
800
16,197
8,886
(1,579)
24
(51)
597
344
1,039
241
233
5,081
18
31,830
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 27 to our 2016 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 Contractual Obligations” and note 28 to our 2016 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.
Voting control of Rogers Communications Inc. is held by a trust, the
beneficiaries of which are members of the Rogers family. The trust
holds voting control of Rogers Communications for the benefit of
the Rogers family via the trust’s
successive generations of
ownership of 91% of the outstanding Class A Voting shares of the
Company (2015 – 91%). The Rogers family are substantial
stakeholders and owned approximately 27% of our equity as at
December 31, 2016 (2015 – 28%) through its ownership of a
combined total of 141 million Class A Voting and Class B
Non-Voting shares (2015 – 142 million).
Our Board is made up of four members of the Rogers family and
another 10 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:
• independent lead director;
• formal corporate governance policy and charters;
• code of business conduct and whistleblower hotline;
• director share ownership guidelines;
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 71
MANAGEMENT’S DISCUSSION AND ANALYSIS
• 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;
• director material relationship standards; and
• separation of CEO and chairman roles (except for the interim
period where the Chairman acts as the interim CEO until a
successor CEO is appointed).
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 used to manage 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 at February 9, 2017
Chair
Member
Alan D. Horn, CPA, CA
Charles Sirois
C. William D. Birchall
Bonnie R. Brooks
Robert K. Burgess
John H. Clappison, FCPA, FCA
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
72 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
SOCIAL RESPONSIBILITY
CORPORATE SOCIAL RESPONSIBILITY
Rogers prides itself on being a good corporate citizen. Our
stakeholders want to deal with a company they feel is ethical and
transparent, and that means putting programs in place that have
societal, economic, and environmental benefits.
Our material aspects, 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 strategy. We are committed to an improved
customer experience and have implemented programs to
address customer issues.
• 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. Focusing on innovation
and network leadership continues to be a key priority under our
strategy.
• Product Responsibility: We have programs and policies in place
to manage a range of product responsibility issues. For instance,
we comply with all relevant safety regulations and codes, have
programs and teams to manage and advise on our accessibility
offerings, and operate stewardship programs to manage the
proper disposal and recycling of our used products, including
Rogers Trade-Up and FidoTrade.
• Customer Privacy: Rogers highly values the security, integrity, and
sensitivity of our customers’ private information. Rogers’ Privacy
Policy outlines our responsibilities and practices regarding the
protection of the personal information of our employees and
customers. Our Chief Privacy Officer oversees our compliance
with this policy and all applicable laws, and responds to requests
from law enforcement for customer data.
Employee experience
• Talent Management: With the launch of our strategy in 2014, we
emphasized “Invest In and Develop Our People” as one of our
key strategic priorities. We want to attract, develop, and engage
the best talent in Canada. We have increased our investment in
employee programs including an onboarding program, new
training programs, a new development planning program, and a
revised employee engagement survey. We are also changing
the way our employees work in order to foster collaboration
across the organization. Our Chief Human Resources Officer
oversees talent management, while the Human Resources
Committee assists the Board in monitoring, reviewing, and
approving compensation and benefit policies and practices.
• Inclusion and Diversity: 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. Our Inclusion and Diversity Council, comprised of
leaders from across the business, 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
minimize potential hazards. We continually monitor
those
practices, our sites, and our work to ensure employees remain
safe.
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
by 2025, reflected in our company-wide reduction targets of
25% and 10%, respectively, based on 2011 levels.
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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,
to reduce their paper
and encourage our employees
consumption. We promote the benefits of e-billing to our
customers, which help to reduce both paper and energy usage.
In addition, our transition to digital media formats, such as
reduce our paper
Texture by Next
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 the
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, targeting to commit at least 1% of our net
earnings before taxes each year to charities and non-profit
In 2016, Rogers provided approximately
organizations.
$60 million in cash and in-kind donations to support various
organizations and causes. 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
to rent-
Success program provides broadband Internet
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 73
MANAGEMENT’S DISCUSSION AND ANALYSIS
subsidized tenants within partnered non-profit organizations and
housing providers. Up to 150,000 Canadian households are
eligible for Internet access through the Connected for Success
program, giving them the tools and resources needed to
experience the benefits of connectivity.
Economy and society
• Economic Performance: We strive to offer innovative solutions for
customers, create diverse and well-paying jobs, support small
taxes, and deliver robust
businesses, pay our fair share of
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.
socially
and environmentally
• 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
ethics,
rights, health and safety, environment, and
management systems. In early 2016, we joined the Joint Audit
Cooperation (JAC), a group of global telecom companies that
share common suppliers. Through our participation in JAC, we
share audit results among our peers to ensure that our suppliers
adhere to internationally
chain and
sustainability standards. Rogers was the first Canadian company
to join JAC, and we began our first audits in 2016.
recognized supply
labour
• 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
governments and regulators at the federal
level through our
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 information about our social and
environmental 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
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.
Income tax payments
Rogers’ total income tax expense of $324 million in 2016 is close to
the expense computed on its accounting income at the statutory
rate of 26.6%. Cash income tax payments totaled $295 million in
2016. 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 is generally lower than
our tax expense primarily as a result of the significant capital
investment we continue to make in our wireless and broadband
telecommunications networks 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 purposes more quickly than they are depreciated for
financial statement recognition purposes. In 2015, our cash income
taxes were further reduced by the utilization of loss carryforwards
from the acquisition of Mobilicity.
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 25,200 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 2016 was approximately $998 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
295
9
133
511
50
998
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
$1,809 million in sales taxes on our products and services and
$545 million in employee payroll taxes.
to optimize trade-offs between risk and return to maximize value to
the organization.
RISK MANAGEMENT
We are committed to continually
risk
management capabilities to protect and enhance shareholder
value. The purpose of risk management is not to eliminate risk but
strengthening our
RISK GOVERNANCE
risk governance and
responsibility for
The Board has overall
oversees management in identifying the principal risks we face in
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.
74 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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;
• 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 (ERM) 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.
ERM is the second line of defence. ERM helps management
identify the top risks to meeting our business objectives, our risk
appetite, and emerging risks. At the business unit and department
level, ERM works with management to provide governance and
advice in managing the key risks and associated controls to
mitigate these risks. ERM works with Internal Audit to monitor the
adequacy and effectiveness of the controls to reduce risks to an
acceptable level.
ERM carries out an annual strategic risk assessment to identify our
principal risks to achieving our corporate objectives by identifying
corporate-, business unit- and department-level risks and aligning
business unit and department objectives to the corporate
objectives. Using an aggregate approach, ERM identifies the top
impact on our ability to achieve our
risks and their potential
corporate objectives. This assessment
includes reviewing risk
reports, audit reports, and industry benchmarks and interviewing
senior management with business unit
and department
accountability. ERM 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 governance
the design and operational effectiveness of
program, internal controls, and risk management. Risks, controls,
and mitigation plans
identified through this process are
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.
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The Executive Leadership Team and the Audit and Risk Committee
are responsible for approving our enterprise risk policies. Our ERM
methodology and policies
rely on the expertise of our
management and employees to identify risks and opportunities
and implement risk mitigation strategies as required.
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
and is affected by the strength of the economy.
Poor economic conditions can also have an impact on our pension
plans as 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, requiring us to make contributions in the
future that differ significantly from current contributions and
assumptions being used in the actuarial valuation process.
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, as
we may need to extend lower wireless pricing offers to attract new
customers and retain existing subscribers. As wireless penetration
of the population deepens, new wireless customers may generate
lower average monthly revenue, which could slow revenue growth.
Wireless could face increased competition due to recent changes
to foreign ownership rules 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
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 75
MANAGEMENT’S DISCUSSION AND ANALYSIS
• 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,
could make it harder for incumbent wireless carriers to acquire
additional
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.
legislation
spectrum.
The
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.
Management has committed to an information and cybersecurity
program designed to reinforce the importance of remaining a
secure, vigilant, and resilient organization. Our ongoing success
depends on protecting our sensitive data,
including personal
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 threat intelligence, internal
monitoring, reviewing best practices, and implementing controls as
required to mitigate cybersecurity risks. We have insurance
related to cybersecurity
coverage against certain damages
breaches, intrusions, and attacks, amongst other things. The Audit
and Risk Committee is responsible for overseeing management’s
policies and associated procedures related to cyber security risks.
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
76 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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 IT 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 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.
Most of our employees and critical elements of our network
infrastructure and IT systems are concentrated in various physical
facilities. If we cannot access one or more of these facilities as a
result 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.
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 control access
to programming based on subscription
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,
subscription
including
video-on-demand, and Internet
service revenue may both
decrease, which could result in a decline in our Cable revenue.
premium video-on-demand
and
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.
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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
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 as viewers can skip advertising aired on the
television networks. The continued emergence and growth of
subscriber-based satellite and digital radio products could affect
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.
Regulatory changes or decisions made by these regulators could
adversely impact our
results on a consolidated basis. This
regulation relates to, among other things, licensing 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
in other
the costs of providing
In addition,
communications systems.
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.
to acquire an interest
Generally, our licences are granted for a specified term and are
subject to conditions on the maintenance of these licences. These
licensing 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
violated, we would be subject
to various penalties, possibly
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
including providing
deploy new services on a timely basis,
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 Canadian 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
(excluding enterprise plans) entered into or
renewed after
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”
laws,
Our Wireless business could be adversely affected if
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 personal communications service (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
requirements and
notifying the public and addressing local
concerns. Certain types of antenna installations are excluded from
the consultation requirements with local authorities and the public.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 77
MANAGEMENT’S DISCUSSION AND ANALYSIS
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
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
(Canada)
(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 Telecommunications Act
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.
CRTC LICENCE RENEWALS
In November 2016, the CRTC held hearings to consider the
renewal of many of our CRTC licences that permit us to operate
many of our Media television properties. These licences expire on
August 31, 2017. The CRTC has not yet issued its decision to renew
these licences. If any of these licences are not renewed, or are
renewed on terms that are adverse to our business plans, it could
have a significant negative impact on our results of operations. See
“Regulation in Our Industry” for more information.
BUSINESS RISKS
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.
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.
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
network and IT functions, and invoice printing.
Interruptions in
these services could adversely affect our ability to service our
customers.
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 or
missed opportunities.
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.
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
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.
78 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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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.
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
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.
If
Apple has introduced soft Subscriber Identification Module (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.
Increased competition for
programming rights to content and popular properties from both
traditional
linear 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.
the
and
unbundling
environment.
operating
package
CHANNEL UNBUNDLING
Recent CRTC regulatory decisions have been unfavourable to
certain of our Media television properties and have resulted in a
CRTC-mandated
challenging
programming
required
flexible channel packaging by BDUs could
implementation of
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), G4
Canada, and VICELAND. Certain channels are currently included in
favourable channel packaging with many 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.
DECLINE OF PAY TELEVISION SUBSCRIBERS IN CANADA
The number of pay television households in Canada continues to
decline. Other video offerings available to consumers (for example,
direct-to-consumer subscription and free services), as well as piracy,
have contributed to this trend. If this decline continues, it could
have a material adverse effect on our results of operations.
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
platforms, such as search engines, social networks, and digital
content alternatives, has resulted in advertising dollars migrating
from conventional television broadcasters to digital platforms. The
impact is greater on conventional over-the-air broadcast networks,
such as City 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 shifting 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. Our radio, television, and magazine
properties may not continue performing how they currently
perform. 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.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 79
MANAGEMENT’S DISCUSSION AND ANALYSIS
FINANCIAL RISKS
LITIGATION 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.
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.
80 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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 the plaintiffs took no active steps. The
appeal courts in several provinces dismissed the corresponding
claims as an abuse of process. The claims in all provinces other than
Saskatchewan have now been dismissed or discontinued. 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 certifying the
proceeding as a national class action in Saskatchewan. We have not
recognized a liability for this contingency.
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
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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.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
Management
adequate internal controls over financial reporting.
is responsible for establishing and maintaining
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
financial
adverse effect on our business,
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
results, or
financial
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 at December 31, 2016, private, Rogers family holding
companies controlled by the trust owned approximately 91% of
our outstanding Class A Voting shares (2015 – 91%) and
approximately 10% of our Class B Non-Voting shares (2015 – 10%),
or in total approximately 27% of the total shares outstanding
(2015 – 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 at
December 31, 2016, under
the supervision and with the
participation of our management, including the Chief Executive
Officer and Chief Financial Officer, pursuant
to Rule 13a-15
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 IFRS as issued by
the IASB. 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 at December 31, 2016, 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 at December 31, 2016, 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 2016 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 2016 that materially affected, or are
reasonably likely to materially affect, our internal controls over
financial reporting.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 81
MANAGEMENT’S DISCUSSION AND ANALYSIS
Regulation In Our Industry
Our business, except
Media, is regulated by two groups:
• Innovation, Science and Economic Development Canada (ISED
Canada) on behalf of the Minister of Innovation, Science and
Economic Development; and
for the non-broadcasting operations of
• the CRTC, under
the Telecommunications Act and the
Broadcasting Act (Canada) (Broadcasting 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;
• 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
CANADIAN BROADCASTING AND
TELECOMMUNICATIONS OPERATIONS
Our
telecommunications
operations – including our cable television systems, radio and
television stations, and specialty services – are licensed (or operated
under an exemption order) and regulated by the CRTC under the
Broadcasting Act.
broadcasting
and
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
price regulation, other than our affordable entry-level basic cable
82 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
television service ordered by the CRTC and introduced in 2016, as
the CRTC believes there is enough competition for these services
provided by other carriers to protect the interests of users and 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
(Canada)
under
Radiocommunication
It
(Radiocommunication Act) and the Telecommunications Act.
licences and oversees:
• the technical aspects of the operation of radio and television
Act
the
stations;
• the frequency-related operations of cable television networks;
and
• awarding and supervising spectrum for wireless communications
systems in Canada.
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, Ontario, and Quebec
have enacted consumer protection legislation for wireless, wireline,
and Internet service contracts. This legislation addresses the
content of such contracts,
the early
cancellation fees that can be charged to customers, the use of
security deposits, the cancellation and renewal rights of customers,
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 that will become effective on September 1, 2017.
See “CRTC Wireless Code” for more information.
the determination of
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
their market
total Canadian
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. Through an extensive proceeding culminating with a
three-week public hearing in April 2016, the CRTC examined 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. The CRTC released its decisions in the
proceeding on December 21, 2016 in Telecom Regulatory Policy
CRTC 2016-496. The CRTC set as its universal service objective that
Canadians, in urban areas as well as in rural and remote areas, have
access to voice services and broadband Internet access services, on
both fixed and mobile wireless networks. To measure the
successful achievement of this objective, the CRTC has established
several criteria, including:
• 90% of Canadian residential and business fixed broadband
Internet access service subscribers should be able to access
speeds of at least 50 Mbps download and 10 Mbps upload, and
to subscribe to a service offering with an unlimited data
allowance by 2021, with the remaining 10% of the population
receiving such service by 2031; and
• the latest generally deployed mobile wireless technology should
be available not only in Canadian homes and businesses, but on
as many major transportation roads as possible in Canada.
To help attain the universal service objective, the CRTC will begin to
shift the focus of its regulatory frameworks from wireline voice
services to broadband Internet access services. As such,
the
following services which form part of the universal service objective
are hereby basic telecommunications services within the meaning
of subsection 46.5(1) of the Telecommunications Act:
• fixed and mobile wireless broadband Internet access services;
and
• fixed and mobile wireless voice services.
local
voice serving areas
Designated high cost
received
approximately $100 million in subsidies in 2016 collected by a
0.53% levy on wireline and wireless voice services revenue. In its
decision, the CRTC determined that the current local voice subsidy
will be phased out except where reliable broadband Internet
access service is unavailable and a follow-up proceeding will occur
in 2017 to establish the specifics of the phase-out of the subsidy.
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guiding principles, fund design, and assessment criteria to be set in
a follow-up proceeding to take place in 2017. Implementation will
occur thereafter with a maximum funding level of $100 million in
the first year of implementation, increasing by $25 million annually
over
the following four years to reach an annual cap of
$200 million, with the incremental increases in years four and five
contingent on a review of the fund in the third year to ensure it is
being managed efficiently and is achieving its intended purpose.
Funds will be generated by extending a percent of revenue levy on
wireline and wireless Internet and texting revenue. The CRTC noted
that the revenue percent charge at the $200 million annual cap in
year five would be approximately the same as the current revenue
percent charge.
The CRTC also established regulatory measures to address:
• issues related to wireless services accessibility for persons with
disabilities; and
• online tools for consumers to easily manage their data usage.
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. A private right of action comes into
place under the legislation effective July 1, 2017. 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 600 MHz incentive
auction that began in 2016 and continues in progress. 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.
To assist in extending broadband into under-served rural and
the CRTC will establish a new broadband
remote locations,
the fund including
funding mechanism with the specifics of
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
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 83
MANAGEMENT’S DISCUSSION AND ANALYSIS
Wireless Partnership 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
where licensees have satisfied all of their conditions of licence and
renewed licences will have a one-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.
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. The CRTC process to establish final rates
remains underway.
The CRTC further determined that it is not appropriate to mandate
wholesale MVNO access.
the CRTC determined that
Finally,
the regulatory measures
established in the decision would remain in place for a minimum of
84 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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
ISED Canada released Framework Relating to
In June 2013,
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
including
use when it
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.
CRTC WIRELESS CODE
In June 2013, the CRTC issued its Wireless Code. The Wireless
Code imposes several obligations on wireless carriers, including
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 CRTC committed to a review of
the Wireless Code’s
effectiveness within three years of its implementation. In Telecom
Notice of Consultation CRTC 2016-293, released on July 28, 2016,
the CRTC called for comments on the effectiveness of the Wireless
Code and how the Wireless Code should be updated to reflect the
evolution of
the wireless market since the Wireless Code’s
implementation. An oral hearing began on February 6, 2017.
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 in 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
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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.
CABLE
DIFFERENTIAL PRICING RELATED TO INTERNET DATA
PLANS
On May 18, 2016, the CRTC initiated a proceeding (Telecom
Notice of Consultation CRTC 2016-192) to examine the policy
issues surrounding the use of differential pricing practices by
Canadian ISPs related to the provision of Internet data plans. This
proceeding stems from an application made by several parties
concerning the pricing practices used by Videotron when offering
its Unlimited Music service to its mobile wireless customers. The
CRTC intends to establish a clear and transparent regulatory policy
regarding differential pricing practices for Internet data plans. The
oral hearing commenced the week of October 31, 2016 and
concluded on November 4, 2016. A decision is expected in the first
quarter of 2017.
(Telecom Decision CRTC 2016-117).
WHOLESALE INTERNET COSTING AND PRICING
On March 31, 2016, the CRTC released its decision on the review
of costing inputs and the application process for existing wholesale
high-speed access services that provide for a single provincial point
of interconnection, but which are not available over FTTH access
facilities
The CRTC
determined that wholesale telecom rates paid by competitive
telecom providers were no longer appropriate, and required all
wholesale high-speed access service providers to file new cost
studies with proposed rates for final approval. The CRTC further
determined that all wholesale Internet rates that were currently
approved were to be made interim as of the date of the decision.
The CRTC will assess the extent to which, if at all, retroactivity will
apply when new cost studies are submitted in support of revised
wholesale high-speed access service rates. On June 30, 2016, we
filed our new cost studies with the CRTC, which detail our
proposed rates.
On October 6, 2016, the CRTC issued Telecom Order 2016-396,
significantly reducing existing interim rates for the capacity charge
tariff component of wholesale high-speed access service pending
approval of final rates. The interim rate reductions took effect
immediately. The CRTC will assess the extent to which, if at all,
retroactivity will apply when wholesale high-speed access service
rates are set on a final basis. The process established by the CRTC
to set final rates requires final written submissions by May 31, 2017,
after which the CRTC will make a determination.
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
phased out
in conjunction with the implementation of a
disaggregated service with connections at telephone company
central offices and cable company head-ends. The requirement to
implement disaggregated wholesale high-speed access services
will
include making them available over FTTH access facilities.
Regulated rates will continue to be based on long-run increment
cost studies.
On September 20, 2016, the CRTC released a follow-up decision
(Telecom Decision CRTC 2016-379) to Telecom Regulatory Policy
2015-326, addressing the technical
implementation of new,
disaggregated, high-speed access TPIA, a service that will provide
access to FTTH facilities as ordered in the CRTC’s July 22, 2015
ruling. The decision is consistent with the positions submitted by
Rogers in our filings. Proposed tariffs and supporting cost studies
for the new service were filed on January 9, 2017.
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. On June 15, 2016, the CRTC released its decision
regarding local and community television policy (Broadcasting
Regulatory Policy CRTC 2016-224). The CRTC created a new model
for BDU contributions to Canadian programming set to take effect
on September 1, 2017. Annual contributions will remain at 5% of
annual gross broadcasting revenues; however, of that amount, in all
licensed cable systems, up to 1.5% (rather than the previous 2%)
can be used to fund community channel programming. Of this
revenue, 0.3% must now go to a newly-created Independent Local
News Fund for independently-owned local TV stations, and the
remaining funding will continue to go to the Canada Media Fund
and independent production funds. This decision will provide the
flexibility for BDUs that operate community channels in large
markets (Montreal, Toronto, Edmonton, Calgary, and Vancouver) to
now direct their community channel revenues from those markets
to fund either community channel programming in smaller
markets, or to fund local news on TV stations (such as City, in the
case of Rogers), should they wish to do so.
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 determined 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.
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.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 85
MANAGEMENT’S DISCUSSION AND ANALYSIS
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.
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, except
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.
for
consisting of Canadian local channels, national mandatory services,
community and provincial legislature channels, and the US 4+1
networks. We also offer smaller, reasonably priced packages of
specialty and premium channels. On December 1, 2016, we began
offering all specialty and premium channels on an “à la carte” basis
as well.
On May 24, 2016, the CRTC released a notice of consultation
(Broadcasting Notice of Consultation CRTC 2016-197) stating that
a hearing will be held in consideration of the license renewal
including Rogers. The hearing, which
applications of BDUs,
commenced on September 7, 2016, reviewed the practices of all
BDU licensees in regard to the small basic service and flexible
packaging requirements described above that came into effect on
March 1, 2016.
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.
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.
On March 1, 2016, the first phase of the CRTC’s small basic $25 per
month (excluding equipment) television service mandate came
into effect. Effective March 1, 2016, we offer a small basic service
86 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
BDU licences
renewing Rogers’
On November 21, 2016, the CRTC released Broadcasting Decision
CRTC 2016-458,
from
December 1, 2016 to November 30, 2017. In the decision, the
CRTC established what it called a set of best practices for BDUs that
serve to promote choice for Canadians and stated that it will
monitor all of these practices, including how BDUs promote and
offer the small basic service and pick-and-pay and small package
options, and will take any necessary remedial action when it
examines the renewal of the licenses for BDUs again in 2017 for a
full renewal term.
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 continued 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
In a proceeding initiated by Broadcasting Notice of Consultation
CRTC 2016-225 released June 15, 2016, Rogers sought renewal of
our group-based licences (six City over-the-air English stations,
Sportsnet 360, VICELAND, G4Tech, Outdoor Life, FX, and FXX), our
television licences, and our
five over-the-air ethnic OMNI
mainstream sports Sportsnet and Sportsnet One licences. We also
sought approval of an application seeking a new licence to operate
a discretionary service called OMNI Regional, which would operate
pursuant to a section 9(1)(h) order granting it mandatory carriage
on the basic service with a regulated affiliation fee. An oral hearing
was held during the week of November 28, 2016, a final written
reply was filed on January 9, 2017, and a decision is expected in the
second quarter of 2017.
Other Information
ACCOUNTING POLICIES
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
liabilities,
revenue, and expenses, and our
Management makes judgments, estimates, and assumptions that
affect how accounting policies are applied, the amounts we report
in assets,
related
disclosure 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 revenue-producing perspective.
If technological change
happens 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
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capitalized amounts are calculated based on estimated costs of
projects that are capital in nature, and are generally based on a
per-hour rate.
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,
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 as 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.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 87
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 2016 would be:
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.
(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
(174)
199
18
(18)
48
(49)
(21)
23
4
(4)
5
(5)
STOCK-BASED COMPENSATION
Stock Option Plans
Our employee stock option plans attach cash-settled share
appreciation rights (SARs)
to all new and previously granted
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 and deferred share unit 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 on the vesting date. For DSUs, the
payment amount is established on 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
88 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
We do not amortize intangible assets with indefinite lives
(spectrum, broadcast licences, and certain brand names) as 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 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.
The
testing.
allocation of goodwill
to CGUs or groups of CGUs for
IMPAIRMENT OF ASSETS
We make judgments in determining CGUs and the allocation of
the purpose of
goodwill
impairment
involves
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 TAXES 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,
taxes payable or
income tax payable or
receivable, other
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receivable, and deferred income tax assets and liabilities and could,
in certain circumstances, result in the assessment of interest and
penalties.
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
2016
2015
% Chg
177
215
115
170
54%
26%
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
2016
2015
Printing, legal services, and commission paid on
premiums for insurance coverage
27
31
In addition, during the year ended December 31, 2016, we
announced a strategic change across our publishing business such
that we will focus on digital content through the Internet and
mobile applications. As a result, we have sold select publishing
titles to the aforementioned printing services company for
$5 million.
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 each of 2016 and 2015.
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.
ACCOUNTING CHANGES
Change in accounting policy for measurement of deferred income
taxes
Following the November 2016 publication of
the IFRS
Interpretations Committee’s agenda decision addressing the
expected manner of recovery of intangible assets with indefinite
useful lives for the purposes of measuring deferred tax, we have
retrospectively changed our related accounting policy. The IFRS
Interpretations Committee observed that in applying International
Accounting Standard 12, an entity determines its expected manner
of recovery of the carrying amount of the intangible asset with an
indefinite useful life, and reflects the tax consequences that follow
from that expected manner of recovery. Previously, we measured
deferred taxes on temporary differences arising from the portion of
indefinite-life intangible assets with no initial associated underlying
tax basis using a capital gains tax rate based upon the notion that
recovery would result solely from sales of the assets. Consequently,
we have adopted an accounting policy to measure deferred taxes
on temporary differences arising from indefinite-life intangible
assets based upon the tax consequences that follow from the
expected manner of recovery of the assets.
The accounting policies set out in the notes to our consolidated
statements have been applied in preparing the
financial
consolidated financial statements as at and for the year ended
December 31, 2016 and the comparative information presented in
the consolidated financial statements as at and for the year ended
December 31, 2015. In preparing our opening and comparative
Income, Consolidated
amended Consolidated Statements of
Statements of Comprehensive Income, Consolidated Statements
of Financial Position, and Consolidated Statements of Changes in
Shareholders’ Equity, we have amended certain amounts reported
in previously issued financial statements.
Adjustments to the Consolidated Statements of Income for the year ended December 31, 2015
(In millions of dollars, except per share amounts)
ended December 31, 2015 Adjustments
Previously reported for the year
Amended for the year ended
December 31, 2015
Other (income) expense
Income tax expense
Net income
Earnings per share
Basic
Diluted
(32)
466
1,381
28
11
(39)
$ 2.68
$ 2.67
($0.07)
($0.07)
(4)
477
1,342
$ 2.61
$ 2.60
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 89
MANAGEMENT’S DISCUSSION AND ANALYSIS
Adjustments to the Consolidated Statements of Financial Position as at January 1, 2015
(In millions of dollars)
Goodwill 1
Total assets 1
Deferred tax liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
Previously reported as at
January 1, 2015 Adjustments
Amended as at
January 1, 2015
3,883
26,522
1,769
5,481
26,522
14
14
84
(70)
14
3,897
26,536
1,853
5,411
26,536
1 The adjustment relating to total assets and goodwill was recognized entirely within our Media reportable segment.
Adjustments to the Consolidated Statements of Financial Position as at December 31, 2015
(In millions of dollars)
Goodwill 1
Total assets 1
Deferred tax liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
Previously reported as at
December 31, 2015
Adjustments as at
January 1, 2015
Adjustments
for the year ended
December 31, 2015
Amended as at
December 31, 2015
3,891
29,175
1,943
5,745
29,175
14
14
84
(70)
14
–
–
39
(39)
–
3,905
29,189
2,066
5,636
29,189
1 The adjustment relating to total assets and goodwill was recognized entirely within our Media reportable segment.
Adoption of amendments to IFRS
We adopted the following IFRS amendments in 2016.
• Amendments to IAS 16, Property, Plant and Equipment and IAS
38, Intangible Assets that introduced a rebuttable presumption
that
revenue-based amortization methods for
intangible assets is inappropriate. We adopted the amendment
prospectively beginning on January 1, 2016.
the use of
• Amendments to IFRS 11, Joint Arrangements requiring business
combination accounting to be applied to acquisitions of
interests in a joint operation that constitute a business. We
adopted the amendment on a prospective basis for acquisitions
on or after January 1, 2016, in accordance with the transitional
provisions.
The adoption of these amendments did not have a material effect
on our financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
The IASB has issued the following new 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) –
IFRS 15 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:
1.
2.
identify the contract with a customer;
identify the performance obligations in the contract;
90 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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
5.
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 stand-alone 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 service 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.
We believe significant judgments will need to be made when
defining the enforceable rights and obligations of a contract, in
determining whether a promise to deliver goods or services is
considered distinct, and to determine when the customer
obtains control of the distinct good or service.
The standard is effective for annual periods beginning on or after
January 1, 2018. We are required to retrospectively apply IFRS 15
to all contracts that are not complete on the date of initial
application. We intend to make a policy choice to restate each
prior period presented and recognize the cumulative effect of
initially applying IFRS 15 as an adjustment to the opening
balance of equity at
the earliest period
presented, subject to certain practical expedients we anticipate
we will adopt.
the beginning of
We have a team dedicated to ensuring our compliance with
IFRS 15. This team has also been responsible for determining
system requirements, ensuring our data collection is appropriate,
and communicating the upcoming changes with various
stakeholders.
team is assisting in the
this
development of new internal controls that will help ensure the
system runs as intended and the related results are accurate.
In addition,
We are implementing a new revenue recognition system to
enable us to comply with the requirements of IFRS 15 on a
contract-by-contract basis,
including appropriately allocating
revenue between different performance obligations within
individual contracts for certain revenue streams. We expect to
begin a parallel run under both IAS 18 and IFRS 15 using this
system in 2017. We will have detailed data validation processes
that will continue throughout the course of 2017. As a result, we
are continuing to assess the impact of this standard on our
consolidated financial statements and it is not yet possible to
make a reliable estimate of its impact. We expect to disclose the
estimated financial effects of the adoption of IFRS 15 in our 2017
consolidated financial statements.
loss model
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 financial instruments, a new
expected credit
for calculating impairment on
financial assets, and the new hedge accounting guidance. Under
IFRS 9, financial assets will be classified and measured based on
the business model in which they are held and the characteristics
of their contractual cash flows. The new hedge accounting
standard will align hedge accounting more closely with risk
management. IFRS 9 does not fundamentally change the types
of hedging relationships or the requirement to measure and
recognize ineffectiveness, however it will provide more hedging
to qualify for hedge
strategies used for
risk management
accounting and introduce more judgment
to assess the
effectiveness of a hedging relationship. It also carries forward the
financial
guidance on recognition and derecognition of
instruments from IAS 39. The 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.
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• 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.
this
We are assessing the impact of
standard on our
consolidated financial statements; however, we believe that the
result will be a significant increase to assets and liabilities, as we
will be required to record a right-of-use asset and a
corresponding lease liability on our Consolidated Statements of
Financial Position, as well as a decrease to operating costs, an
increase to finance costs (due to accretion of the lease liability)
and an increase to depreciation and amortization (due to
amortization of the right-of-use asset).
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 alternatives 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.
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.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 91
MANAGEMENT’S DISCUSSION AND ANALYSIS
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.
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 revenue. For Wireless, capital intensity is calculated
using total service 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.
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
Postpaid average revenue per account (ARPA) helps us identify
trends and measure our success in attracting and retaining
multiple-device accounts. A single Wireless postpaid account
typically provides subscribers with the advantage of allowing for the
pooling of plan attributes across multiple devices and on a single
bill. Each Wireless postpaid account is typically represented by an
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 service
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 service
revenue (monthly) by the average total number of Wireless
subscribers for the same time period.
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.
TOTAL SERVICE REVENUE
Commencing in the fourth quarter of 2016, we began disclosing
total service revenue as one of our key performance indicators. We
use total
service revenue to measure our core business
performance from the provision of services to our customers
separate from revenue from the sale of equipment we have
acquired from device manufacturers and resold. Included in this
metric is our retail revenue from TSC and the Toronto Blue Jays,
which are also core to our business. We calculate total service
revenue by subtracting equipment revenue in Wireless, Cable,
Business Solutions, and Corporate from total revenue 1.
1 See note 5 to our 2016 Audited Consolidated Financial Statements.
(In millions of dollars)
Revenue
Deduct:
Wireless equipment revenue
Cable equipment revenue
Business Solutions equipment revenue
Corporate equipment revenue
Years ended December 31
2016
2015
13,702
13,414
658
6
6
5
749
8
4
4
Total service revenue
13,027
12,649
92 ROGERS COMMUNICATIONS INC. 2016 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 reliable ways 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 that 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 tax expense (recovery),
other expense (income), finance
costs, restructuring, acquisition and
other, depreciation and
amortization, stock-based
compensation, and impairment of
assets and related onerous contract
charges.
Adjusted operating profit margin:
Adjusted operating profit
divided by
revenue (service revenue for
Wireless).
Adjusted net income:
Net income
add (deduct)
stock-based compensation,
restructuring, acquisition and other,
impairment of assets and related
onerous contract charges, loss
(gain) on sale or wind down 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 net of proceeds on
disposition, 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-month trailing adjusted
operating profit (defined above).
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 93
MANAGEMENT’S DISCUSSION AND ANALYSIS
RECONCILIATION OF ADJUSTED OPERATING PROFIT AND
ADJUSTED OPERATING PROFIT MARGIN
RECONCILIATION OF ADJUSTED EARNINGS PER SHARE
Years ended December 31
2016
2015
1,481
1,479
Years ended December 31
(In millions of dollars, except per share amounts;
number of shares outstanding in millions)
(In millions of dollars)
Net income 1
Add (deduct):
Income tax expense 1
Other (income) expense 1
Finance costs
Restructuring, acquisition and other
Depreciation and amortization
Impairment of assets and related onerous
contract charges
Stock-based compensation
2016
835
324
191
761
160
2,276
484
61
2015
1,342
477
(4)
774
111
2,277
–
55
Adjusted basic earnings per share:
Adjusted net income 1
Divided by: weighted average number of
shares outstanding
515
515
Adjusted basic earnings per share 1
$ 2.88
$ 2.87
Adjusted diluted earnings per share:
Adjusted net income 1
Divided by: diluted weighted average number
1,481
1,479
of shares outstanding
517
517
Adjusted diluted earnings per share 1
$ 2.86
$ 2.86
Adjusted operating profit 1
5,092
5,032
Basic earnings per share:
1 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12
Income Taxes, certain amounts have been retrospectively amended. See “Accounting
Policies” for more information.
(In millions of dollars, except percentages)
2016
2015
Years ended December 31
Adjusted operating profit margin:
Adjusted operating profit
Divided by: total revenue
Adjusted operating profit margin
5,092
13,702
5,032
13,414
37.2%
37.5%
RECONCILIATION OF ADJUSTED NET INCOME
Net income 1
Divided by: weighted average number of
shares outstanding
Basic earnings per share 1
Diluted earnings per share:
835
515
1,342
515
$ 1.62
$ 2.61
Net income 1
Divided by: diluted weighted average number
of shares outstanding
835
517
1,342
517
Diluted earnings per share 1
$ 1.62
$ 2.60
1 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12
Income Taxes, certain amounts have been retrospectively amended. See “Accounting
Policies” for more information.
Years ended December 31
RECONCILIATION OF FREE CASH FLOW
(In millions of dollars)
Net income 1
Add (deduct):
Stock-based compensation
Restructuring, acquisition and other
Loss on repayment of long-term debt
Net loss on divestitures pertaining to
investments
Gain on acquisition of Mobilicity 1
Loss on non-controlling interest purchase
obligation
Loss on wind down of shomi
Impairment of assets and related onerous
contract charges
Income tax impact of above items
Income tax adjustment, legislative tax change
2016
835
61
160
–
11
–
–
140
484
(213)
3
2015
1,342
55
111
7
–
(74)
72
–
–
(40)
6
Adjusted net income 1
1,481
1,479
1 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12
Income Taxes, certain amounts have been retrospectively amended. See “Accounting
Policies” for more information.
(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
2016
3,957
2015
3,747
(2,352)
(2,440)
(740)
160
756
(14)
(62)
(732)
111
771
302
(83)
Free cash flow
1,705
1,676
RECONCILIATION OF DIVIDEND PAYOUT RATIO OF FREE
CASH FLOW
(In millions of dollars, except percentages)
2016
2015
Years ended December 31
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
1,705
58%
988
1,676
59%
94 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
RECONCILIATION OF ADJUSTED NET DEBT AND ADJUSTED
NET DEBT / ADJUSTED OPERATING PROFIT
(In millions of dollars)
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
Bank advances (cash and cash equivalents)
As at December 31
2016
750
15,330
117
16,197
2015
1,000
15,870
111
16,981
(1,683)
(2,028)
(57)
800
71
(152)
800
(11)
Adjusted net debt
15,328
15,590
As at December 31
(In millions of dollars, except ratios)
2016
2015
Adjusted net debt / adjusted operating profit
Adjusted net debt
Divided by: trailing 12-month adjusted
operating profit
Adjusted net debt / adjusted operating profit
15,328
15,590
5,092
3.0
5,032
3.1
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2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 95
MANAGEMENT’S DISCUSSION AND ANALYSIS
SUMMARY OF FINANCIAL RESULTS OF LONG-TERM DEBT GUARANTOR
Our outstanding public debt, $2.9 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 consolidated 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)
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Selected Statements of Income data measure:
Revenue
Net Income (loss) 5
10
835
24
1,342
11,746
674
11,489
1,439
2,173
990
2,099
1,104
(227)
(1,664)
(198) 13,702
835
(2,543)
13,414
1,342
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)
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Selected Statements of Financial Position data measure:
Current assets
Non-current assets 5
Current liabilities
Non-current liabilities 5
22,831
28,812
25,712
17,159
23,891
27,161
24,024
17,928
19,665
38,448
25,190
2,084
19,322
36,862
25,951
1,719
9,780
5,805
5,558
75
8,331
8,250
5,609
281
(49,706)
(47,293)
(51,347)
(1,358)
2,570
(48,922)
(45,706) 25,772
5,113
(50,567)
(1,392) 17,960
2,622
26,567
5,017
18,536
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, 2015.
5 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See “Accounting
Policies” for more information.
96 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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FIVE-YEAR SUMMARY OF CONSOLIDATED FINANCIAL RESULTS
(In millions of dollars, except per share amounts, subscriber count
results, churn, ARPA, ARPU, percentages, and ratios)
2016
2015
2014
2013
2012
As at or years ended December 31
Income and cash flow:
Revenue
Wireless
Cable
Business Solutions
Media
Corporate items and intercompany eliminations
Total revenue
Adjusted operating profit 1
Wireless
Cable
Business Solutions
Media
Corporate items and intercompany eliminations
Total adjusted operating profit
Net income from continuing operations 2
Net income 2
Adjusted net income from continuing operations 1,2
Cash provided by operating activities
Free cash flow 1
Additions to property, plant and equipment
Earnings per share from continuing operations 2
Basic
Diluted
Earnings per share 2
Basic
Diluted
Adjusted earnings per share 1,2
Basic
Diluted
Statements of Financial Position:
Assets
Property, plant and equipment, net
Goodwill 2
Intangible assets
Investments
Other assets
Total assets
Liabilities and Shareholders’ Equity
Long-term liabilities 2
Current liabilities
Total liabilities 2
Shareholders’ equity 2
Total liabilities and shareholders’ equity
Subscriber count results (000s) 3
Wireless subscribers
Internet subscribers
Television subscribers
Phone subscribers
Additional Wireless metrics 3
Postpaid churn (monthly)
Postpaid ARPA (monthly) 4
Blended ARPU (monthly)
Additional consolidated metrics
Revenue growth
Adjusted operating profit growth
Dividends declared per share
Dividend payout ratio of net income 2,3
Dividend payout ratio of free cash flow 1,3
Return on assets 2,3
Adjusted net debt / adjusted operating profit 1
Total service revenue 3,5
7,916
3,449
384
2,146
(193)
13,702
3,285
1,674
123
169
(159)
5,092
835
835
1,481
3,957
1,705
2,352
$ 1.62
$ 1.62
$ 1.62
$ 1.62
$ 2.88
$ 2.86
10,749
3,905
7,130
2,174
4,384
28,342
17,960
5,113
23,073
5,269
28,342
10,274
2,145
1,820
1,094
1.23%
$117.37
$ 60.42
2%
1%
$ 1.92
118%
58%
2.9%
3.0
13,027
7,651
3,465
377
2,079
(158)
13,414
3,239
1,658
116
172
(153)
5,032
1,342
1,342
1,479
3,747
1,676
2,440
$ 2.61
$ 2.60
$ 2.61
$ 2.60
$ 2.87
$ 2.86
10,997
3,905
7,243
2,271
4,773
29,189
18,536
5,017
23,553
5,636
29,189
9,877
2,048
1,896
1,090
1.27%
$110.74
$ 59.71
4%
0%
$ 1.92
74%
59%
4.6%
3.1
12,649
7,305
3,467
382
1,826
(130)
12,850
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
3,897
6,588
1,898
3,498
26,536
16,205
4,920
21,125
5,411
26,536
9,450
2,011
2,024
1,150
1.27%
$106.41
$ 59.41
1%
1%
$ 1.83
70%
66%
5.1%
2.9
7,270
3,475
374
1,704
(117)
12,706
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
3,765
3,211
1,487
4,897
23,615
14,410
4,606
19,016
4,599
23,615
9,503
1,961
2,127
1,153
1.24%
$ 59.58
2%
3%
$ 1.74
54%
58%
7.1%
2.3
7,280
3,358
351
1,620
(123)
12,486
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
19,618
12,918
3,002
15,920
3,698
19,618
9,437
1,864
2,214
1,074
1.29%
$ 59.79
1%
2%
$ 1.58
48%
50%
8.6%
2.3
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 substitutes or alternatives 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 a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See “Accounting Policies” for more
information. Adjustments relating to the IFRS Interpretation Committee’s agenda decision relating to IAS 12 Income Taxes also applied to periods prior to January 1, 2015 and have been
retrospectively amended.
3 As defined. See “Key Performance Indicators”.
4 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”.
5 Total service revenue has not been presented for periods prior to 2015. We commenced reporting service revenue as a key performance indicator in the fourth quarter of 2016. See “Key
Performance Indicators”.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 97
CONSOLIDATED FINANCIAL STATEMENTS
Management’s Responsibility for Financial Reporting
December 31, 2016
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. Our internal control over financial reporting as at
December 31, 2016 has been audited by KPMG, LLP,
in
accordance with the standards of
the Public Company
Accountability Oversight Board (United States). KPMG LLP has full
and free access to the Audit and Risk Committee.
February 9, 2017
Alan D. Horn, CPA, CA
Interim President and Chief Executive
Officer
Anthony Staffieri, FCPA, FCA
Chief Financial Officer
The accompanying consolidated financial statements of Rogers
Communications Inc. and its subsidiaries and all the information in
are the
Management’s Discussion and Analysis
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
respects, Rogers
their opinion, present
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
the
and includes management
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.
98 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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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,
2016 and December 31, 2015, 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.
Management’s Responsibility for the Consolidated Financial
Statements
the preparation and fair
responsible for
Management
is
presentation of
in
these consolidated financial
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
In making those risk assessments, we consider internal
error.
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
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, 2016 and
December 31, 2015, 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.
Comparative Information
Without modifying our opinion, we draw attention to Note 2(d) to
the consolidated financial statements which indicates that the
comparative
ended
December 31, 2015 has been adjusted to reflect the retrospective
adoption of a new accounting policy.
information presented for
year
the
Other Matter
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Rogers Communications Inc.’s internal control over
financial
reporting as of December 31, 2016, 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 9, 2017 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 9, 2017
Toronto, Canada
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 99
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Rogers Communications Inc.
We have audited Rogers Communications Inc.’s internal control
over financial reporting as of December 31, 2016, based on criteria
established in Internal Control – 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, 2016. 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
in accordance with generally accepted
external purposes
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
are recorded as necessary to permit preparation of
financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are
in accordance with authorizations of
being made only
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, 2016, 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
Company Accounting Oversight Board (United States),
the
consolidated statements of
financial position of Rogers
Communications Inc. as of December 31, 2016 and December 31,
2015, and the related consolidated statements of
income,
comprehensive income, changes in shareholders’ equity, and cash
flows for the years ended December 31, 2016 and December 31,
2015, and our report dated February 9, 2017 expressed an
unqualified opinion on those consolidated financial statements.
Chartered Professional Accountants, Licensed Public Accountants
February 9, 2017
Toronto, Canada
100 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
Consolidated Statements of Income
(In millions of Canadian dollars, except per share amounts)
Years ended December 31
Revenue
Operating expenses:
Operating costs
Depreciation and amortization
Impairment of assets and related onerous contract charges
Restructuring, acquisition and other
Finance costs
Other expense (income)
Income before income tax expense
Income tax expense
Net income for the year
Earnings per share:
Basic
Diluted
The accompanying notes are an integral part of the consolidated financial statements.
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Note
2016
2015
see note 2(d)
5
13,702
13,414
6
7, 8
7
9
10
11
12
8,671
2,276
484
160
761
191
1,159
324
835
8,437
2,277
–
111
774
(4)
1,819
477
1,342
13
13
$ 1.62
$ 1.62
$ 2.61
$ 2.60
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 101
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Comprehensive Income
(In millions of Canadian dollars)
Years ended December 31
Net income for the year
Other comprehensive loss:
Items that will not be reclassified to income:
Defined benefit pension plans:
Remeasurements
Related income tax recovery (expense)
Items that will not be reclassified to net income
Items that may subsequently be reclassified to income:
Available-for-sale investments:
Increase (decrease) in fair value
Reclassification to net income for gain on sale of investment
Related income tax recovery (expense)
Available-for-sale investments
Cash flow hedging derivative instruments:
Unrealized (loss) gain in fair value of derivative instruments
Reclassification to net income of loss (gain) on debt derivatives
Reclassification to net income of 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 recovery (expense)
Cash flow hedging derivative instruments
Equity-accounted investments:
Share of other comprehensive (loss) income of equity-accounted investments, net of tax
Reclassification to net income of realized other comprehensive income for equity-
accounted investments
Equity-accounted investments
Items that may subsequently be reclassified to net income
Other comprehensive loss for the year
Comprehensive income for the year
The accompanying notes are an integral part of the consolidated financial statements.
Note
2016
2015
see note 2(d)
835
1,342
22
16
(101)
27
(74)
90
(39)
(7)
44
(336)
255
–
(80)
(69)
66
(164)
(8)
(15)
(23)
(143)
(217)
618
24
(6)
18
(143)
–
20
(123)
1,524
(1,307)
7
(148)
(58)
(65)
(47)
23
–
23
(147)
(129)
1,213
102 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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:
Bank advances
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
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2016
2015
see note 2(d)
–
1,949
315
215
91
2,570
10,749
7,130
2,174
1,708
98
8
3,905
28,342
71
800
2,783
186
134
367
750
22
5,113
33
15,330
118
562
1,917
23,073
5,269
28,342
11
1,792
318
303
198
2,622
10,997
7,243
2,271
1,992
150
9
3,905
29,189
–
800
2,708
96
10
388
1,000
15
5,017
50
15,870
95
455
2,066
23,553
5,636
29,189
14
15
16
7
8
17
16
12
8
18
19
20
16
19
20
16
21
12
23
27
28
23
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
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 103
CONSOLIDATED FINANCIAL STATEMENTS
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, 2016
Amount
(000s) Amount
Number
of shares
Number
of shares
(000s)
Retained
earnings
Available-for-
sale financial
assets reserve
Hedging
reserve
Equity
investment
hedging
reserve
Total
shareholders’
equity
Balances, January 1, 2016 (note 2(d))
72 112,439
402 402,308
4,474
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
Total other comprehensive income (loss)
Comprehensive income for the year
Transactions with shareholders recorded
directly in equity:
Dividends declared
Shares issued on exercise of stock options
Share class exchange
Total transactions with shareholders
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(27)
(27)
–
–
–
–
–
–
–
–
3
–
3
–
–
–
–
–
–
–
–
61
27
88
835
(74)
–
–
–
(74)
761
(988)
–
–
(988)
598
–
–
44
–
–
44
44
–
–
–
–
57
33
–
–
–
(164)
–
(164)
(164)
–
–
–
–
–
–
–
–
(23)
(23)
(23)
–
–
–
–
5,636
835
(74)
44
(164)
(23)
(217)
618
(988)
3
–
(985)
Balances, December 31, 2016
72 112,412
405 402,396
4,247
642
(107)
10
5,269
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 (note 2(d))
72 112,448
402 402,298
Net income for the year (note 2(d))
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
Total other comprehensive income (loss)
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(9)
–
(9)
–
–
–
–
–
–
–
–
–
–
–
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
–
–
–
–
5,411
1,342
18
(123)
(47)
23
(129)
1,213
(988)
–
–
(988)
Retained
earnings
4,102
1,342
18
–
–
–
18
1,360
–
–
–
–
–
–
–
–
9
1
10
(988)
–
–
(988)
Balances, December 31, 2015 (note 2(d))
72 112,439
402 402,308
4,474
598
57
33
5,636
The accompanying notes are an integral part of the consolidated financial statements.
104 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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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:
Depreciation and amortization
Program rights amortization
Finance costs
Income tax expense
Stock-based compensation
Post-employment benefits contributions, net of expense
Net loss on divestitures pertaining to investments
Loss on wind down of shomi
Impairment of assets and related onerous contract charges
Gain on acquisition of Mobilicity
Other
Cash provided by operating activities before changes in non-cash working capital
items, 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:
Net repayments on short-term borrowings
Net (repayment) issuance of long-term debt
Net (payment) proceeds on settlement of debt derivatives and forward contracts
Transaction costs incurred
Dividends paid
Other
Cash used in financing activities
Change in cash and cash equivalents
Cash and cash equivalents, beginning of year
(Bank advances) cash and cash equivalents, end of year
Note
2016
2015
see note 2(d)
835
1,342
7, 8
8
10
12
24
22
11
7
25
29
7
8
8, 17, 25
18
29
29
2,276
71
761
324
61
(3)
11
140
484
–
34
4,994
14
5,008
(295)
(756)
3,957
(2,352)
(46)
(103)
–
45
(2,456)
–
(538)
(45)
(17)
(988)
5
(1,583)
(82)
11
(71)
2,277
87
774
477
55
(16)
–
–
–
(74)
82
5,004
(302)
4,702
(184)
(771)
3,747
(2,440)
(64)
(116)
(1,077)
(70)
(3,767)
(42)
754
129
(9)
(977)
–
(145)
(165)
176
11
Cash and cash equivalents are defined as cash and short-term deposits that have an original maturity of less than 90 days, less bank
advances. As at December 31, 2015, 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.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
106
107
110
110
112
113
114
116
120
120
120
120
122
122
123
Nature of the Business
Note 1
Significant Accounting Policies
Note 2
Capital Risk Management
Note 3
Segmented Information
Note 4
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 Expense (Income)
Income Taxes
Note 12
Note 13
Earnings Per Share
Note 14 Accounts Receivable
Inventories
Note 15
NOTE 1: NATURE OF THE BUSINESS
123
131
132
132
133
136
136
140
140
143
144
145
146
147
Note 16
Financial Risk Management and
Financial Instruments
Investments
Note 17
Short-Term Borrowings
Note 18
Provisions
Note 19
Note 20
Long-Term Debt
Note 21 Other Long-Term Liabilities
Post-Employment Benefits
Note 22
Shareholders’ Equity
Note 23
Stock-Based Compensation
Note 24
Note 25
Business Combinations
Note 26 Related Party Transactions
Note 27 Guarantees
Note 28 Commitments and Contingent Liabilities
Note 29
Supplemental Cash Flow Information
On January 1, 2016, Fido Solutions Inc., a subsidiary of RCI,
transferred its partnership interest
in Rogers Communications
Partnership (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).
During the year ended December 31, 2016, Wireless, Cable, and
Business Solutions were operated by our wholly-owned subsidiary,
RCCI (2015 – RCP), and certain other wholly-owned subsidiaries.
Media was operated by our wholly-owned subsidiary, Rogers
Media Inc., and its subsidiaries.
See note 4 for more information about our reportable operating
segments.
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 9, 2017.
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 reportable segments.
Each segment and the nature of its business is 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
Media
network and data centre assets to support
a range of voice, data, networking,
hosting, and cloud-based services for the
enterprise, public sector, and carrier
wholesale markets.
A diversified portfolio of media properties,
including sports media and entertainment,
television and radio broadcasting,
specialty channels, multi-platform
shopping, digital media, and publishing.
106 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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;
• the net deferred pension liability, which is measured as
described in note 22; and
• liabilities for stock-based compensation, which are measured at
fair value as disclosed in note 24.
(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.
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F
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S
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M
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N
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S
(d) CHANGES IN ACCOUNTING POLICIES ADOPTED IN
2016
Change in accounting policy for measurement of deferred income
taxes
Following the November 2016 publication of
the IFRS
Interpretations Committee’s agenda decision addressing the
expected manner of recovery of intangible assets with indefinite
useful lives for the purposes of measuring deferred tax, we have
retrospectively changed our related accounting policy. The IFRS
Interpretations Committee observed that in applying International
Accounting Standard 12, an entity determines its expected manner
of recovery of the carrying amount of the intangible asset with an
indefinite useful life, and reflects the tax consequences that follow
from that expected manner of recovery. Previously, we measured
deferred taxes on temporary differences arising from the portion of
indefinite-life intangible assets with no initial associated underlying
tax basis using a capital gains tax rate based upon the notion that
recovery would result solely from sales of the assets. Consequently,
we have adopted an accounting policy to measure deferred taxes
on temporary differences arising from indefinite-life intangible
assets based upon the tax consequences that follow from the
expected manner of recovery of the assets.
The accounting policies set out in these notes to our consolidated
financial
statements have been applied in preparing the
consolidated financial statements as at and for the year ended
December 31, 2016 and the comparative information presented in
these consolidated financial statements as at and for the year
In preparing our opening and
ended December 31, 2015.
Income,
comparative amended Consolidated Statements of
Income,
of
Consolidated
Consolidated Statements of Financial Position, and Consolidated
Statements of Changes in Shareholders’ Equity, we have amended
certain amounts reported in previously issued financial statements.
Comprehensive
Statements
Adjustments to the Consolidated Statements of Income for the year ended December 31, 2015
(In millions of dollars, except per share amounts)
December 31, 2015 Adjustments Note
Previously reported
for the year ended
Other (income) expense
Income tax expense
Net income
Earnings per share
Basic
Diluted
(32)
466
1,381
28
11
(39)
$ 2.68
$ 2.67
($0.07)
($0.07)
11
12
13
13
Amended
for the year ended
December 31, 2015
(4)
477
1,342
$ 2.61
$ 2.60
Adjustments to the Consolidated Statements of Financial Position as at January 1, 2015
(In millions of dollars)
Goodwill 1
Total assets 1
Deferred tax liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
Previously reported as at
January 1, 2015 Adjustments Note
Amended as at
January 1, 2015
3,883
26,522
1,769
5,481
26,522
8
12
14
14
84
(70)
14
3,897
26,536
1,853
5,411
26,536
1 The adjustment relating to total assets and goodwill was recognized entirely within our Media reportable segment.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Adjustments to the Consolidated Statements of Financial Position as at December 31, 2015
(In millions of dollars)
Goodwill 1
Total assets 1
Deferred tax liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
Previously reported as at
December 31, 2015
Adjustments as at
January 1, 2015
Adjustments
for the year ended
December 31, 2015 Note
Amended as at
December 31, 2015
3,891
29,175
1,943
5,745
29,175
14
14
84
(70)
14
8
12
–
–
39
(39)
–
3,905
29,189
2,066
5,636
29,189
1 The adjustment relating to total assets and goodwill was recognized entirely within our Media reportable segment.
Adoption of amendments to IFRS
We adopted the following IFRS amendments in 2016.
• Amendments to IAS 16, Property, Plant and Equipment and
introduced a rebuttable
IAS 38,
presumption that
revenue-based amortization
methods for intangible assets is inappropriate. We adopted the
amendment prospectively beginning on January 1, 2016.
Intangible Assets
the use of
that
• Amendments to IFRS 11, Joint Arrangements requiring business
combination accounting to be applied to acquisitions of
interests in a joint operation that constitute a business. We
adopted the amendment on a prospective basis for acquisitions
on or after January 1, 2016, in accordance with the transitional
provisions.
The adoption of these amendments did not have a material effect
on our financial statements.
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
19
22
24
25
28
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
110
112
114
116
120
122
122
123
123
131
132
136
140
143
146
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
X
108 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
(f) RECENT ACCOUNTING PRONOUNCEMENTS NOT YET
ADOPTED
The IASB has issued the following new 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) – IFRS
15 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) the entity satisfies a
performance obligation.
5.
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 stand-alone 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 service 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.
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We believe significant judgments will need to be made when
defining the enforceable rights and obligations of a contract,
in determining whether a promise to deliver goods or services
is considered distinct, and to determine when the customer
obtains control of the distinct good or service.
The standard is effective for annual periods beginning on or
after January 1, 2018. We are required to retrospectively apply
IFRS 15 to all contracts that are not complete on the date of
initial application. We intend to make a policy choice to restate
each prior period presented 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, subject to certain practical expedients we
anticipate we will adopt.
We have a team dedicated to ensuring our compliance with
IFRS 15. This team has also been responsible for determining
system requirements, ensuring our data collection is
appropriate, and communicating the upcoming changes with
various stakeholders. In addition, this team is assisting in the
development of new internal controls that will help ensure the
system runs as intended and the related results are accurate.
We are implementing a new revenue recognition system to
enable us to comply with the requirements of IFRS 15 on a
contract-by-contract basis, including appropriately allocating
revenue between different performance obligations within
individual contracts for certain revenue streams. We expect to
begin a parallel run under both IAS 18 and IFRS 15 using this
system in 2017. We will have detailed data validation
processes that will continue throughout the course of 2017. As
a result, we are continuing to assess the impact of this
standard on our consolidated financial statements and it is not
yet possible to make a reliable estimate of its impact. We
expect
the
adoption of
IFRS 15 in our 2017 consolidated financial
statements.
to disclose the estimated financial effects of
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 financial instruments, a
new expected credit loss model for calculating impairment on
financial assets, and the new hedge accounting guidance.
Under IFRS 9, financial assets will be classified and measured
based on the business model in which they are held and the
characteristics of their contractual cash flows. The new hedge
accounting standard will align hedge accounting more closely
with risk management. IFRS 9 does not fundamentally change
the types of hedging relationships or the requirement to
measure and recognize ineffectiveness, however it will provide
more hedging strategies used for risk management to qualify
for hedge accounting and introduce more judgment to assess
the effectiveness of a hedging relationship.
It also carries
forward the guidance on recognition and derecognition of
financial instruments from IAS 39. The 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.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IAS 17, Leases (IAS 17) standard.
• IFRS 16, Leases (IFRS 16) – In January 2016, the IASB issued the
final publication of the IFRS 16 standard, which will supersede
the current
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
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,
impairment of assets and related onerous contract charges, other
expense (income), and income tax expense.
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.
110 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
• recognize the cumulative effect of initially applying IFRS 16
as an adjustment to opening equity at the date of initial
application.
We are assessing the impact of
this standard on our
consolidated financial statements; however, we believe that
the result will be a significant increase to assets and liabilities,
as we will be required to record a right-of-use asset and a
corresponding lease liability on our Consolidated Statements
of Financial Position, as well as a decrease to operating costs,
an increase to finance costs (due to accretion of the lease
liability) and an increase to depreciation and amortization (due
to amortization of the right-of-use asset).
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 wholly-owned subsidiary through which our Rogers Platinum
MasterCard and Fido MasterCard programs are operated is
regulated by the Office of
the Superintendent of Financial
Institutions, which requires that a minimum level of regulatory
capital be maintained. Rogers’ subsidiary was in compliance with
that requirement as at December 31, 2016 and 2015. The capital
requirements are not material to the Company as at December 31,
2016 or December 31, 2015.
With the exception of the Rogers Platinum MasterCard and the
Fido MasterCard programs and the subsidiary through which they
are operated, we are not subject to externally imposed capital
requirements. Our overall strategy for capital risk management has
not changed since December 31, 2015.
USE OF ESTIMATES AND JUDGMENT
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 (see 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.
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D
F
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S
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M
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S
13,702
8,610
5,092
61
2,276
484
160
761
191
1,159
2,352
3,905
13,414
8,382
5,032
55
2,277
111
774
(4)
1,819
2,440
3,905
Corporate
items and
eliminations
Consolidated
totals
Business
Solutions
384
261
123
Media
2,146
1,977
169
(193)
(34)
(159)
INFORMATION BY SEGMENT
Year ended December 31, 2016
(In millions of dollars)
Revenue
Operating costs 1
Adjusted operating profit
Stock-based compensation 1
Depreciation and amortization
Impairment of assets and related onerous
contract charges
Restructuring, acquisition and other
Finance costs
Other expense
Income before income tax expense
Additions to property, plant and equipment
Goodwill
Total assets
Note Wireless
Cable
5
24
7, 8
7
9
10
11
7,916
4,631
3,285
3,449
1,775
1,674
702
1,160
14,074
1,085
1,379
5,288
146
429
62
937
357
–
1,219
2,474
5,287
28,342
Corporate
items and
eliminations
Consolidated
totals
(158)
(5)
(153)
1 Included in Operating costs on the Consolidated Statements of Income.
Year ended December 31, 2015
(In millions of dollars)
Revenue
Operating costs 1
Adjusted operating profit
Stock-based compensation 1
Depreciation and amortization
Restructuring, acquisition and other
Finance costs
Other income 2
Income before income tax expense 2
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
24
7, 8
9
10
11
Additions to property, plant and equipment
Goodwill 2
Total assets 2
866
1,160
14,543
1,030
1,379
6,007
187
429
60
937
297
–
1,338
2,579
4,722
29,189
1 Included in Operating costs on the Consolidated Statements of Income.
2 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See note 2(d).
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 111
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: 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
• 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
Equipment subsidies related to providing equipment to new
and existing subscribers
• Equipment subsidies are recognized 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
112 ROGERS COMMUNICATIONS INC. 2016 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)
2016
2015
Years ended December 31
Wireless:
Service 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
7,258
658
7,916
1,495
1,562
386
3,443
6
3,449
307
71
378
6
384
870
474
325
477
6,902
749
7,651
1,343
1,669
445
3,457
8
3,465
288
85
373
4
377
866
440
308
465
Total Media
2,146
2,079
Corporate items and intercompany
eliminations
Total revenue
(193)
(158)
13,702
13,414
NOTE 6: OPERATING COSTS
(In millions of dollars)
2016
2015
Years ended December 31
Cost of equipment sales and direct
sales channel subsidies
Merchandise for resale
Other external purchases
Employee salaries and benefits and
stock-based compensation
Total operating costs
1,954
209
4,435
2,073
8,671
1,849
202
4,411
1,975
8,437
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 113
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;
• expected costs of decommissioning the items and restoring the
sites on which they are located (see note 19); 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
useful lives once the assets to which they relate 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.
114 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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 an impairment charge
An item of property, plant and equipment, an intangible asset, or
goodwill is impaired if the recoverable 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.
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.
We reverse a previously recognized impairment loss if our estimate
of the recoverable amount of a previously impaired asset or CGU
has increased such that the impairment recognized in a previous
is recognized by increasing the
year has reversed. The reversal
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 than its carrying
amount if we had not recognized an impairment loss in previous
years.
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 residual
values, 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.
Furthermore, we use estimates in determining the recoverable
amount of property, plant and equipment. 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
EXPLANATORY INFORMATION
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.
We make certain assumptions when deriving expected future cash
flows, which may include assumptions pertaining to discount and
terminal growth rates. 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.
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
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(In millions of dollars)
December 31, 2016
December 31, 2015
December 31, 2014
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
(375)
(13,035)
(2,424)
(1,156)
(193)
(720)
687
998
7,073 20,900
1,872
5,294
404
1,658
264
423
449
1,311
(347)
(13,579)
(3,421)
(1,197)
(175)
(868)
Net
carrying
amount
651
7,321
1,873
461
248
443
Cost
942
19,588
4,960
1,543
383
1,236
Accumulated
depreciation
(319)
(12,387)
(3,353)
(988)
(151)
(799)
Net
carrying
amount
623
7,201
1,607
555
232
437
(17,903) 10,749 30,584
(19,587) 10,997
28,652
(17,997) 10,655
Cost
1,062
20,108
4,296
1,560
457
1,169
28,652
The tables below summarize the changes in the net carrying amounts of property, plant and equipment during 2016 and 2015.
(In millions of dollars)
December 31, 2015
Land and buildings
Cable and wireless networks
Computer equipment and software
Customer premise equipment
Leasehold improvements
Equipment and vehicles
Total property, plant and equipment
1 Includes disposals, reclassifications, and other adjustments.
Net carrying
amount
651
7,321
1,873
461
248
443
10,997
Additions Depreciation
Impairment
Other 1
64
1,173
732
240
46
97
2,352
(28)
(1,216)
(522)
(296)
(30)
(91)
(2,183)
–
(205)
(207)
–
–
–
(412)
–
–
(4)
(1)
–
–
(5)
December 31, 2016
Net carrying
amount
687
7,073
1,872
404
264
449
10,749
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 115
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions of dollars)
December 31, 2014
December 31, 2015
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
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
(In millions of dollars)
Impairment of property, plant and
equipment
Onerous contracts and other
Total impairment of assets and related
onerous contract charges
Year ended
December 31, 2016
412
72
484
The $484 million charge relates to a change in strategic direction
such that we have discontinued the internal development of our
IPTV product. We have determined there is no significant salvage
value for any of the assets that were impaired as determined based
upon fair value less costs of disposal. The onerous contracts
charges primarily represent the remaining contractual liabilities for
the development of our IPTV product and were recognized in
accounts payable and accrued liabilities. All
related charges
impacted our Cable segment.
During the year ended December 31, 2015, we did not record an
impairment charge.
Finite useful lives
We amortize intangible assets with finite useful
lives into
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 monitor and review the useful
lives, residual
values, and amortization methods at least once a year and change
them if
from our previous estimates. We
recognize the effects of changes in estimates in net income
prospectively.
they are different
Intangible asset
Estimated useful life
Customer relationships
Roaming agreements
3 to 10 years
12 years
1 Includes disposals, reclassifications, and other adjustments.
Property, plant and equipment not yet in service and therefore not
depreciated as at December 31, 2016 was $949 million (2015 –
$1,017 million). During 2016, capitalized interest pertaining to
property, plant and equipment was recognized at a weighted
average rate of approximately 3.9% (2015 – 4.0%).
In 2016, we performed an analysis to identify fully depreciated
assets that had been disposed of. This resulted in an adjustment to
cost and accumulated depreciation of $3,557 million. The disposals
had nil impact on the Consolidated Statements of Income.
IMPAIRMENT OF ASSETS AND RELATED ONEROUS
CONTRACT CHARGES
During the year ended December 31, 2016, we recorded a total
charge of $484 million for asset impairment and onerous contracts
related to our Internet Protocol television (IPTV) product.
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
useful
lives when the asset is ready for its intended use. Upon
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
acquisition of
the asset. The cost of a separately-acquired
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, including
spectrum licences, broadcast licences, and certain brand names.
116 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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Acquired program rights
Program rights are contractual rights we acquire from third parties
to broadcast programs, including rights to broadcast live sporting
events. 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 Statements of
the expected
exhibition period. If 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 costs for multi-year sports and television broadcast rights
agreements are recognized in operating expenses during the
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 Statements 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
the separately identified assets and liabilities, we
that of
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
its recoverable amount. The
amount to our new estimate of
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.
We make certain assumptions when deriving expected future cash
flows, which may include assumptions pertaining to discount and
terminal growth rates. 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.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 117
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUDGMENTS
We make significant judgments that affect the measurement of our
intangible assets and goodwill.
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 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.
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.
EXPLANATORY INFORMATION
(In millions of dollars)
December 31, 2016
December 31, 2015
December 31, 2014
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
Brand names
Finite-life intangible assets:
Customer relationships
Roaming agreements
Marketing agreements
Acquired program rights
Total intangible assets
Goodwill 1
Total intangible assets and
6,416
329
420
1,609
524
10
289
9,597
4,126
–
–
(270)
(1,470)
(524)
(10)
(75)
(2,349)
–
–
(99)
(14)
6,416
230
136
–
–
–
(5)
139
–
–
209
(118) 7,130
(221) 3,905
6,416
324
420
1,609
523
10
332
9,634
4,126
–
–
(270)
(1,414)
(488)
(10)
(91)
(2,273)
–
–
(99)
(14)
6,416
225
136
–
–
–
(5)
195
35
–
236
(118) 7,243
(221) 3,905
5,576
324
420
1,620
523
10
343
8,816
4,118
–
–
(255)
(1,339)
(444)
(10)
(62)
(2,110)
–
– 5,576
225
151
(99)
(14)
–
–
–
(5)
281
79
–
276
(118) 6,588
(221) 3,897
goodwill
13,723
(2,349)
(339) 11,035
13,760
(2,273)
(339) 11,148
12,934
(2,110)
(339)10,485
1 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See note 2(d).
The tables below summarize the changes in the net carrying amounts of intangible assets and goodwill in 2016 and 2015.
(In millions of dollars)
Spectrum licences
Broadcast licences
Brand names
Customer relationships
Roaming agreements
Acquired program rights
Total intangible assets
Goodwill 1
Total intangible assets and goodwill
December 31, 2015
Net carrying
amount 1
Net additions
Amortization 2
Other 3
Net carrying
amount
December 31, 2016
6,416
225
136
195
35
7,007
236
7,243
3,905
11,148
–
–
–
–
–
–
46
46
–
46
–
–
–
(58)
(35)
(93)
(71)
(164)
–
(164)
–
5
–
2
–
7
(2)
5
–
5
6,416
230
136
139
–
6,921
209
7,130
3,905
11,035
1 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See note 2(d).
2 Of the $164 million of total amortization, $71 million related to acquired program rights is included in Other external purchases in Operating costs (see note 6), and $93 million in
depreciation and amortization on the Consolidated Statements of Income.
3 Includes disposals, write-downs, reclassifications, and other adjustments.
In 2016, there were no acquisitions from business combinations.
118 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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(In millions of dollars)
December 31, 2014
December 31, 2015
Net carrying
amount 1
Acquisitions
from business
combinations
Net additions
Amortization 2
Other 3
Net carrying
amount 3
Spectrum licences
Broadcast licences
Brand names
Customer relationships
Roaming agreements
Acquired program rights
Total intangible assets
Goodwill 1
5,576
225
151
281
79
6,312
276
6,588
3,897
Total intangible assets and goodwill
10,485
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
3,905
11,148
1 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12 Income Taxes, certain amounts have been retrospectively amended. See note 2(d).
2 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.
3 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).
CHANGE IN ACCOUNTING ESTIMATE
Effective January 1, 2016, we made a change in accounting
estimates relating to the useful lives of certain brand name assets.
We determined that these assets have an indefinite useful life as we
believe the brands are core to our long-term going concern. As a
result of this change in estimate, we ceased recording amortization
on these assets effective January 1, 2016 on a prospective basis.
2015 SPECTRUM LICENCE ACQUISITIONS
2500 MHz spectrum licence auction
We participated in the 2500 MHz spectrum licence auction in
Canada during 2015. 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
attributable costs. Subsequent to exercising the option, certain
non-contiguous spectrum licences acquired from Shaw were
transferred to WIND Mobile Corp.
for nominal cash
proceeds.
(WIND)
Data & Audio-Visual Enterprises Wireless Inc. (Mobilicity) spectrum
licences
We obtained $458 million of AWS-1 spectrum licences through
our acquisition of Mobilicity as described in note 25, and
recognized the licences of $458 million as intangible assets upon
acquisition.
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 2016 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
937
6,549 Value in use
– Value in use
233
Fair value less cost to sell
5
5
5
0.5
1.0
2.0
7.9
7.6
9.2
Our fair value measurement for Media is classified as Level 3 in the
fair value hierarchy.
We did not recognize an impairment charge related to our
goodwill or
intangible assets in 2016 or 2015 because the
recoverable amounts of the CGUs exceeded their carrying values.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 119
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9: RESTRUCTURING, ACQUISITION AND OTHER
During the year ended December 31, 2016, we incurred
$160 million (2015 – $111 million) in restructuring, acquisition and
other expenses. These expenses in 2016 primarily consisted of
severance costs associated with the targeted restructuring of our
employee base and costs related to the wind down of and changes
to certain businesses.
In 2015, these expenses were incurred
primarily as a result of the targeted restructuring of our employee
base, a reorganization of our OMNI
the
acquisition of Mobilicity, and the purchase of our interest in Glentel.
television stations,
NOTE 10: FINANCE COSTS
(In millions of dollars)
Note
2016
2015
Years ended December 31
Interest on borrowings
Interest on post-employment benefits
liability
Loss on repayment of long-term debt
Loss on foreign exchange
Change in fair value of derivative
22
16
20
instruments
Capitalized interest
Other
Total finance costs
758
761
9
–
13
(16)
(18)
15
11
7
11
3
(29)
10
761
774
NOTE 11: OTHER EXPENSE (INCOME)
(In millions of dollars)
Losses from associates and joint
ventures
Gain on acquisition of Mobilicity 1
Net loss on divestitures pertaining
to investments
Other investment income
Total other expense (income)
Years ended December 31
Note 2016
2015
see note 2(d)
17
25
216
–
11
(36)
191
99
(74)
–
(29)
(4)
1 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12
Income Taxes, certain amounts have been retrospectively amended. See note 2(d).
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
120 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
In 2016, we announced the decision to wind down our shomi joint
venture. As a result of this decision, we recognized a net loss of
$140 million, which is recorded in losses from associates and joint
ventures, associated with the writedown of the investment and the
estimated cost of our share of
the remaining contractual
obligations of shomi (most significantly video content costs). See
note 19 for more information about the provision related to our
share of the remaining contractual obligations based on our best
estimate of the expected future costs.
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.
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.
CHANGE IN ACCOUNTING POLICY
In November 2016, the IFRS Interpretation Committee issued
clarifications to IAS 12 that provide guidance on the expected
application of tax rates related to the recovery of an indefinite-life
intangible asset for the purposes of measuring deferred tax. We
have retrospectively changed our related accounting policy (see
note 2d).
USE OF ESTIMATES AND JUDGMENTS
JUDGMENTS
We make significant
judgments in interpreting tax rules and
regulations when we calculate income tax expense. 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)
Current tax expense:
Total current tax expense
Deferred tax (recovery) expense:
(Reversal) origination of temporary
differences
Revaluation of deferred tax balances
due to legislative changes
Total deferred tax (recovery) expense
Total income tax expense
Years ended December 31
2016
2015
see note 2(d)
386
(65)
3
(62)
324
234
237
6
243
477
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The table below shows the difference between income tax
expense computed by applying the statutory income tax rate to
income before income tax expense and the income tax expense
for the year.
(In millions of dollars, except rates)
Statutory income tax rate
Income before income tax expense
Computed income tax expense
Increase (decrease) in income tax expense
resulting from:
Non-deductible stock-based
compensation
Non-deductible portion of equity
losses
Income tax adjustment, legislative tax
change
Non-taxable gain on acquisition
Non-taxable portion of capital gain
Other
Years ended December 31
2016
26.6%
1,159
308
2015
see note 2(d)
26.5%
1,819
482
5
18
3
–
(7)
(3)
5
11
6
(20)
–
(7)
Total income tax expense
Effective income tax rate
324
28.0%
477
26.2%
DEFERRED TAX ASSETS AND LIABILITIES
(In millions of dollars)
Deferred tax assets
Deferred tax liabilities
Net deferred tax liability
As at December 31
2016
2015
see note 2(d)
8
(1,917)
(1,909)
9
(2,066)
(2,057)
The table below summarizes the movement of net deferred tax assets and liabilities during 2016 and 2015.
Deferred tax assets (liabilities)
(In millions of dollars)
Property,
plant and
equipment
and inventory
Goodwill
and other
intangibles
Stub period
income and
partnership
reserve Investments
Non-capital
loss
carryforwards
January 1, 2016
(Expense) recovery in net income
(Expense) recovery in other comprehensive income
December 31, 2016
(921)
(26)
–
(947)
(844)
(109)
–
(953)
(178)
178
–
–
(61)
7
(7)
(61)
32
(8)
–
24
Deferred tax assets (liabilities)
(In millions of dollars)
Property,
plant and
equipment
and inventory
Goodwill
and other
intangibles
Stub period
income and
partnership
reserve Investments
Non-capital
loss
carryforwards
January 1, 2015 (see note 2(d))
(Expense) recovery in net income
(Expense) recovery in other comprehensive income
Acquisitions
December 31, 2015 (see note 2(d))
(889)
(32)
–
–
(921)
(632)
(116)
–
(96)
(844)
(313)
135
–
–
(178)
(80)
–
19
–
(61)
54
(197)
–
175
32
Other
Total
(85)
20
93
28
(2,057)
62
86
(1,909)
Other
Total
16
(33)
(70)
2
(85)
(1,844)
(243)
(51)
81
(2,057)
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 121
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We have 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 2035
Deductible temporary differences in foreign
jurisdictions
Total unrecognized temporary differences
As at December 31
2016
2015
1
36
14
51
31
34
49
114
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.
There are taxable temporary differences associated with our
investments in Canadian domestic subsidiaries. We do not
recognize deferred tax liabilities for temporary differences because
we are able to control the timing of the reversal and the reversal is
not probable in the foreseeable future. Reversing these taxable
temporary differences are not expected to result in any significant
tax implications.
EXPLANATORY INFORMATION
Years ended December 31
(In millions of dollars, except per share
amounts)
2016
2015
see note 2(d)
Numerator (basic) – Net income for the
year
835
1,342
Denominator – Number of shares (in
millions):
Weighted average number of
shares outstanding – basic
Effect of dilutive securities (in millions):
Employee stock options and
restricted share units
Weighted average number of shares
outstanding – diluted
515
2
517
515
2
517
Earnings per share:
Basic
Diluted
$ 1.62
$ 1.62
$ 2.61
$ 2.60
For the twelve months ended December 31, 2016, there were nil
options out of the money (2015 – 1,107,344). These options were
excluded from the calculation of the effect of dilutive securities
because they were anti-dilutive.
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 excess is allocated
to an allowance for doubtful accounts and recognized as a loss in
net income.
EXPLANATORY INFORMATION
(In millions of dollars)
Customer accounts receivable
Other accounts receivable
Allowance for doubtful accounts
Total accounts receivable
As at December 31
2016
2015
1,455
553
(59)
1,329
549
(86)
1,949
1,792
122 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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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
2016
2015
236
79
315
238
80
318
Cost of equipment sales and merchandise for resale includes
$2,088 million (2015 – $1,966 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 initially measure all financial instruments at fair value plus, in the case of our financial instruments not classified as fair value
through profit or loss, transaction costs that are directly attributable to the acquisition or issuance of the financial instruments. The
classifications and methods of measurement subsequent to initial recognition of our financial assets and financial liabilities are as follows:
Financial instrument
Financial assets
Cash and cash equivalents
Accounts receivable
Investments, available-for-sale
Financial liabilities
Bank advances
Short-term borrowings
Accounts payable
Accrued liabilities
Long-term debt
Derivatives 3
Debt derivatives
Bond forwards
Expenditure derivatives
Equity derivatives
Categorization
Measurement method
Loans and receivable
Loans and receivable
Available-for-sale 1
Other financial liabilities
Other financial liabilities 2
Other financial liabilities
Other financial liabilities
Other financial liabilities 2
Held-for-trading 4
Held-for-trading 4
Held-for-trading 4
Held-for-trading 5
Amortized cost
Amortized cost
Fair value
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Fair value
Fair value
Fair value
Fair value
1 Subsequently measured at fair value with changes 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.
2 Subsequently measured at amortized cost using the effective interest method.
3 The derivatives can be in an asset or liability position at a point in time historically or in the future.
4 For derivatives designated as cash flow hedges for accounting purposes, the ineffective portion of the hedge is recognized immediately into net income.
5 Subsequent changes are 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.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 123
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
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
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
judgments in determining whether our
We make significant
financial
for hedge accounting. These
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.
124 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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
Bank advances
Short-term borrowings
Accounts payable
Accrued liabilities
Long-term debt
Derivatives 1
Debt derivatives
Bond forwards
Expenditure derivatives
Equity derivatives
Liquidity
Liquidity and interest
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
risk
doubtful accounts sufficiently reflects the related credit
associated with our accounts receivable. As at December 31, 2016,
$541 million (2015 – $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.
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The table below provides an aging of our customer accounts
receivable.
(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
2016
2015
849
298
134
115
759
305
113
66
1,396
1,243
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
2016
86
54
(81)
59
2015
98
66
(78)
86
We use various controls and processes, 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
terms. While our credit controls and
established payment
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.
Credit
risk related to our debt derivatives, bond forwards,
expenditure derivatives, and equity 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.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 125
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, 2016 and 2015.
December 31, 2016
(In millions of dollars)
Carrying
amount
Contractual
cash flows
Less than
1 year
Bank advances
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 accounted for as hedges:
Cash outflow (Canadian dollar)
Cash inflow (Canadian dollar equivalent of US dollar) 1
Debt derivative instruments not accounted for as hedges:
Cash outflow (Canadian dollar)
Cash inflow (Canadian dollar equivalent of US dollar) 1
Bond forwards
Net carrying amount of derivatives (asset)
71
800
2,783
16,080
18
–
–
–
–
–
–
–
–
(1,659)
71
800
2,783
16,197
18
(1,708)
1,732
8
7,417
(8,996)
201
(201)
(51)
1 to 3
years
–
–
–
3,081
12
(468)
483
–
71
800
2,783
750
–
(1,240)
1,249
8
–
–
1,435
(1,880)
201
(201)
–
–
–
(51)
4 to 5
years
More than
5 years
–
–
–
2,350
3
–
–
–
–
–
–
–
–
–
–
–
10,016
3
–
–
–
5,982
(7,116)
–
–
–
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.
18,093
18,271
4,421
2,612
2,353
8,885
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.
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, 2016 and 2015.
December 31, 2016
(in millions of dollars)
Less than
1 year
1 to 3 years
4 to 5 years
More than
5 years
Net interest payments
727
1,294
1,033
5,832
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
126 ROGERS COMMUNICATIONS INC. 2016 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, 2016 and 2015 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. We designate the debt derivatives related to our
senior notes and senior debentures as hedges for accounting
purposes against the foreign exchange risk associated with specific
debt instruments. We use expenditure derivatives to manage the
foreign exchange risk in our operations, designating them as
hedges for certain of our forecasted operational and capital
expenditures. As at December 31, 2016, 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.
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, 2016.
We are exposed to risk of changes in market interest rates due to
this has on interest expense for our short-term
the impact
borrowings, bank credit facilities, and our $250 million floating rate
senior unsecured notes. As at December 31, 2016, 91.2% of our
outstanding long-term debt and short-term borrowings was at
fixed interest rates (2015 – 90.3%).
(Change in millions of dollars)
2016
2015
2016
2015
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
2
–
–
6
2
4
14
14
9
–
–
–
8
–
–
–
DERIVATIVE INSTRUMENTS
As at December 31, 2016, 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, 2016
Notional
amount
(US$)
Exchange
rate
Notional
amount
(Cdn$)
Fair
value
(Cdn$)
(In millions of dollars, except
exchange rates)
Debt derivatives accounted for
as cash flow hedges:
As assets
As liabilities
5,200
1,500
1.0401
1.3388
5,409
2,008
1,751
(68)
Debt derivatives not accounted
for as hedges:
As liabilities
Net mark-to-market
debt derivative asset
Bond forwards accounted for
as cash flow hedges:
As liabilities
Expenditure derivatives
accounted for as cash flow
hedges:
As assets
As liabilities
Net mark-to-market
expenditure derivative
liability
Equity derivatives not
accounted for as hedges:
As assets
Net mark-to-market asset
150
1.3407
201
–
1,683
900
(51)
990
300
1.2967
1.4129
1,284
424
40
(21)
19
270
8
1,659
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 127
During 2016, we entered into and settled debt derivatives related
to our credit facility borrowings as follows:
(In millions of dollars,
except exchange rates)
Debt derivatives entered
Debt derivatives settled
Net cash received
As at December 31, 2016
Notional
(US$)
Exchange
rate
Notional
(Cdn$)
8,683
8,533
1.31
1.31
11,360
11,159
8
We did not enter into or settle any debt derivatives related to our
credit facility borrowing in 2015.
We entered into new debt derivatives in 2016 and 2015 to hedge
foreign currency risk associated with the principal and interest
components of the US dollar-denominated senior notes issued on
November 4, 2016 and December 8, 2015 (see note 20). The table
below shows debt derivatives we entered into to hedge senior
notes issued during 2016 and 2015.
(In millions of
dollars, except for
coupon and
interest rates)
Effective date
December 8, 2015
December 8, 2015
US$
Hedging effect
Principal/
notional
amount
(US$)
500
700
300
Fixed
hedged
Cdn$
interest
rate 1
Maturity
date
Coupon
rate
2026
2.900%
2.834%
2025
2044
3.625%
5.000%
3.566%
5.145%
Equivalent
Cdn$
671
937
401
1 Converting from a fixed US$ coupon rate to a weighted average Cdn$ fixed rate.
The table below shows debt derivatives
that matured in
conjunction with the repayment or repurchase of the related senior
notes during 2015 (see note 20).
(In millions of dollars)
Maturity date
Notional amount
(US$)
Net cash (proceeds)
settlement (Cdn$)
March 15, 2015
March 15, 2015
Total
550
280
830
(106)
(48)
(154)
Upon the repayment of the related senior notes in March 2015, a
$7 million non-cash loss, which was previously deferred in the
hedging reserve, was recognized in net income (see note 10). This
loss relates to transactions in 2013 wherein contractual foreign
exchange rates on the related debt derivatives were renegotiated
to then-current rates.
As at December 31
November 4, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As at December 31, 2015
Notional
amount
(US$)
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
The table below shows derivative instruments assets and derivative
instruments liabilities reflected on our Consolidated Statements of
Financial Position.
(In millions of dollars)
Current asset
Long-term asset
Current liability
Long-term liability
Net mark-to-market asset
2016
91
1,708
1,799
(22)
(118)
(140)
1,659
2015
198
1,992
2,190
(15)
(95)
(110)
2,080
As at December 31, 2016, US$6.7 billion notional amount of our
outstanding debt derivatives have been designated as hedges for
accounting purposes (2015 – US$6.2 billion). As at December 31,
2016, 100% of our currently outstanding bond forwards and
expenditure derivatives have been designated as hedges for
accounting purposes (2015 – 100%). In 2016, we recognized a
$5 million increase to net income related to hedge ineffectiveness
(2015 – $3 million decrease).
Debt derivatives
We use cross-currency interest exchange agreements to manage
risks from fluctuations in foreign exchange rates associated with our
US dollar-denominated debt
facility
borrowings. We designate the debt derivatives related to our
senior notes and debentures as hedges for accounting purposes
against the foreign exchange risk associated with specific debt
instruments. We do not designate the debt derivatives related to
our credit facility borrowings as hedges for accounting purposes.
instruments and credit
128 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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Bond forwards
During 2016 or 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 that were outstanding as at December 31, 2016 and 2015.
(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, 2016
Hedged GoC
interest rate as at
December 31, 2015 1
10
10
30
Total
December 2014
December 2014
December 2014
January 4, 2017
April 30, 2018
December 31, 2018
500
500
400
1,400
–
2.52%
2.62%
2.34%
2.23%
2.52%
2016
2015
–
500
400
900
500
500
400
1,400
1 Bond forwards with maturity dates beyond December 31, 2016 are subject to GoC rate re-setting from time to time. The $500 million due April 2018 was extended in April 2016
to reset in April 2017. The $400 million due December 2018 was extended in December 2016 to reset in January 2018.
On November 4, 2016, we exercised a $500 million notional bond
forward due January 4, 2017 in relation to the issuance of the
US$500 million senior notes due 2026 and paid $53 million to
settle the derivative. The amount paid represents the fair value of
the bond forward at the time of settlement and will be recycled into
finance costs from the hedging reserve using the effective interest
rate method over the life of the US$500 million senior notes due
2026.
On December 8, 2015, we exercised a $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 recycled into
finance costs from the hedging reserve using the effective interest
rate method over the life of the US$700 million senior notes due
2025.
Expenditure derivatives
The table below shows the expenditure derivatives into which we entered during 2016 and 2015 to manage foreign exchange risk related
to certain forecasted expenditures.
(In millions of dollars, except exchange rates)
Expenditure derivatives entered
Expenditure derivatives settled
Years ended December 31
2016
Notional
(US$)
Exchange
rate
Notional
(Cdn$)
Notional
(US$)
Exchange
rate
990
840
1.33
1.22
1,318
1,025
990
810
1.28
1.11
2015
Notional
(Cdn$)
1,266
902
As at December 31, 2016, we had US$1,290 million of expenditure
derivatives outstanding (2015 – US$1,140 million), at an average
rate of $1.32/US$ (2015 – $1.24/US$), with terms to maturity
ranging from January 2017 to December 2018 (2015 – January
2016 to December 2017). Our outstanding expenditure derivatives
maturing in 2017 are hedged at an average exchange rate of
$1.33/US$.
Equity derivatives
We have equity derivatives to hedge market price appreciation risk
associated with RCI Class B Non-Voting shares that have been
granted under our stock-based compensation programs for stock
options, restricted share units (RSUs), and deferred share units
(DSUs) (see note 24). The equity derivatives were originally entered
into at a weighted average price of $50.37 with terms to maturity of
one year, extendible for further one-year periods with the consent
of the hedge counterparties.
In 2016, 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 2017 (from April 2016). The equity
derivatives have not been designated as hedges for accounting
purposes.
As at December 31, 2016, we had equity derivatives outstanding
for 5.4 million (2015 – 5.7 million) RCI Class B shares with a
weighted average price of $50.30 (2015 – $50.37). In August 2016,
we settled 0.3 million equity derivatives at a weighted average price
of $58.16 as a result of a reduction in the number of share-based
compensation units outstanding.
During 2016, we recognized a recovery, net of interest receipts, of
$33 million (2015 – $22 million recovery),
in stock-based
compensation expense related to the change in fair value of our
equity derivative contracts net of
received payments. As at
December 31, 2016, the fair value of the equity derivatives was an
asset of $8 million (2015 – $15 million liability), which is included in
current portion of derivative instruments.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 129
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
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
Expenditure derivatives accounted for as cash flow hedges
Equity derivatives not 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
Expenditure derivatives accounted for as cash flow hedges
Equity derivatives not accounted as cash flow hedges
Total financial liabilities
The fair value of our long-term debt is estimated as follows.
(In millions of dollars)
these debt derivatives and expenditure
each derivative. For
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;
• 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, 2016 and 2015 and there were no transfers
between Level 1, Level 2, or Level 3 during the respective periods.
As at December 31
Carrying value Fair value (Level 1) Fair value (Level 2)
2016
2015
2016
2015
2016
2015
1,047
966
1,047
966
–
–
1,751 2,032
158
–
40
8
–
–
–
–
–
–
1,751
40
8
2,032
158
–
2,846 3,156
1,047
966
1,799
2,190
68
51
21
–
4
91
–
15
140
110
–
–
–
–
–
–
–
–
–
–
68
51
21
–
4
91
–
15
140
110
As at December 31
2016
2015
Carrying amount
Fair value 1 Carrying amount
Fair value 1
Long-term debt (including current portion)
16,080
17,628
16,870
18,252
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, 2016 and 2015.
130 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
NOTE 17: INVESTMENTS
ACCOUNTING POLICY
Investments in publicly-traded and private companies
We classify our investments in 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 the
entity. 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.
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INVESTMENTS, AVAILABLE-FOR-SALE
Publicly-traded companies
We hold a number of interests in publicly-traded companies. This
year we recognized realized losses of nil and unrealized gains of
$81 million (2015 – nil of realized losses and $164 million of
unrealized losses) with corresponding amounts 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
shomi is a joint venture equally owned by Rogers and Shaw and
previously operated 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.
In 2016, we
announced the decision to wind down our shomi joint venture (see
note 11).
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. 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.
As at or years ended December 31
EXPLANATORY INFORMATION
(In millions of dollars)
Investments in:
Publicly-traded companies
Private companies
Investments, available-for-sale
Investments, associates and joint ventures
Total investments
(In millions of dollars)
Current assets
Long-term assets
Current liabilities
Long-term liabilities
As at December 31
Total net assets
2016
2015
Our share of net assets
1,047
169
1,216
958
2,174
966
212
1,178
1,093
2,271
Revenue
Expenses
Total net loss
Our share of net loss
2016
518
3,391
(1,186)
(1,082)
1,641
834
1,596
(2,027)
(431)
(216)
2015
1,024
3,295
(935)
(1,221)
2,163
1,086
1,958
(2,178)
(220)
(99)
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 131
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 relating to our share of the change in the fair value
of this obligation (see note 11).
NOTE 18: 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, 2016, the
proceeds of the sales were committed up to a maximum of
$1,050 million (2015 – $1,050 million). Effective January 1, 2015, we
amended the terms of
the accounts receivable securitization
program, increasing the maximum potential proceeds under the
program from $900 million to $1,050 million. Effective July 8, 2016,
we extended the term of the program from January 1, 2018 to
January 1, 2019.
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. 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.
Below is a summary of
receivable securitization program.
the activity relating to our accounts
(In millions of dollars)
(In millions of dollars)
2016
2015
Short-term borrowings from buyer
Twelve months ended December 31
Trade accounts receivable sold to buyer as
security
Overcollateralization
As at December 31
2016
2015
1,460
(800)
1,359
(800)
660
559
Short-term borrowings
Proceeds received on
short-term
borrowings
Repayment of short-
term borrowings
Net (repayments) proceeds
received on short-term
borrowings
295
(295)
294
(336)
–
(42)
NOTE 19: PROVISIONS
ACCOUNTING POLICY
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
value. We revise our
forecasts when business conditions or
technological requirements change.
When we recognize a decommissioning liability, we recognize a
in property, plant and equipment and
corresponding asset
depreciate the asset based on the corresponding asset’s useful
life 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
132 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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 and where significant
judgment is required in determining the amount of unavoidable
costs. We measure these provisions at the present value of the
lower of 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.
USE OF ESTIMATES AND JUDGMENTS
ESTIMATES
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, which can require us to use significant estimates.
EXPLANATORY INFORMATION
(In millions of dollars)
Liabilities shomi Other Total
Decommissioning
December 31, 2015
Additions
Adjustments to existing
provisions
Reversals
Amounts used
December 31, 2016
Current
Long-term
40
–
1
–
(6)
35
5
30
–
119
20
60
– 119
–
–
(7)
112
112
–
–
–
1
–
(13)
20 167
17 134
–
3
33
Decommissioning and restoration costs
Cash outflows associated with our decommissioning liabilities are
generally expected to occur at the decommissioning dates of the
NOTE 20: LONG-TERM DEBT
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.
shomi
In 2016, we announced the decision to wind down our shomi joint
venture. shomi
is equally owned by Rogers and Shaw. We are
therefore responsible for our portion of any remaining contractual
liabilities (most significantly video content costs) incurred by the
venture. We have recognized a provision related to our share of the
remaining obligations based on our best estimate of the expected
future costs.
Other
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
(In millions of dollars, except interest rates)
Due date
Principal
amount
Bank credit facilities
Bank credit facilities
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 notes
Senior debentures 1
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
2016
2017
2017
2018
2019
2019
2020
2021
2022
2023
2023
2024
2025
2026
2032
2038
2039
2040
2041
2043
2043
2044
US
100
150
1,000
500
250
US 1,400
400
500
900
1,450
600
500
850
600
700
500
200
350
500
800
400
500
US
US
650
US 1,050
US
US
US
US
US
US
Interest
rate
Floating
Floating
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%
2.900%
8.750%
7.500%
6.680%
6.110%
6.560%
4.500%
5.450%
5.000%
As at December 31
2016
100
201
–
500
250
1,880
400
500
900
1,450
600
671
1,141
600
940
671
269
470
500
800
400
671
873
1,410
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
16,197
(117)
(750)
16,981
(111)
(1,000)
15,330
15,870
1 Senior debentures originally issued by Rogers Cable Inc. which are unsecured obligations of RCI and for which RCCI was an unsecured guarantor as at December 31, 2016 and
for which RCP was an unsecured guarantor as at December 31, 2015.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 133
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Each of the above senior notes and debentures are unsecured and,
as at December 31, 2016, were guaranteed by RCCI (2015 – 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.
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 has
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.
Our $2.5 billion revolving credit facility is available on a fully
revolving basis until maturity and there are no scheduled
reductions prior
rate charged on
to maturity. The interest
borrowings from the revolving credit facility ranges from nil to
1.25% per annum over the bank prime rate or base rate, or 0.85%
to 2.25% (1.00% to 2.25% prior to April 2014) over the bankers’
acceptance rate or London Inter-Bank Offered Rate.
WEIGHTED AVERAGE INTEREST RATE
Our effective weighted average rate on all debt and short-term
borrowings, as at December 31, 2016, including the effect of all of
the associated debt derivative instruments and the exercised bond
forward, was 4.72% (2015 – 4.82%).
BANK CREDIT AND LETTER OF CREDIT FACILITIES
During the years ended December 31, 2016 and 2015, we had the
following activity relating to our revolving and non-revolving bank
credit facilities:
(In millions of dollars,
except exchange rates)
Issuance of long-term debt in
US dollars
Issuance of long-term debt in
Canadian dollars
Total long-term debt issued
Year ended December 31, 2016
Notional
(US$)
Exchange
rate
Notional
(Cdn$)
2,188
1.31
2,877
1,140
4,017
Repayment of long-term debt in
US dollars
(2,038)
1.32
(2,686)
(1,540)
(4,226)
Effective April 1, 2016, we amended our $2.5 billion revolving credit
facility to, among other things, extend the maturity date from July
2019 to September 2020. At the same time, we also amended the
$1.0 billion non-revolving credit facility to, among other things,
extend the maturity date from April 2017 to April 2018. As a result
of the repayments made during the year, we reduced the amount
of borrowings available under our non-revolving credit facility from
$1.0 billion to $301 million.
As at December 31, 2016, we had $0.3 billion ($0.1 billion and
US$0.2 billion) drawn under our revolving and non-revolving credit
facilities (2015 – $0.5 billion). We have entered into debt derivatives
related to the US dollar-denominated portion of these borrowings
to convert all the interest and principal payment obligations to
Canadian dollars (see note 16) as at December 31, 2016.
As at December 31, 2016, we had available liquidity of $2.4 billion
revolving and
(2015 – $3 billion) under our $2.9 billion of
non-revolving credit and letter of credit facilities (2015 – $3.6
billion), of which we had utilized approximately $0.1 billion (2015 –
$0.1 billion) related to outstanding letters of credit and $0.4 billion
of borrowings (2015 – $0.5 billion).
SENIOR NOTES AND DEBENTURES
Interest is paid on our senior notes as follows:
• semi-annually on all of our
fixed rate senior notes and
debentures; and
• quarterly on our floating rate senior notes.
Year ended December 31, 2015
Notional
(US$)
Exchange
rate
Notional
(Cdn$)
We have the option to redeem each of our fixed rate senior notes
and debentures, in whole or in part, at any time, if we pay the
premiums specified in the corresponding agreements.
–
–
–
–
6,025
(5,525)
Repayment of long-term debt in
Canadian dollars
Total long-term debt repaid
(In millions of dollars,
except exchange rates)
Issuance of long-term debt in
Canadian dollars
Repayment of long-term debt in
Canadian dollars
134 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
Issuance of senior notes
The table below provides a summary of the senior notes that we issued in 2016 and 2015.
(In millions of dollars, except interest rates and discounts)
Date Issued
2016 issuances
Principal
amount
Due date
Interest rate
Discount/
premium at
issuance
Total gross
proceeds 1
(Cdn$)
Transaction costs
and discounts 2
(Cdn$)
November 4, 2016
US
500
2026
2.900%
98.354%
671
2015 issuances
December 8, 2015
December 8, 2015
Total for 2015
US
US
700
300
2025
2044
3.625%
5.000%
99.252%
101.700%
937
401
1,338
17
13
1 Gross proceeds before transaction costs and discounts (see note 29).
2 Transaction costs and discounts are included as deferred transaction costs and discounts in the carrying value of the long-term debt, and recognized in net income using the
effective interest method.
Concurrent with the 2016 and 2015 issuances, we entered into debt derivatives to convert all interest and principal payment obligations to
Canadian dollars (see note 16).
Repayment of senior notes and related derivative settlements
The table below provide a summary of the repayment of our senior
notes during 2016 and 2015.
PRINCIPAL REPAYMENTS
The table below shows the principal repayments on our long-term
debt due in each of the next five years and thereafter as at
December 31, 2016.
N
O
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E
S
T
O
C
O
N
S
O
L
I
D
A
T
E
D
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
(In millions of dollars)
Maturity date
2016 repayments
May 26, 2016
2015 repayments
March 15, 2015
March 15, 2015
Total for 2015
Notional amount
(US$)
Notional amount
(Cdn$)
–
1,000
550
280
830
702
357
1,059
(In millions of dollars)
2017
2018
2019
2020
2021
Thereafter
Total long-term debt
750
2,181
900
900
1,450
10,016
16,197
There were no debt derivatives associated with the 2016
repayment. The associated debt derivatives
the 2015
repayments were settled at maturity (see note 16).
for
FOREIGN EXCHANGE
We recognized $13 million in net foreign exchange losses in 2016
(2015 – $11 million in net losses). These losses were primarily
attributed to the US dollar-denominated borrowings under our
bank credit
facilities that were not hedged for accounting
purposes. These losses were offset by the change in fair value of
derivatives which were primarily a result of our debt derivatives that
were used to offset the foreign exchange risk related to these US
dollar-denominated borrowings. Both the foreign exchange loss
and the offsetting gain in the change in fair value of derivatives are
recognized in finance costs on the Consolidated Statements of
Income.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 135
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TERMS AND CONDITIONS
As at December 31, 2016 and 2015, 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
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
NOTE 21: OTHER LONG-TERM LIABILITIES
As at December 31
(In millions of dollars)
Note
2016
2015
Deferred pension liability
Supplemental executive retirement
plan
Stock-based compensation
Other
22
22
24
404
296
62
64
32
56
50
53
Total other long-term liabilities
562
455
NOTE 22: POST-EMPLOYMENT BENEFITS
ACCOUNTING POLICY
Post-employment benefits – Defined Benefit Pension Plan
We offer contributory and non-contributory defined benefit
pension plans that provide employees with a lifetime monthly
pension on retirement.
We separately calculate our net obligation for each defined benefit
pension plan by estimating the amount of
future benefits
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
136 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
two of
three specified credit
public debt securities are assigned investment-grade ratings by at
least
rating agencies. As at
December 31, 2016, 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.
Consolidated Statements of Income in the periods the employees
provide the related services.
Post-employment benefits – Defined Contribution Pension Plan
On July 1, 2016, we closed the Defined Benefit Pension Plan to
new members and introduced a Defined Contribution Pension
Plan. This change did not impact current members and any
employee enrolled in the Defined Benefit Pension Plan will
continue to earn pension benefits and credited service in those
plans.
We recognize a pension expense in relation to our contributions to
the Defined Contribution Pension Plan when the employee
provides service to the Company.
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.
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 benefit
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, 2016.
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
2016
2015
4.1%
4.3%
3.0%
CIA Private with
CPM B Scale
3.0%
CIA Private with
CPM B Scale
4.3%
4.1%
3.0%
CIA Private with
CPM B Scale
3.0%
CIA Private with
CPM B Scale
Sensitivity of key assumptions
In the sensitivity analysis shown below, we determine the defined
benefit obligation for our funded plans 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)
2016
2015
2016
2015
Discount rate
Impact of 0.5% increase
Impact of 0.5% decrease
(174)
199
(146)
167
(21)
23
(18)
19
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)
48
(49)
18
(18)
39
(41)
4
(4)
5
(5)
3
(3)
4
(4)
EXPLANATORY INFORMATION
We sponsor a number of contributory and non-contributory
pension arrangements for employees, including defined benefit
and defined contributions plans. We do not provide any
non-pension post-retirement benefits. We also provide unfunded
supplemental pension benefits to certain executives.
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
The Rogers Defined Benefit Pension Plan provides a defined
pension based on years of service and earnings, with no increases
in retirement for inflation. The plan was closed to new members on
July 1, 2016. Participation in the plan was 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 benefit pension plan under the Income Tax Act
(Canada)’s maximum pension limits.
We also sponsor smaller defined benefit pension plans in addition
to the Rogers Defined Benefit Pension Plan. The Pension Plan for
Employees of Rogers Communications Inc. and the Rogers
Pension Plan for Selkirk Employees are closed legacy 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
employees from the Cable business were eligible to participate;
this plan was closed to new members on July 1, 2016.
In addition to the defined benefit pension plans, we also provide
various defined contribution plans to certain groups of employees
of the Company and to employees hired after March 31, 2016 who
choose to join. Additionally, we provide other tax-deferred savings
arrangements,
including a Group RRSP and a Group TFSA
program which are accounted for as deferred contribution
arrangements.
The Pension Committee of the Board of Directors oversees the
administration of our registered 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,
performing duties in respect of
the plans,
actuarial and investment management services;
• proposing, considering and approving amendments;
• proposing, considering and approving amendments to the
Statement of Investment Policies and Procedures;
• reviewing management and actuarial
reports prepared in
respect of the administration of the pension plans; and
• reviewing and approving the audited financial statements of the
pension plan funds.
The assets of the defined benefit pension plans are held in
segregated accounts isolated from our assets. They 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.
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.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 137
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 two defined
contribution plans are registered with the Financial Services
Commission of Ontario, subject to the Ontario Pension Benefits
Act. The plans are also registered with the Canada Revenue
Agency and are subject to the Income Tax Act (Canada). The
benefits provided under the plans and the contributions to the
plans are funded and administered in accordance with all
applicable legislation and regulations.
The defined benefit pension plans are subject to certain risks
inadequate plan surplus,
related to contribution increases,
unfunded obligations, and market
return, which we
rates of
mitigate through the governance described above. Any significant
changes to these items may affect our future cash flows.
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.
(In millions of dollars)
2016
2015
Years ended December 31
Accrued benefit obligations, beginning
of year
Service cost
Interest cost
Benefits paid
Contributions by employees
Remeasurements, recognized in other
comprehensive loss (income) and
equity
Accrued benefit obligations, end of
1,713
119
75
(70)
35
1,592
98
65
(46)
32
134
(28)
year
2,006
1,713
The table below shows the effect of the asset ceiling.
(In millions of dollars)
2016
2015
Years ended December 31
(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.
(387)
–
(387)
17
(404)
(387)
(281)
(3)
(284)
12
(296)
(284)
(In millions of dollars)
Plan assets, beginning of year
Interest income
Remeasurements, return (loss) 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
2016
1,432
68
2015
1,285
56
32
35
125
(70)
(3)
(10)
32
118
(46)
(3)
Plan assets, end of year
1,619
1,432
As at December 31
2016
2015
1,619
(2,006)
1,432
(1,713)
Asset ceiling, beginning of year
Interest
Remeasurements, change in asset
ceiling (excluding interest income)
Asset ceiling, end of year
(3)
–
3
–
(7)
(1)
5
(3)
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)
Equity securities
Debt securities
Other – cash
Years ended December 31
Total fair value of plan assets
As at December 31
2016
2015
990
625
4
873
554
5
1,619
1,432
119
7
126
3
129
98
9
107
3
110
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)
2016
2015
Years ended December 31
Plan cost:
Service cost
Net interest cost
Net pension expense
Administrative expense
The table below shows the accrued benefit obligations arising from
funded obligations.
Total pension cost recognized in net
income
138 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
N
O
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T
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C
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N
S
O
L
I
D
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Net interest cost, a component of the plan cost above is included in
finance costs and is outlined as follows:
ALLOCATION OF PLAN ASSETS
Years ended December 31
(In millions of dollars)
2016
2015
Interest income on plan assets
Interest cost on plan obligation
Net interest cost recognized in finance
costs
(68)
75
7
(56)
65
9
Equity securities:
Domestic
International
Debt securities
Other – cash
Total
Allocation of plan assets
2016
2015
Target asset
allocation
percentage
12.4%
48.8%
38.5%
0.3%
19.7%
7% to 17%
41.3% 33% to 48%
38.7% 30% to 50%
0% to 2%
0.3%
100.0%
100.0%
The remeasurement recognized in other comprehensive income, is
determined as follows:
(In millions of dollars)
2016
2015
Years ended December 31
Return (loss) 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 (loss) income and
equity
32
(69)
–
(65)
3
(10)
45
–
(17)
4
(99)
22
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)
2016
2015
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
5
2
2
(3)
62
56
3
2
(2)
(3)
56
We also have defined contribution plans with total pension
expense of $3 million in 2016 (2015 – $3 million), which is included
in employee salaries and benefits expense.
Plan assets consist primarily of pooled funds that invest in common
stocks and bonds. The pooled funds have investments in our equity
securities and corporate bonds. As a result, approximately
$2 million (2015 – $3 million) of plan assets are indirectly invested in
our own securities under our defined benefit plan.
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
2016
125
35
160
2015
118
32
150
We estimate our 2017 employer contributions to our funded plans
to be $144 million. The actual value will depend on the results of
the 2017 actuarial funding valuations. The average duration of the
defined benefit obligation as at December 31, 2016 is 19 years
(2015 – 19 years).
Actual net return on plan assets was $97 million in 2016 (2015 –
$44 million).
We have recognized a cumulative loss in other comprehensive
income and retained earnings of $380 million as at December 31,
2016 (2015 – $306 million).
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 139
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 23: 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 billion
• 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.
DIVIDENDS
We declared and paid the following dividends on our outstanding
Class A Voting and Class B Non-Voting shares:
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 above $0.05 cents per
share.
On January 26, 2017, 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 3, 2017, to shareholders of record on
March 13, 2017.
Date declared
Date paid
January 27, 2016
April 18, 2016
August 11, 2016
October 20, 2016
April 1, 2016
July 4, 2016
October 3, 2016
January 3, 2017
January 28, 2015
April 21, 2015
August 13, 2015
October 22, 2015
April 1, 2015
July 2, 2015
October 1, 2015
January 4, 2016
Dividend per
share (dollars)
0.48
0.48
0.48
0.48
1.92
0.48
0.48
0.48
0.48
1.92
NOTE 24: 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
140 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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 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.
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 2016
and 2015, and the principal assumptions used in applying the
Black-Scholes model
for non-performance-based options and
trinomial option pricing models for performance-based options to
determine their fair value at grant date.
Years ended December 31
2016
2015
Weighted average fair value
$
6.20
$
4.65
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
0.5%
3.7%
21.3%
n/a
2.4 years
9.9 years
3.9%
1.5
50
1.1%
4.5%
22.0%
n/a
2.4 years
9.9 years
3.9%
1.5
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)
2016
2015
Years ended December 31
Stock options
Restricted share units
Deferred share units
Equity derivative effect, net of interest
receipt
Total stock-based compensation
expense
17
45
32
(33)
61
18
40
19
(22)
55
As at December 31, 2016, we had a total liability recognized at its
fair value of $189 million (2015 – $157 million) related to stock-
based compensation, including stock options, RSUs, and DSUs.
The current portion of this is $125 million (2015 – $107 million) and
is included in accounts payable and accrued liabilities. The long-
term portion of this is $64 million (2015 – $50 million) and is
included in other long-term liabilities (see note 21).
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, 2016 was $61 million (2015 –
$56 million).
We paid $69 million in 2016 (2015 – $73 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 $51.70 (2015 – $46.63).
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
the Board of Directors or our Management
officers by
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
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.
four years; however
Performance options
We granted 420,035 performance-based options in 2016 (2015 –
496,200) 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, 2016,
we had 2,268,102 performance options (2015 – 3,688,612)
outstanding.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 141
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of stock options
The table below is a summary of the stock option plans, including performance options.
Year ended December 31, 2016
Year ended December 31, 2015
(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
4,873,940
1,054,530
(1,811,727)
(384,219)
3,732,524
1,770,784
$41.47
$49.95
$40.45
$47.80
$43.70
$40.39
5,759,786
1,289,430
(1,978,149)
(197,127)
4,873,940
2,457,005
Weighted average
exercise price
$38.71
$44.77
$35.40
$43.49
$41.47
$38.57
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, 2016.
Range of exercise prices
$34.29 – $34.99
$35.00 – $39.99
$40.00 – $44.99
$45.00 – $49.96
Options outstanding
Weighted average
remaining contractual
life (years)
Options exercisable
Weighted average
exercise price
Number
exercisable
Weighted average
exercise price
0.92
2.13
4.87
7.05
4.71
$34.38
$37.96
$43.99
$49.33
510,845
452,075
496,637
311,227
$43.70
1,770,784
$34.38
$37.96
$43.78
$48.36
$40.39
Number
outstanding
510,845
452,075
1,541,154
1,228,450
3,732,524
Unrecognized stock-based compensation expense as at December 31, 2016 related to stock-option plans was $3 million (2015 –
$7 million), and will be recognized in net income over the next four years as the options vest.
Years ended December 31
(In number of units)
2016
2015
Outstanding, beginning of year
Granted and reinvested dividends
Exercised
Forfeited
2,484,405
763,364
(826,918)
(183,766)
2,765,255
798,074
(822,972)
(255,952)
Outstanding, end of year
2,237,085
2,484,405
at
Unrecognized stock-based compensation
December 31, 2016 related to these RSUs was $35 million (2015 –
$41 million) and will be recognized in net income over the next
three years as the RSUs vest.
expense
as
DEFERRED SHARE UNITS
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
RESTRICTED SHARE UNITS
The RSU plan allows employees, directors, and officers 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.
Performance RSUs
We granted 98,889 performance-based RSUs in 2016 (2015 –
114,979) to certain key executives. The number of units that vest
and will be paid three years from the grant date will be within 50%
the initial number granted based upon the
to 150% of
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.
142 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
Performance DSUs
We granted 328,206 performance-based DSUs in 2016 (2015 –
443,139) to certain key executives. The number of units that vest
and will be paid three years from the grant date will be within 50%
the initial number granted based upon the
to 150% of
certain annual and cumulative three-year
achievement of
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)
2016
2015
Outstanding, beginning of year
Granted and reinvested dividends
Exercised
Forfeited
1,770,871
972,894
(132,620)
(214,687)
826,891
1,324,169
(257,677)
(122,512)
Outstanding, end of year
2,396,458
1,770,871
Unrecognized stock-based compensation
at
December 31, 2016 related to these DSUs was $30 million
expense
as
(2015 – $26 million) and will be recognized in net income over the
next three years as the executive DSUs vest. All other DSUs are fully
vested.
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 $41 million in 2016 (2015 – $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 $33 million gain (2015 – $22 million gain)
in stock-based
compensation expense for these derivatives.
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NOTE 25: BUSINESS COMBINATIONS
ACCOUNTING POLICY
for business combinations using the acquisition
We account
method of accounting. Only acquisitions that result in our gaining
control over the acquired businesses are accounted for as business
combinations. 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.
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.
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.
CHANGE IN ACCOUNTING POLICY
In November 2016, the IFRS Interpretations Committee issued
clarifications to IAS 12 Income Taxes that provide guidance on the
application of tax rates related to the expected method of recovery
of an indefinite-life intangible asset for the purposes of measuring
deferred tax (see note 2(d)). As a result of the clarifications, we have
retrospectively changed our related accounting policy, including
the measurement of the gain on acquisition of Mobilicity in 2015.
EXPLANATORY INFORMATION
We did not make any acquisitions that resulted in business
combinations in 2016. We made several acquisitions in 2015,
which we describe below. Goodwill recognized in the 2015 dealer
tax purposes; goodwill
store acquisitions was deductible for
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.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 143
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 $74 million (see note
2(d)). 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 2
Fair value of net identifiable assets
acquired and liabilities assumed
(Gain on acquisition) goodwill 2
Acquisition transaction costs
443
5
11
458
–
175
(31)
(8)
(93)
517
(74)
16
33
3
6
–
19
–
(2)
–
(1)
25
8
–
476
8
17
458
19
175
(33)
(8)
(94)
542
16
1 Customer relationships are amortized over a period of seven years.
2 As a result of the IFRS Interpretations Committee’s agenda decision relating to IAS 12
Income Taxes, certain amounts have been retrospectively amended. See note 2(d).
NOTE 26: 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
were recognized at the amount agreed to by the related parties
144 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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 tax expense 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.
and are subject to the terms and conditions of formal agreements
approved by the Audit and Risk Committee. The totals received or
paid were less than $1 million for each of 2016 and 2015.
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.
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Compensation
The compensation expense for key management for employee
services was included in employee salaries and benefits as follows:
(In millions of dollars)
2016
2015
Years ended December 31
In addition, during the year ended December 31, 2016, we
announced a strategic change across our publishing business such
that we will focus on digital content through the Internet and
mobile applications. As a result, we have sold select publishing
titles to the aforementioned printing services company for
$5 million.
Salaries and other short-term employee
benefits
Post-employment benefits
Stock-based compensation 1
Total compensation
12
5
30
47
SUBSIDIARIES, ASSOCIATES, AND JOINT ARRANGEMENTS
We have the following material operating subsidiaries as at
December 31, 2016 and 2015:
• Rogers Communications Canada Inc. (see note 1); and
• Rogers Media Inc.
13
3
20
36
1 Stock-based compensation does not include the effect of changes in fair value of RCI
Class B Non-Voting shares or equity derivatives.
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
of our 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).
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.
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 RCI. There are no significant
restrictions on the ability of subsidiaries, 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.
the following business transactions with our
We carried out
associates and joint arrangements. Transactions between us and
our subsidiaries have been eliminated on consolidation and are not
disclosed in this note.
(In millions of dollars)
Revenue
Purchases
Years ended December 31
2016
177
215
2015
115
170
Outstanding balances at year-end are unsecured, interest-free, and
settled in cash.
Years ended
December 31
Outstanding
balance as at
December 31
2016
2015
2016
2015
27
31
3
3
(In millions of dollars)
Accounts receivable
Accounts payable and accrued
liabilities
As at December 31
2016
2015
70
32
56
30
(In millions of dollars)
Printing, legal services, and
commission paid on
premiums for insurance
coverage
NOTE 27: GUARANTEES
We had the following guarantees as at December 31, 2016 and
2015 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
the
regulations (including tax legislation), or litigation against
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
losses incurred as a result of breaches of representations and
loss or damages to property, changes in laws and
warranties,
regulations (including tax legislation), or litigation against
the
counterparties.
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 145
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2016 or 2015. Historically, we have
not made any significant payments under these indemnifications or
guarantees.
NOTE 28: 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, 2016:
(In millions of dollars)
Operating leases
Player contracts 1
Purchase obligations 2
Program rights 3
Total commitments
Less than
1 Year
159
161
422
510
1,252
1-3 Years
4-5 Years
235
165
359
1,083
1,842
109
18
153
1,067
1,347
After
5 Years
94
–
105
2,421
2,620
Total
597
344
1,039
5,081
7,061
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.
Operating leases are for network sites, office premises, and retail
outlets across the country. The majority of the lease terms range
from five to fifteen years. Rent expense for 2016 was $223 million
(2015 – $219 million).
In addition, as at December 31, 2016, our
contractual
commitments were $241 million for the acquisition of property,
plant and equipment and $233 million for the acquisition of
intangible assets.
In addition, as at December 31, 2016, our
contractual
commitments related to all of our associates and joint ventures
were $524 million, which are not included in the above table.
CONTINGENT LIABILITIES
We have the following contingent liabilities as at December 31,
2016:
System Access Fee – Saskatchewan
In 2004, a class action was commenced against providers of wireless
the Class Actions Act
communications
(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 Canada under
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 the plaintiffs took no active steps. The
appeal courts in several provinces dismissed the corresponding
146 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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claims as an abuse of process. The claims in all provinces other than
Saskatchewan have now been dismissed or discontinued. 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
and
providers
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.
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
financial
adverse effect on our business,
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
results, or
financial
NOTE 29: SUPPLEMENTAL CASH FLOW INFORMATION
CHANGE IN NON-CASH OPERATING WORKING CAPITAL
ITEMS
The following two tables provide details on the net cash issuance
and repayment of long-term debt.
Years ended December 31
Years ended December 31
(In millions of dollars)
2016
2015
(In millions of dollars)
Accounts receivable
Inventories
Other current assets
Accounts payable and accrued liabilities
Unearned revenue
Total change in non-cash working capital
(141)
3
(12)
182
(18)
(185)
(66)
(23)
33
(61)
Net issuance of senior notes
Borrowings under bank credit
facilities
Discount on bank credit facilities
Total proceeds on issuance of
long-term debt
items
14
(302)
Note
20
20
2016
671
4,017
–
2015
1,338
6,025
(25)
4,688
7,338
Years ended December 31
CASH PROVIDED BY FINANCING ACTIVITIES
(In millions of dollars)
Note
2016
2015
The following table summarizes net issuance (repayment) of long-
term debt.
Net repayment of senior notes
Repayment of bank credit
Years ended December 31
Total repayment of long-term
facilities
20
20
(1,000)
(1,059)
(4,226)
(5,525)
(In millions of dollars)
Note
2016
2015
debt
(5,226)
(6,584)
Proceeds on issuance of long-term
debt
Repayment of long-term debt
Net (repayment) issuance of long-
4,688
(5,226)
7,338
(6,584)
term debt
20
(538)
754
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 147
(In millions of dollars)
Note
2016
2015
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
forward contracts
Payments on debt derivatives
related to credit facility
borrowings
Total gross payments on debt
derivatives and forward
contracts
20
20
16
–
–
(596)
(309)
(53)
(25)
16
(11,159)
–
(11,212)
(930)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes net cash (payments) proceeds on
debt derivatives and forward contracts.
Years ended December 31
(In millions of dollars)
Note
2016
Proceeds on debt derivatives
Payments on debt derivatives
and forward contracts
Net (payment) proceeds on
settlement of debt derivatives
and forward contracts
11,167
2015
1,059
(11,212)
(930)
16
(45)
129
The following two tables provide details on the gross proceeds
(payments) on debt derivatives and forward contracts.
(In millions of dollars)
Note
2016
2015
Years ended December 31
Proceeds on termination of
US$550 million debt
derivatives
Proceeds on termination of
US$280 million debt
derivatives
Proceeds on debt derivatives
related to credit facility
borrowings
Total gross proceeds on debt
derivatives
20
20
–
–
702
357
16
11,167
–
11,167
1,059
148 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 149
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.
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.
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.
Broadband: Communications services which
allows for the high-speed transmission of voice,
data, and video simultaneously at rates of 1.544
Mbps and above.
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.
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.
CPE (Customer Premise Equipment):
Telecommunications hardware, such as modems
or set-top boxes, that is located at the home or
business of a customer.
CRTC (Canadian Radio-television and
Telecommunications Commission): The federal
regulator for radio and television broadcasters
and cable TV and telecommunications
companies in Canada.
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.
ICT (Information and Communications
Technology): A term that includes any
communication device or application, such
as radio, television, cellular phones, computer
and network hardware and software, satellite
systems, and so on, as well as the various services
and applications associated with them, such as
videoconferencing.
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.
IoT (Internet of Things): The concept of connecting
everyday objects and devices (e.g., appliances and
cellular phones) to the Internet and each other.
This allows them to sense their environment and
communicate between themselves, allowing for the
seamless flow of data.
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).
150 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
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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.
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.
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.
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
Commission for Complaints for
Telecommunications Services (CCTS)
An independent organization dedicated to
working with consumers and service providers to
resolve complaints about telephone and Internet
services. Its structure and mandate were approved
by the CRTC. www.ccts-cprst.ca
For a more comprehensive glossary
of industry and technology terms,
go to rogers.com/glossary
2016 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 151
Corporate and shareholder information
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For details of the public debt securities
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the “Debt Securities” section under
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Company as detailed earlier on this page.
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.
2,355 litres
of water saved
19 kg
solid waste
not created
52 kg CO2 of
net greenhouse
gases prevented
1,000,000 BTUs
energy not
consumed
© 2017 Rogers Communications Inc.
Other registered trademarks that appear are the property of the respective owners.
Design: Ove Brand | Design, a division of Publicis Canada
152 ROGERS COMMUNICATIONS INC. 2016 ANNUAL REPORT
COMMON STOCK TRADING AND
DIVIDEND INFORMATION
Closing Price RCI.b on TSX
2016
High
Low
Close
Dividends
Declared
per Share
$52.66 $46.15 $52.00 $0.48
First Quarter
Second Quarter $53.01 $48.34 $52.30 $0.48
Third Quarter
$58.99 $52.30 $55.66 $0.48
Fourth Quarter $56.07 $50.15 $51.79 $0.48
Shares Outstanding at December 31, 2016
112,411,992
Class A
402,396,133
Class B
2017 Expected Dividend Dates
Record Date*:
Payment Date*:
March 13, 2017
June 12, 2017
September 15, 2017
December 11, 2017
* Subject to Board approval
April 3, 2017
July 4, 2017
October 3, 2017
January 2, 2018
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.
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 https://
www.canstockta.com/en/InvestorServices/
Dividend_Reinvestment_Plans/Overview_
Of_DRIPs/ 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 https://www.canstockta.com/
en/InvestorServices/Delivery_of_Investor_
Materials/Electronic_Consent. This approach
gets information to shareholders faster 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
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